Supply chain woes expected to cloud M&S positive results update
M&S management is expected to deliver an upbeat message on its continuing recovery this week, including a marked clothing revival, but there remains one shadow: growing supply chain issues.
The UK retail giant, which will update the market on Wednesday on its first-half performance, is also expected to admit that shortages of some of its clothing and homeware ranges will last until spring, amid supply difficulties and increasing cost pressures.
According to The Telegraph, M&S will be the latest high-profile retailer to say that it will take about six months to overcome delays and diversions caused by shipping container bottlenecks and labour scarcity.
It will also flag an increase in day-to-day costs, coming particularly from China, which will weigh on prices. The company, however, is unlikely to pass them on for the time being, the report noted.
But M&S is also expected to reveal half-year profits above pre-Covid levels, alongside a surge in clothing sales, The Times reported.
Importantly, the retailer’s long-suffering clothing division has been boosted in the past year by a shift to more online sales, underpinned by its decision to sell a host of third-party fashion brands, including Ghost, Joules and Seasalt, while buying brands such as Jaeger.
According to the report, M&S managers recently told analysts that there was a £400 million sales opportunity if they could convince the four million women who purchased lingerie to also to buy a single item of clothing, while if the six million who bought childrenswear from rivals switched to M&S it could boost sales by £70 million.
This view has been backed by already strong childresnswear sales, growing 14% despite a flat market, accompanied by it achieving a 30.5% share of the schoolwear segment.
According to internal company figures, its children’s range has reached its highest market share in five years, after M&S made the collection less expensive and added more collaborations with popular characters, including a range featuring Mr Men and Little Miss designs. The group also has added the Smiggle children’s stationery brand and Clarks shoes in an attempt to attract shoppers.
The overall positivity is backed by the City, with none of the 11 analysts covering M&S having a ‘sell’ rating on the company.
Instead, they believe the retailer will report £205 million-£252 million in underlying half-year profits, a major improvement on the £17 million loss last year and above pre-pandemic profits of £180 million.
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