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
ebooks
ebooksAn introduction to the ground rules of British democracy
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: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Guru Careers: Investment Writer / Stock Picker

Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue