Up 81%, can this FTSE 100 turnaround share keep surging?

This recovering retailer has been one of the FTSE’s greatest performers over the past year. Royston Wild considers whether it can continue to impress.

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Share prices across the FTSE 100 have soared in recent weeks. And some have really shot the lights out, thanks to some seriously impressive trading news.

Take Marks and Spencer Group (LSE:MKS). The retailer continues to enjoy barnstorming profits growth, and a forecast-beating full-year update led to further substantial price gains.

At 293p per share, it’s now up 81% over the past year. Only Rolls-Royce has punched stronger in the Footsie during the period. Can it continue to soar?

So what’s going on?

There have been many false dawns at Marks and Spencer. But trading during the 12 months to March indicates it’s finally turned the corner, and in spectacular fashion.

Revenues at the FTSE firm increased 9.4% in the 12 months to March, to £13.1bn. UK Food sales rose 13% over the period, to £8.2bn, while revenues at its UK Clothing and Home division improved 5.3% to £3.9bn.

This lifted the group’s pre-tax profit 58%, to £716.4m.

M&S also revealed meaty cost reductions totalling £100m last year. In light of this success, the firm’s now upgraded its cost-reduction target through to financial 2028, to £500m from £400m previously.

Sea change

The company’s recovery appears to be no passing fad. Indeed, sales at the Food and Clothing and Home divisions have now risen for 12 straight quarters.

Kathleen Brooks, research director at broker XTB, notes that “a shift has happened at M&S in recent months.”

Its fashion offering (for women at least) has gone off the charts, tailoring is good quality for a decent price, and the style of its ranges can also compete with the higher end ‘affordable luxury’ brands for sale elsewhere.

Kathleen Brooks

On top of this, the retailer’s huge investment in Food also continues to pay off handsomely. Sales of its ‘Remarksable Value’ products rose 34% year on year as the business invested in pricing. It also launched 1,300 new products to supercharge sales.

Fly in the ointment

In the interests of balance, it’s worth noting that M&S’s Ocado online grocery joint venture continues to disappoint.

Post-tax losses here widened to £133.7m in fiscal 2024 from £59m a year earlier.

Analyst Guy Lawson-Johns of Hargreaves Lansdown notes that “despite promising in-house progress… losses from M&S’s share in Ocado Retail have widened, and its public spat has drawn media attention, suggesting potential strain in the partnership.”

Ocado threatened legal action against Marks in February after the latter refused to make a performance-related payment due to disappointing sales.

So what next?

Marks and Spencer’s share price ascent has been truly impressive. But there’s no guarantee that it will continue on this path. Fresh stress in the British economy, inflationary pressures, and enduring issues at Ocado could limit gains.

But M&S clearly has the bit between its teeth, and additional price appreciation’s quite possible. As XTB analyst Brooks comments: “With results like these, there could be further upside to go.”

Given the company’s solid progress — and the possibility of forecast upgrades in the weeks months ahead — Marks and Spencer share price still looks pretty reasonable. And this could provide the bedrock for further gains.

Today, it trades on a price-to-earnings (P/E) ratio of 11.7 times. With sales soaring, its balance sheet improving and dividends resumed, it could prove to be an investment worth considering right now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown Plc and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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