The group is pressing ahead with the biggest store refurbishment programme of any UK retailer in the past 10 years and mulling over whether to open more overseas stores in countries including China in its attempt to cement its nascent recovery.
It is reviewing its entire UK store portfolio as part of its plan to spend up to £570m this year on refurbishing the "decrepit" estate inherited when Stuart Rose took over as chief executive two years ago. Stores that do not make much profit are likely to be shut, while others get extended, Mr Rose said. Folkestone and Dartford have already been closed.
Mr Rose said the group would "experiment more" with other products including non-M&S brands after testing shoppers' appetite for consumer electronics, from iPods to mobile phones.
Despite evidence of the transformation wrought by Mr Rose and his team, shares in M&S dipped 18p to 549p, off highs of 620p earlier this month.
Analysts attributed the fall to disappointment that sales had risen by just 10 per cent in the 27 stores so far given a makeover. M&S also said that the refit programme, which will modernise 3.3 million square feet of its space this year alone, would cost around £20 more per square foot than it had hoped at between £80 and £90 per square foot. By the end of the year it will have revamped 35 per cent of its UK space.
Some investors had also wanted a sign that the group might gear up its balance sheet further, using its substantial freehold property estate, but this was ruled out. Ian Dyson, the finance director, said the group wanted to retain the flexibility of owning its stores rather than pay someone else rent.
A lucrative cocktail of selling more full-price clothes, paying its suppliers less, sourcing its products from cheaper places and having less stock tied up in the business boosted pre-tax profits by 48 per cent to £745.7m. On an underlying basis, profits rose 35 per cent to £751.4m, towards the top end of expectations. Its earnings per share hit a record 31.4p, beating even the level achieved at the height of its success in 1997, when profits topped £1bn, thanks to some £4.5bn of share buybacks since then. Mr Rose wants to see evidence of growth next Christmas before declaring the recovery complete, but conceded: "Push me about the 'r' word, I'd say these results are respectable. Push me harder and I'll say they were very respectable."
M&S managed its first improvement in full price market share in all of its product segments for the first time in three years. But at 10.1 per cent, its share remains some way off its 13 per cent peak. Group like-for-like sales rose 1.3 per cent last year, but the trend improved throughout the period, particularly in its key womenswear market. Underlying food sales rose 3.6 per cent.Reuse content