BUSINESS LIVE: M&S profits soar 75%; Reach to cut 450 jobs; ITV suffers weaker studios demand

JD Wetherspoon’s sales improved in the first quarter of its financial year, helped by cost cutting and continued demand for its drinks and food at below-average prices despite the cost of living crisis.

The group, which owns and operates 816 pubs across the UK and Ireland, said it would spend around £70m this year to upgrade its pubs.

President Tim Martin said:

‘Sales in the first 14 weeks of the financial year have continued the pattern of gradual improvement that followed the end of lockdowns and restrictions. Inflationary pressures have eased, but energy costs, in particular, remain at much higher levels than before the pandemic, putting pressure on suppliers and the broader economy.

‘The company is increasing investment in existing pubs in the current financial year to approximately £70 million (FY23: £46.9 million). Areas of investment include new staff rooms, changing rooms, glass racks over the bars (to cater for the increased use of ‘branded’ glasses by brewers) and air conditioning.

“The company currently expects a result for the financial year in line with market expectations and will provide further updates as the year progresses.”

According to a report, PwC will cut around 600 jobs in the UK as staff have been reluctant to leave on their own.

The accounting giant confirmed it planned to make “voluntary redundancy offers” to some of its staff as attrition figures were lower than usual.

PwC did not mention any jobs figures, but the Financial Times reported that it aims to cut between 500 and 600 people.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown:

‘The good progress in Clothing and Home, where Marks & Spencer has struggled in recent years, is to be commended. It shows the extent to which the company has regained its style credentials and is particularly admirable given the pressure on discretionary sales amid the cost of living crisis.

‘The M&S brand is focused on quality and value, and has been successful in attracting shoppers. But at the end of the first half, unusually warm weather during September and October has naturally left investors concerned about winter clothing sales. They have weakened from their first quarter highs, but there is still plenty of time for sales to recover, especially now that the weather has started to turn into a Christmas holiday frenzy.

M&S Food was a strong performer in the first half, with demand here arguably more protected from high levels of inflation. At a more premium end of the market, M&S’s core customers are not as price sensitive. Along with impressive margin growth, total underlying operating profits increased significantly.

‘There has also been good progress in the group’s refurbishment programme, which seeks to pivot to new locations and refurbish existing stores to create a more productive complex. Full-year guidance has been maintained, although performance is expected to lean towards the first half, and the group is likely to want to outrun any potential movement on the expectations dial over the Christmas period.

‘But the real talking point was the reintroduction of dividend payments, which should give investors a boost. The performance is relatively low, but it marks an important moment for the group and is a real statement of confidence in the prospects of the business from M&S management.

“The group is due to hold a capital markets day this afternoon at which investors expect to hear more details about its £400m cost-cutting programme, as well as updates on the levers being pulled to drive a further growth in market share and margins.

Lower demand for ITV content from free-to-air broadcasters will affect its studio business in the fourth quarter, the media group has warned.

ITV told shareholders it expects to see growth of around 3 percent for the unit in 2023, down from its previous forecast in the mid-single digits.

ITV has been growing its studio business and its ITVX streaming service to help smooth out volatility in advertising demand.

It said the strategy delivered total revenue growth of 1 per cent over the first nine months to £2.98bn, despite a total advertising revenue fall of 7 per cent over the period.

Mirror newspaper owner Reach is set to cut 450 full-time jobs as part of a cost-cutting drive.

Reach said it hoped to replicate its 2023 plan to achieve a 5 to 6 per cent reduction in annual operating costs, which is “on track to be met”, in the next financial year.

He told shareholders the move would “strengthen its position as a leading digital publisher and mitigate against the backdrop of continued inflationary pressures”, while delivering “better customer value”.

Jim Mullen, CEO of Reach, said:

‘Our industry has a history of change and the future will undoubtedly involve even more. That is why it is essential that we prepare to win, adapting our operations to an increasingly fast-paced, competitive and customer-focused digital world.”

‘The hard work of recent years has allowed us to consolidate ourselves as a leading digital publisher. But there is more to do and today is about organizing our business to meet that challenge.”

Marks & Spencer beat profit forecasts in the first half, with pre-tax and unsavory profits rising more than 75 per cent to £360.2 million, but the retail giant urged Cation to push ahead in amid the impact of high borrowing costs and a volatile geopolitical environment.

Analysts had expected the group to post a profit of £276m for the quarter, up from £205.5m in the same period last year.

The clothing and food group, with a 139-year history, said its commercial momentum had continued into October and that it was planning a good Christmas, with customers already responding positively to its ranges.

But he warned that the economic outlook remained uncertain, pointing to the consumer impact of the highest interest rates in 20 years, deflation, geopolitical events and erratic weather.