M&S shares jump after surprise recovery in sales

Marks & Spencer showed a tantalising glimpse of a recovery yesterday when it reported its first increase in group sales in three years. M&S shares jumped 10 per cent to 307p, their highest level since early 2000, after a better-than-expected trading update covering the 12 weeks to 29 September.

Marks & Spencer showed a tantalising glimpse of a recovery yesterday when it reported its first increase in group sales in three years. M&S shares jumped 10 per cent to 307p, their highest level since early 2000, after a better-than-expected trading update covering the 12 weeks to 29 September.

M&S said it had experienced a steady improvement in clothing performance throughout the three-month period. The key womenswear division has been particularly encouraging, helped by better product appeal and the launch this autumn of the "Perfect" range of basic essentials, such as T-shirts, jeans and jumpers.

Luc Vandevelde, chairman and chief executive, refused to say whether the improved trading meant he would deliver a meaningful recovery in M&S fortunes within his self-imposed two-year deadline, which expires in February. "This is clearly a step in the right direction and shows that customers have not lost faith in Marks & Spencer," he said.

He then used a line from a Winston Churchill speech to describe the upturn in sales as "the end of the beginning rather than the beginning of the end".

In the 12 weeks to 29 September, M&S' total sales rose by 2.8 per cent, or 2.1 per cent on a like-for-like basis. However, the figures were flattered by a weak comparative period last year when sales were dented by the petrol crisis. Taking that into account like-for-like sales in the key clothing sector were down by 2 per cent, though this still showed a strong recovery from minus 9 per cent in the first quarter. Food sales rose by 3.4 per cent on a like-for- like basis.

Analysts said the recovery in trading was supported by a benign retail environment in September, with the British Retail Consortium figures saying that the value of sales rose by 5.7 per cent from the same month last year.

But many turned positive on the company for the first time in years and there were several upgrades for the current year. Nick Bubb at SG Securities, said: "All of a sudden it looks sexy. It's got food, it's got property, its got a strong balance sheet. We think it's turning."

Merrill Lynch upgraded its current-year profit forecast from £530m to £570m. Roy Maconochie, at Investec Henderson Crosthwaite, said share buying by big US funds like Brandes Investment Partners and Franklin Resources, as well as London institutions had sustained the share price rally this year rather than anything to do with trading. "Now you could start to see the seeds of a turnaround," he said.

However, analysts at Teather & Greenwood and Seymour Pierce remained negative.

M&S has been the best performing share on the FTSE 100 index so far this year with a rise of 60 per cent.

The trading statement did not include any meaningful benefit from the new George Davies-designed Per Una range of womenswear, which was only launched on 28 September.

Mr Vandevelde was cautious on the outlook, saying the economic environment was "uncertain and may impact the high street over the crucial Christmas trading period".

The terrorist attacks on the United States had not had any impact on trade, he said.