M&S 'turns corner' with highest profit in four years

Marks & Spencer claimed it had turned the corner as it reported its highest profits for four years alongside plans to expand in financial services, home furnishings and food.

Luc Vandevelde, the chairman and chief executive, expressed confidence in the future though warned that consumer spending may start to slow. "We've been very cautious up to now not to call a turnaround," he said. "But I think these figures provide evidence that we have turned the corner. I must admit we were helped by a more buoyant market, but everyone needs a bit of luck."

Mr Vandevelde now seems certain to receive the £707,000 bonus that he waived last year, though half must be taken in shares. He is also in line for a further bonus equal to his £650,000 salary. This should take his total pay to £2m. His four million share options are worth £6m after the surge in the share price in the past year. Roger Holmes, managing director of UK retail, has options worth £1.8m.

Reporting a 31 per cent jump in full-year profits to £647m, M&S outlined plans to expand outside its core clothing business. The recovering retail giant will test two huge standalone home furnishings stores over the next 18 months. The 70,000 square foot, out-of-town stores will stock an extended range of furniture as well as kitchen, bedroom and bathroom accessories. M&S tried home furnishings stores once before in the 1980s though found its limited range in high street locations did not work.

There are plans to open 20 more branches of its Simply Food convenience store concept this year. There are currently six outlets with the next two due to open in Clapham and Greenwich, south London.

In financial services, M&S will test a combined credit card/loyalty card in Wales and the North east in the autumn. The card, which will be backed by a initial £35m investment, will accrue points on purchases made at M&S or elsewhere. The points then convert to discounts at M&S.

Mr Vandevelde said all adult clothing sectors had seen improvements in sales and margins, with market share also starting to recover towards the end of last year. "There was an enormous reservoir of loyal customers," he said. "They wanted us to succeed and as soon as they saw that was happening they needed no encouragement to come back."

The shares fell 14.5p to 396p.