Profit rise boosts Marks and Spencer recovery

07-11-2006

Profit rise boosts Marks and Spencer recovery
Marks and Spencer has posted its highest first half profit in almost a decade, after reporting strong growth in food and clothes sales.

The high street chain recorded a 32 per cent rise in profits for the six months to September 30th, revealing pre-tax profits of £405.1 million, compared to £305.7 million for the same period a year ago.

The result represents the retailer's highest first-half profit since the 1997/8 financial year and comes amid signs that the British retail market is beginning to slowly recover from August's slump in consumer confidence.

Following a high profile advertising campaign fronted by model Twiggy, Marks and Spencer said that its total market share for the clothing market rose by 90 basis points to 10.1 per cent, while its share of the food market was up by 20 basis points to four per cent.

Overall like-for-like sales were up 6.4 per cent over the second quarter, while the company also revealed that footfall increased "significantly" with 19 million more visits to its stores during the first half, which it said were "driven by better values, with style and innovation".

Commenting on the results, chief executive Stuart Rose, who took over the running of the company in 2004 after Marks and Spencer fought off a £9 billion takeover bid from retail entrepreneur, Sir Philip Green, said that the company had had a "good first half".

"While competition remains intense, we are focusing on driving profitable revenues and market share," said Mr Rose.

"We continue to improve and develop our customer offers in core areas through better product while also driving service levels and improving store environment," he added.

Mr Rose also confirmed that Marks and Spencer's trading for the first five weeks of the third quarter was in line with the first half run rate and said he believed the high street chain was "well positioned" for the Christmas period.

But despite revealing that Marks and Spencer was pursuing opportunities to expand its business "across new channels and overseas", Mr Rose told BBC Radio 4's Today programme that the retailer still had a "big hill to climb" in a "tough market".

The latest retail survey from the Confederation of British Industry (CBI) showed that the balance of retailers who were more, as opposed to less positive, about the outlook for the sector, reached 42 per cent in September, up from 33 per cent in the previous month.

Nonetheless, while other indices have indicated slow growth in consumer confidence and retail sales, businesses remain nervous about the impact that this week's expected interest rate rise may have on consumer spending.

Marks and Spencer's board is proposing an interim dividend increase of 31.3 per cent to 6.3 pence per share for its investors.


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