Business Briefing: It's not just profit, it's M&S profit

When Marks & Spencer reports first half-yearly results on Tuesday, the City will want to know two things:the impact of Stuart Rose's strategy for recovery and his plans for expansion in Asia.

Deutsche Bank analysts believe that improved autumn trading on the back of the store modernisation programme will give the retailer a huge boost and accelerate second-half profits growth. Although modernisation has had a negative impact on profit due to disruption costs, the bank believes it will boost 2007-08 profits by £58m, with £46m of this in the second half, and in 2008-09 by £69m.

The City now seems to have faith in Mr Rose's ability to turn the company around. The redesign is only one element in Rose's plan, which includes lower prices, more fashionable lines and strong brand advertising.

Morgan Stanley believes that M&S could also see potential overseas growth in markets such as Asia and Russia despite the company's rocky start in Europe.

"Investors think of M&S as having 'failed' internationally, historically, but difficulties were in Europe, not in Asia," said analyst Claire Kent. She added that the UK-based retailer has been successful in seven Asian markets since 1988, including its direct presence in Hong Kong. Given the rising middle class in emerging economies, the biggest opportunities are in China, India and Russia, Ms Kent said.

The consensus is that M&S will show a pre-tax profit of £444m for the first six months of its financial year, up from £405m. It is also expected to withstand a slowdown as roughly half of its sales are food and 75 per cent of its customers, according to Deutsche Bank, are aged over 45 and less vulnerable to a credit squeeze. Its shares also outperformed the UK market in the last two consumer downturns.