M&S optimism on economy grows as profits beat forecasts

But it warns that bad news ahead could include VAT rises beyond 17.5 per cent

Sir Stuart Rose, the executive chairman of Marks & Spencer, called the bottom of the recession yesterday but warned that it might be 2011 before the UK returns to historical growth levels.

His comments came as the high street bellwether posted pre-tax profits, before property disposals, of £298.3m for the half-year to 26 September, but the profits were flat on last year's £297.8m when trading on the high street was dire. Sir Stuart said: "We have got through the worst and we are growing again and our profits are stabilising." For the half-year, M&S grew total sales by 2.8 per cent to £4.3bn.

But Sir Stuart warned of a "fragile recovery in consumer confidence", adding: "I think in 2010, we will see a steady and slow improvement, but it might be 2011 until we see any growth [in the UK market]." He warned of a "fair amount of bad news coming" next year, including rising taxes, and raised the spectre of the next government raising VAT beyond 17.5 per cent and adding it to previously exempt categories, including most food.

Over the half-year, UK like-for-like sales – which strip out the impact of new space – at M&S fell by 0.9 per cent. While its underlying food sales fell by 0.3 per cent, the retailer said this was its fourth consecutive quarter of improving food sales. M&S touted the success of its cheaper 500 Wise Buys products, which account for up to 15 per cent of food sales. It also reiterated its claim that it is "considerably cheaper" than Waitrose on 1,200 monitored products, which its rival disputes.

Sir Stuart insisted that customers were beginning to treat themselves again to its premium ranges. "Food has continued to improve and people are fed up with eating cheap and not very exciting food," he said.

On Tuesday, M&S said it would sell a range of about 400 branded grocery and household products ranging from Tabasco to Bovril in its stores in the UK and Republic of Ireland, adding it would match the major grocers on price.

M&S posted like-for-like general merchandise, primarily clothing, sales down by 1.4 per cent over the half year. Sir Stuart touted strong market share gains in childrenswear, but said: "Menswear has been a bit flat and womenswear has moved backwards a bit." Pre-tax profits at M&S were flat at £306.7m on last year's £307.8m. Sir Stuart said he wanted its multi-channel, mainly online, sales – which are on track to hit £0.5bn next year – to reach £2bn inside 10 years.

He declined to comment on the search to find a new chief executive by July 2010 but said that internal and external candidates are still being considered. M&S said it would pay an interim dividend of 5.5p a share, compared to 8.3p last year, which it had previously signalled. Tony Shiret, the Credit Suisse analyst, said: "There is a degree of self-help in the figures. They have been trying to run stock very conservatively and beating up suppliers – all the usual stuff." M&S launches its Christmas TV ad campaign next week, which has cost just under £10m, which features celebrities including Joanna Lumley, Twiggy and John Sergeant.

Start your day with The Independent, sign up for daily news emails
News
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
News
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
news
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
News
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own