Bolland makes his mark as ad campaign lifts M&S sales

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Second-quarter sales at Marks & Spencer have soared ahead of City expectations after its new chief executive, Marc Bolland, sanctioned a larger marketing budget.

The cornerstone of its marketing splurge was its new autumn and winter TV advertising campaign last month, which helped to attract an extra 1.8 million customers into its shops.

Mr Bolland, who joined M&S in May from the grocer Morrisons, said yesterday that customers were "returning to quality" clothing. But he warned that "trading conditions ahead are likely to become more challenging" after VAT rises to 20 per cent on 4 January and the Government's austerity cuts take effect.

The TV fashion campaign – which featured M&S stalwarts Twiggy and Lisa Snowdon and lasted until 25 September – helped the retailer to post a 5.3 per cent rise in UK underlying sales for the 13 weeks to 2 October. The advertisements ignited sales of boots and coats in particular, with M&S boasting of weekly sales of 2,000 of the Autograph military-style coats.

While Mr Bolland, who gained a reputation for being a savvy marketeer at Morrisons, was keen not to take the plaudits, he admitted that the TV campaign had not initially been planned. But the Dutchman, who is set to unveil his strategy for the retailer at its interim results next month, gave little else away, although he promised "evolution not revolution".

M&S forecast that the increased investment in marketing and higher sales volumes would see its operating costs, before bonus payments, rise by up to 5 per cent for the full year. Despite this, the retailer stuck to its existing profit guidance for 2010/11.

Underlying sales of general merchandise – clothing and homewares – rose by 7 per cent in the UK, nearly double the City's consensus expectations of a 3.7 per cent rise.

The nation's largest fashion retailer by sales volumes grew its share of the clothing market by 70 basis points over the 12 weeks to 15 August, according to Kantar Worldpanel.

Mr Bolland said: "Customers are looking to buy once and buy well in general merchandise and that is a trend I see continuing."

He said this had been particularly evident with men's suits and knitwear.

Food also made a strong contribution, with like-for-like UK food sales rising by 3.7 per cent over the quarter.

Andy Wade, an analyst at Numis Securities, said: "We continue to be impressed by the progress being made on the food side of the business, with the increased innovation clearly driving the business forward."

Mr Bolland said that its food business was now on the "front foot" and that it had grown sales ahead of the market. M&S launched 370 new food products over the quarter.

But Mr Bolland remained cautious about the outlook. "Consumers' disposable incomes will come under greater pressure from increased VAT rates and public sector spending cuts," he added.

He said that older customers were "better prepared" for this environment than their younger counterparts.

He also dismissed fears of the UK slipping back into recession. "We are not forecasting for a double dip," he said.

M&S's group sales rose by 6.5 per cent.

Robert Swannell joined M&S as a non-executive director this week. He will become chairman on 4 January, when Sir Stuart Rose leaves.