M&S staff check out of shares saving scheme with a £40m windfall

The surge in Marks & Spencer's share price, which recently broke 500p for the first time in seven years, has handed a £40m windfall to thousands of its staff after three save-as-you-earn share schemes matured.

The payout is the biggest since the retailer's heyday in the late 1990s and was boosted by the 47 per cent rise in its stock last year. More than 11,500 staff - about one-fifth of its workforce - who participated in all three schemes will pocket an average of £3,500 each.

Although similar schemes mature every 12 months, this is the first time for many years that the retailer has opted to shout about its employees' jackpot. The group's fortunes turned faster than even Stuart Rose, its chief executive, had anticipated thanks to strict stock control, better fashions and a focus on full-price sales.

Of the three schemes, which stretched over three, five and seven years, the five-year scheme was the most lucrative because the strike price was the lowest at £1.56.

Louisa Dmello, who works at Marks & Spencer's Croydon store, was among those who scooped the maximum £40,000 from the five-year scheme because she invested the full £250 per month. This was a return of 260 per cent on her original £15,000 investment. She was thrilled and planned to spend the cash on a world cruise.

Even Ms Dmello's windfall is dwarfed by the potential £1.5m paper profit that Mr Rose is sitting on from his options over 980,000 shares that he was granted when he joined the company. They do not vest until July 2007, however, so he will need to ensure the group's recovery does not lapse until then.

After surging past the 400p hurdle that represented Philip Green's potential cash offer for the group in the summer of 2004, the next milestone for the stock is the 650p peak of 1997 it reached after profits exceeded £1.1bn.

Mr Rose said he was "delighted" that those employees who have showed "faith" in the retailer have prospered from their hard work. About one-third of the group's workforce, 22,000 employees, are members of the scheme.

Marks & Spencer is widely tipped to be one of the festive winners when it reports its Christmas trading update tomorrow.

Analysts expect a small rise in like-for-like sales. Anything less will be a disappointment given the heady expectation surrounding the announcement. The retailer was one of the few not to rely on pre-Christmas discount to boost sales, opting not to repeat the two one-day "mega sales" it held in 2004. It also kept its doors shut on Boxing Day.

The lowest amount staff could save in the three schemes was £5 per month but on average employees put £50 aside. Each month employees use the money saved, plus a bonus, to buy shares at the market price at the beginning of the savings period, less a 20 per cent discount to entice them to join the scheme.

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