M&S to buy back £1bn of shares as profits soar

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The Independent Online

Marks & Spencer launched a £1bn share buy-back yesterday as it outlined plans for overseas expansion.

The high-street retailer reported a higher-than-expected rise in first-half pre-tax profits, up 11.5 per cent to £451.8m.

However, sales growth slowed from 2 per cent in the first quarter to 1.2 per cent into the second, giving an overall figure of 1.6 per cent in the six months to 29 September. Food sales were particularly poor during a summer which saw consumers ditching plans for barbecues and picnics due to days of endless rain.

Chief executive Stuart Rose said this was "a creditable first half in a difficult market". He was cautious on the outlook for the consumer environment, but nonetheless remains confident in M&S.

"The actions we have taken to reposition and revitalise M&S over the last three years put us in a good position to continue to outperform."

The high-street retailer surprised the City by announcing the share buyback and by raising the interim dividend 32 per cent to 8.3p. "These decisions reflect our confidence in the strength and prospects of the business," he said. Investors welcomed the move and shares in the company jumped 3.3 per cent over the day to close 21p ahead at 653p.

The company's store modernisation programme, which has helped attract consumers, will see 70 per cent of store space modernised by Christmas and 90 per cent updated by the end of next year.

Mr Rose also revealed the company is to enter China next year with stores planned for Shanghai, and will also increase its spend in India.

Asked about his future at the company following speculation he was about to quit, Mr Rose said: "Don't write me off yet. Reports of my demise are somewhat exaggerated."

Following on from its coup of signing Dame Shirley Bassey for its glitzy Christmas campaign last year, M&S launches this year's festive ad tomorrow night, featuring Hollywood actor Antonio Banderas in the role of a 1940s film star, alongside regulars Twiggy, Erin O'Connor, Lizzie Jagger, Laura Bailey and Noemie Lenoir.

Celebrities sell by bringing extra column inches to the brand. Reports that Victoria Beckham had bought M&S's black leather dress ensured that it became one of the big autumn sellers.

The company's green credentials also continue to be a hit with shoppers. M&S yesterday announced it is to introduce a 5p charge for plastic bags in England following a successful trial in Northern Ireland. This led to a 66 per cent reduction in bag consumption.

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