# Britain’s M&S warns of ‘gathering storm’ of higher costs and weak consumer Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-11-09 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: M&S Warns of Higher Costs and Falling Profits Meta Description: M&S anticipates challenges due to rising costs and shrinking profits, with consumers cutting back as inflation soars and confidence drops. URL: https://financedigest.com/britains-ms-warns-of-gathering-storm-of-higher-costs-and-weak-consumerhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-11-09t072651z2lynxmpeia80a1rtroptp4m-s-ceo-1736814892089-compressed.jpg) By James Davey LONDON (Reuters) -British retailer Marks & Spencer warned on Wednesday of a “gathering storm” of higher costs and pressure on household budgets, as it reiterated full-year profits would fall. The 138-year old clothing and food group, one of the biggest names in British business, reported a 24% decline in profit before tax and adjusting items to 205.5 million pounds ($237 million) for the six months to Oct. 1 – [slightly ahead of analysts’ average forecast](https://www.financedigest.com/german-govt-to-slightly-raise-2023-gdp-forecast-sources.html "German govt to slightly raise 2023 GDP forecast – sources"). Profits fell, [despite an 8.5% rise](https://www.financedigest.com/suedzucker-quarterly-profits-surge-73-5-despite-cost-rise.html "Suedzucker quarterly profits surge 73.5% despite cost rise") in revenue to 5.54 billion pounds, due to higher costs. The group also [missed out on the business tax relief it received from the government during the pandemic as well as profit](https://www.financedigest.com/ericssons-quarterly-core-profit-misses-expectations.html "Ericsson’s quarterly core profit misses expectations") contributions from both Russia, which it has exited, and Ocado Retail, its online joint venture with Ocado Group. Prior to Wednesday’s update, analysts were on average forecasting a profit before tax and adjusting items of 397 million [pounds for the 2022-23 fiscal year](https://www.financedigest.com/commonenergy-mistakes-costing-homeowners-hundreds-of-pounds-each-year.html "Commonenergy mistakes costing homeowners hundreds of pounds each year"), down from 523 million pounds in 2021-22. Marks & Spencer (M&S), whose shares have halved this year, said total food [sales increased](https://www.financedigest.com/increase-in-sales-of-human-insulin-market-to-scale-revenue-growth-in-the-global-market.html "Increase in Sales of Human Insulin Market to Scale Revenue Growth in the Global Market") 5.6% in the first half, while clothing and home sales rose 14%. M&S is also facing higher labour and energy costs, and a stronger dollar that will push up its purchasing costs, while consumers’ disposable income is falling amid a worsening [cost of living](https://www.financedigest.com/indefensible-uks-sunak-under-fire-over-response-to-cost-of-living-crisis.html "‘Indefensible’: UK’s Sunak under fire over response to cost of living crisis") squeeze. Across all M&S [markets it is highly likely that conditions will become more challenging](https://www.financedigest.com/molasses-market-a-study-combine-with-challenges-and-opportunities-forecast-by-2017-to-2025.html "Molasses Market: A Study Combine With Challenges And Opportunities, Forecast By 2017 To 2025") in FY24,” M&S said. However, the far-reaching changes made over the past few years, together with a reinvigorated [product offer and strong value for money credentials provide](https://www.financedigest.com/two-thirds-of-consumers-would-prefer-to-deal-with-a-single-provider-for-insurance-products.html "Two-thirds of consumers would prefer to deal with a single provider for insurance products") some insulation from the gathering storm. It said trading in the first four weeks of its second half was in line with forecasts, with clothing and home sales up 4.2%, food sales up 3.0% and [international](https://www.financedigest.com/adnami-appoints-jeetesh-luhar-as-international-sales-director.html "Adnami appoints Jeetesh Luhar as International Sales Director") sales up 4.1%. With [inflation at a 40-year high of 10.1% and consumer](https://www.financedigest.com/euro-zone-consumers-more-optimistic-on-inflation-ecb-survey-shows.html "Euro zone consumers more optimistic on inflation, ECB survey shows") confidence close to the gloomiest on record, Britons are cutting back and planning less spending this Christmas. M&S reckons its bias towards older, more affluent [customers gives it some protection](https://www.financedigest.com/banks-can-provide-a-protective-shield-to-defend-customers-from-cyber-attack.html "Banks can provide a protective shield to defend customers from cyber attack") from the crisis, but analysts are still concerned they will feel the pinch, with both its food and clothing divisions at risk of shoppers heading to cheaper rivals. The group is seeking to [transform its fortunes and build a more resilient business with a renewed focus on the quality and value](https://www.financedigest.com/2021-predictions-realising-the-value-of-payments-transformation.html "2021 Predictions: Realising the Value of Payments Transformation") of its clothing and food, heavy investment in technology and e-commerce, and a radical overhaul of its store estate – with a target to reduce its full line stores by 67 to 180 by 2028, while increasing its food only stores by 104 to 420. M&S has deferred [considering options](https://www.financedigest.com/3-options-to-consider-when-you-owe-the-irs-back-taxes.html "3 Options to Consider When You Owe The IRS Back Taxes") for reinstating capital returns to shareholders until nearer the year end. ($1 = 0.8670 pounds) (Reporting by James Davey; Editing by Kate Holton and Mark Potter) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---