M&S hails women's clothing boost
Marks & Spencer pointed to signs of improved trading in womenswear today as it battles to end three years of declining clothing sales.
Shares surged by as much as 10% after chief executive Marc Bolland revealed a surprise rise in half-year profits, although the group still registered a 13th consecutive quarter of falling sales in its clothing division.
Mr Bolland, who joined the company in 2010, highlighted an improving trend in womenswear following "increasingly positive feedback" from customers, with sales up 1.3% when excluding an unseasonably warm September.
Across the group, sales rose 1% to £4.9 billion in the six months to September 27 and underlying profits lifted 2.3% to £268 million, compared with City expectations for a decline.
Mr Bolland said: " M&S delivered sales growth and increased profit in the first half despite a tough market, particularly in September. We are pleased with the progress we have made against our key priorities for the year."
M&S said its food business continued to outperform the market with a 1% rise in like-for-like sales, as its high-end positioning has allowed the retailer to avoid being dragged into the ongoing supermarket price war.
Across general merchandise, which has now seen more than three years of falling sales, second quarter like-for-like sales were down by 4%. However, Marks pointed out that about 2.5% of the decline was due to the impact of unseasonably warm weather conditions in September.
It said: "Womenswear performance continues to improve with growth in full price sales and increasingly positive feedback from our customers.
"However, the recent market conditions remain challenging, with unseasonal weather resulting in high levels of promotional activity across the market."
Mr Bolland has come under increasing pressure this year as the retailer's performance has stuttered despite turnaround efforts including a £2.3 billion investment drive over the last three years, the hiring of new fashion executives and a celebrity-driven marketing push.
Annual profits have fallen for three years in a row and were recently overtaken by rival Next, although M&S is on course to improve profits in the 2014/15 financial year to £ 660 million, from £623 million in 2013/14.
Today's surprise improvement in half-year profits was accompanied by a rise in its half-year dividend, while investors were also cheered by better margins in the company's general merchandise division after tighter control of costs and a focus on full-price sales.
It is also planning 200 new Simply Food stores over the next three years, compared with 150 previously guided.
Neil Saunders, managing director of retail consultancy Conlumino, said there were some glimmers of hope from the retailer, particularly on signs that its strategy of becoming more fashion-focused was starting to pay off.
He added: "Overall, M&S's school report for this term reads 'showing signs of improvement', but there is quite some way to go before it is back at the top of the class."
M&S, which employs 75,000 staff in the UK, including 65,000 customer service assistants, said it was well placed for the Christmas trading period.
It added: " Despite some improvement in consumer confidence, market conditions continue to be challenging. As a result, we remain cautious about the outlook for the remainder of the year."