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 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 2 British tourists 'murdered' in Thailand: Pair's bloodied bodies found naked on Koh Tao beach
- 3 Lego breaks out of the toy box and heads for the gallery
- 4 Vogue under fire for 'Big Booty' article
- 5 Julian Assange and Edward Snowden join piracy mogul Kim Dotcom’s political campaign in New Zealand
British tourists 'murdered' in Thailand: Pair's bloodied bodies found naked on Koh Tao beach
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Jihadi John': MI5 may have identified Isis militant who killed David Haines but options limited
Scottish independence: Police will be on high alert on Friday whatever the result
David Haines beheading: David Cameron says Britain will hunt down Isis 'monsters' shown in video murdering aid worker
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...