M&S hails profit rise but faces ‘mountain to climb’

THE City gave a guarded welcome to Marks & Spencer’s first rise in annual profit in four years today but remained wary about calling a definitive turnaround at one of Britain’s bellwether retailers.

Marc Bolland, the CEO of Marks and Spencer Group, delivers a speech at the opening of a Marks & Spencer store in Brussels, on May 7, 2015. Picture: AFP/Getty

M&S chief executive Marc Bolland unveiled underlying pre-profits up 6 per cent to £661.2 million for the year to 28 March, above City expectations though the group’s shares eased 2p to 583.5p. The high street stalwart also announced a £150m share buyback, the first twime it has returned cash to shareholders this way since 2008.

One analyst said M&S was now taking “considerable strides” towards the days when its earnings once topped

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£1 billion. However, others urged caution on the state of the rebound.

Phil Dorrell, of the Retail Remedy consultancy, commented: “One strong season does not a turnaround make. But at least it is an indication that M&S’s core business has stopped misfiring at last.

“Bolland still has a mountain to climb. Look beyond the flagship locations and many M&S stores are still a mess of baffling sub-brands.”

However, as the boss shortly completes five years at the helm, Dorrell added: “Food remains the hero of the piece, but these results at least hint that M&S is returning to what it should be – a clothing retailer with a successful sideline in food, rather than a successful food retailer with a moribund clothing business holding it back.”

M&S’s general merchandise division, dominated by clothing, saw a like-for-like sales decline 3.1 per cent in the year.

But the group said the first same-floorspace clothing sales rise in the final three months of the financial year, following 14 consecutive quarters of sales falls, meant it was now expecting a period of “modest sales growth” in the key business.

M&S blamed the disappointing annual clothing and knitwear performance partly on the autumn weather – the third warmest on record – hitting sales. It said the food division had an “outstanding” year, posting 0.6 per cent like-for-like sales growth despite rampant price promotions in the industry.

It came as Bolland, a co-author of a report for the UK government on cutting Brussels red tape, said the European Union remained “very important for M&S”, with the group running more than 100 stores there.

He said it was right that Britain waited to see what possible reforms to the EU were on the table before making a decision in a referendum by end–2017 whether to stay in.