M&S warns of volatile trading after profits dive

High street giant cautious on outlook as weak clothing drags results down 10 per cent and consumers remain under pressure

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The Independent Online

The chief executive of Marks & Spencer has warned of "volatile" trading on the high street ahead of the crucial Christmas period, as the retail giant posted a double-digit fall in half-year profits.

Marc Bolland also pleaded with the City to be given more time to turn around its struggling womenswear business, adding that the improvements delivered by its general merchandise team will not be seen until its autumn collection hits stores next July.

He said: "It will take time for the team to make their mark. A meaningful difference can only be made once they've had the opportunity to start buying and ranging new collections."

But Mr Bolland, who took the helm in May 2010, remains a man under pressure after its bottom line shrank for the second consecutive half year.

Nick Bubb, the independent retail analyst, said: "Chief executive Marc Bolland will have to get profits moving up at M&S if he wants to keep his job. But there is a quiet confidence at M&S about online growth potential and autumn clothing trading should have been quite good."

Asked about investors, Alan Stewart, the retailer's finance director, said they are "very, very supportive of us".

A weak performance in clothing dragged down M&S's profits by 10 per cent to £289.5m over the 26 weeks to 29 September, although this was ahead of City forecasts. This helped shares in the group rise by 10.8p to 398.7p yesterday.

Mr Bolland said that trading conditions remain "volatile", citing the impact of payday on shopping patterns around the end of the month. "People are a bit more wary about payday and around payday." He added: "This, coupled with continuing pressure on consumers' disposable incomes, makes us cautious about the outlook for the rest of this year."

This view was supported by a lacklustre 1.1 per cent rise in total retail sales in October, the worst figures for 11 months, according to the British Retail Consortium and KPMG survey.

While M&S's underlying general merchandise sales fell by 1.8 per cent during its second quarter, this represented a marked improvement on the 6.8 per cent slump in the previous three months.

Mr Bolland said it had improved its merchandising and bought five times more stock around its current advertising, such as its "real women" campaign, which has led to a threefold jump in sales of these lines.

Following the exit of Kate Bostock in October, M&S lifer John Dixon is now running general merchandise and the retailer on Monday promoted Frances Russell to head of womenswear and hired Janie Schaffer as director of lingerie and beauty from the US chain Victoria's Secret.

M&S's food operation, which accounts for about half of revenues, continues to outperform and the division's underlying sales jumped 1.6 per cent in the second quarter. "It is one of the strongest food businesses in Europe," Mr Bolland said.

Boosted by a strong online performance, group sales at M&S, which has 400 shops overseas, rose by 0.9 per cent over the half. More than a third of women's dresses are now sold online, up by 29 per cent.

But Bethany Hocking, an analyst at Investec, described as "disappointing" a 1.4 per cent fall in international sales, hit by challenging trading in the Republic of Ireland and Greece.