M&S profit beat leads analysts to upgrade forecasts for 2025

Proactive Investors – Marks and Spencer Group PLC (LON:MKS) rose 8% to around a six-year higher after its profits beat forecasts, with analysts hailing the significant strategic progress.

The group declared a final dividend of 2p, making for a full payot of 3p pay-out after profits and cash flow jumped.

Peel Hunt (LON:PEEL)’s Jonathan Pritchard says it was a “small beat” at the pre-tax profit level though the results “showcased an exceptional year for the business, with significant strategic progress made”.

The profit beat was primarily driven by a very strong food performance, he said, as like-for-like sales accelerated in the fourth quarter from 10% to 12%, and the margin performance “is pleasing, already ahead of the mid-term targets”.

Clothing & Home saw LFL also pick up from 4.8% to 5.1%, “but profit was slightly below our estimate”.

“International was the only area of concern, but Ocado (LON:OCDO) losses were better than we expected.”

While M&S did not offer a current trading statement, Pritchard said the beat on profits “makes it clear to us that forecasts will increase today, by c.5%”.

Clive Black at house broker Shore Capital said management had guided to “further progress” and while “we cannot expect a re-run of the exceptional progress achieved in FY24” he felt that M&S “may beat our materially upgraded estimate but the magnitude of that beat to our numbers and consensus is considerable”.

Accordingly, he anticipates a more normally balanced first and second half split, with costs remaining in the system be from the UK National Living Wage and business rates or ongoing pass-through from the food supply chain, “which implies disinflation rather than deflation”.

Shore Cap forecasts adjusted PBT of £755 million and EPS of 25.7p, upgraded 12% from previous estimates, with circa £801 million pencilled in for 2026.