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
Thursday 05 November 2009
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.
- 1 Should Apple buy Greece?
- 2 Michael Douglas regrets 'embarrassing' Catherine Zeta-Jones with oral sex comments
- 3 Drummer Lee Rigby's family reject 'extremist' groups using Woolwich murder for political gain
- 4 Tunisia hotel attack: Locals form 'human shield' to protect hotel from gunman Seifeddine Rezgui
The moment a Queen's Guard soldier lost it and drew his gun at annoying tourist
Greece crisis: The wider lesson is that it’s time to abandon this failed experiment in currencies
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Extend Right To Buy to tenants of private landlords, Labour's Jeremy Corbyn says
David Cameron struck double blow in his hopes to win Britain a new EU deal
Pentagon accuses Russia of 'playing with fire' over nuclear threats towards Nato
iJobs Money & Business
£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...
Negotiable: Recruitment Genius: This extremely successful and well-established...
Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...
Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...