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
Life and Style
love + sex
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle 0 Man United 1: Last minute strike seals precious victory
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
Arts and Entertainment
Seth Rogan is one of America’s most famous pot smokers
filmAmy Pascal resigned after her personal emails were leaked following a cyber-attack sparked by the actor's film The Interview
Benjamin Netanyahu and his cartoon bomb – the Israeli PM shows his ‘evidence’
ebooksA special investigation by Andy McSmith
Arts and Entertainment
80s trailblazer: comedian Tracey Ullman
Life and Style
A statue of the Flemish geographer Gerard Kremer, Geradus Mercator (1512 - 1594) which was unveiled at the Geographical Congree at Anvers. He was the first person to use the word atlas to describe a book of maps.
techThe 16th century cartographer created the atlas
Arts and Entertainment
Stephen Tompkinson is back as DCI Banks
tvReview: Episode one of the new series played it safe, but at least this drama has a winning formula
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot