M&S reveals surprise profits boost

Marks & Spencer boss Sir Stuart Rose drew encouragement from recent trading today after the chain posted an unexpected rise in half-year profits.

Sir Stuart announced profits of £298.3 million for the six months to September 26, ahead of City forecasts and slightly stronger than a year earlier.

He added that the third quarter of the financial year had got off to a good start, although he warned that trading conditions remained competitive.

Marks has also revealed plans to sell around 400 branded products from firms such as Kellogg's, Coca-Cola and Marmite across its UK store network.

The chain is rolling out the sale of branded household goods and groceries after a successful trial in stores in the North East and South East of England.

M&S said it could "simply never compete" with certain popular brands and was introducing them to its shops for the convenience of customers.

No M&S products are to be dropped as a result of the move, which will focus on lines where the retailer would have a lower share of the market such as soft drinks, beer, laundry and confectionery.

Today's figures reveal that M&S increased sales by 2.8 per cent to £4.3 billion in the half-year period, helped by 12 per cent growth overseas. UK revenues were 1.8 per cent higher, but down 0.9 per cent when changes in store space are excluded.

Sir Stuart, who is executive chairman, said: "We are pleased with our half-year performance. We increased our share of the clothing market over the period, and our performance in food has also improved."

The company said tight management of costs and operating margins also enabled it to beat last year's profits figure.

The result represents a recovery from earlier in the year, when Marks announced a 40 per cent drop in full-year profits to £604.4 million and cut its annual dividend by 33 per cent - the first such move since 2000.

Marks said general merchandise sales were up 1.7 per cent as it maintained its position as the UK's leading clothing retailer by value and volume.

The retailer said it launched the Portfolio and Indigo ranges in womenswear and also grew market share in the 35 and under age range segment.

In food, sales were up 1.8 per cent as Marks delivered its fourth consecutive quarter of improved like-for-likes sales, although market share slipped from 3.7 per cent to 3.5 per cent.

Promotional offers have been key to driving footfall in its stores, with the retailer's "Dine in for two for £10" offer selling 4.5 million meals in the half.

Shares opened 5 per cent higher after the profits figure beat the City's consensus forecast for a figure of £285 million.

Sir Stuart sounded a note of caution despite today's boost, saying: "We have had a good start to the third quarter. However, the market remains competitive and, as we came up against volatile trading conditions last year, we remain cautious about the outlook for Christmas and the year ahead."