City File: Put your shirt on Marks & Spencer

MARKS & SPENCER is set to announce a sharp rise in pre-tax profits this week, continuing to give the impression there has been no recession. They will be up from pounds 673m to around pounds 730m for 1992/3. The truth is, however, that M&S has negotiated the recession with great skill, hanging on to both its market share and its profit margins.

One of the main features will be a hefty rise in turnover. This has been deliberately engineered by the price-reduction campaign instituted by M&S last autumn. Until then, the group had refused to cut its profit margins, but a slight erosion in market share eventually prompted it to shave prices on the clothing side. Market share was duly restored with a vengeance, and profits have risen.

Although the food side continues to look lacklustre, there is every reason to assume from last year's performance that M&S will continue to impress. Because it is not a recovery stock, its shares have fallen out of favour with the stock market, but the market is wrong. The shares are a buy.