'Bolland plan' pays off as M&S sales hit new highs

• M&S saw clothing sales surge 3.8% - while the previously troubled food arm also did well

The Dutchman, who joined M&S in May from Morrisons, said the high street bellwether "traded well" during the festive period despite the wintry conditions during November and December.

Like-for-like sales of general merchandise, including clothing, were up 3.8 per cent during the 13 weeks to 1 January while food, an area where M&S has suffered in previous years, rose 1.8 per cent.

The retailer enjoyed its strongest ever day for food sales on 23 December, with more than 50 million worth of items such as salmon, prawns and turkeys passing through the check-outs.

After several years of turmoil at its food division, M&S has recently stolen sales from rivals, with its market share up from 3.8 per cent to 3.9 per cent in the 12 weeks to 28 November.

While the Arctic conditions are believed to have shaved 50m-55m off sales, the impact on M&S's balance sheet has been more or less wiped out by the post-Christmas sale period, which was included in the firm's festive update for the first time.

Bolland said he did not anticipate a particularly adverse effect from the VAT rise this year as there was evidence that shoppers are opting to spend a bit more on better products.

"People are also returning to quality and are buying quality products," he said, adding that M&S is seeking to hold prices on as many products as it can in the face of the 20 per cent VAT rate.

However, Bolland warned that rising commodity prices and tough comparatives with the previous year could cause the retailer some issues. He said these problems posed a greater threat than the VAT increase and government spending cuts although he did concede that the latter were "not going to make customers' lives much easier".

Matthew McEachran, an analyst at Singer Capital Markets, said the festive figures were "better than many others" and were only slightly down on the previous quarter.

Freddie George, retail analyst at Seymour Pierce, argued they were proof that Bolland's strategy was slowly paying off. Bolland was credited with turning around Morrisons during his four years at the helm.

George said: "Marc Bolland's proposed shake-up of the company has not been a 'damp squib'.It will be more revolutionary rather than evolutionary and the market will come to appreciate this over the next 12 months.

"We reiterate our 'buy' recommendation and believe that the Bolland strategy will lead to further upside to earnings toward the 1 billion level over the next three years."

Bolland presented his first festive update to the City on the same day as Sir Stuart Rose stepped down as chairman, ending a colourful six-year tenure with the high street giant.

Elsewhere on the high street, homewares chain Dunelm said sales fell 1.2 per cent in the 26 weeks to January after collapsing by 4.2 per cent in the final, crucial 13 weeks of the period.