M&S shares rise as retailer reports better margins

Marks & Spencer yesterday raised its annual forecast for margins in clothing and homewares even though quarterly sales fell in this troubled division.
M&S shares rise as retailer reports better margins

The group also beat forecasts for first-half profit and increased its dividend, sending its shares up almost 4% at one stage.

The performance is likely to give a boost to chief executive Marc Bolland who, rather than chasing unprofitable sales has focused on gross margins, the difference between the price M&S pays for goods and the price it sells them, through improvements in sourcing operations.

The company said sales of general merchandise, spanning clothing, footwear and home wares, at stores open over a year, fell 1.9% in the 13 weeks to September 26, its fiscal second quarter.

“We delivered good underlying profit growth in the first half and made strong progress against our key priorities,” Mr Bolland said.

It reported a 6.1% rise in first-half underlying pre-tax profit to £284m (€298m). While UK profits rose 14.6%, overall profit growth was dragged back by a weak international performance, where profit fell 52%.

Its shares have risen 29% over the last year on hopes that the billions of euro on the redesign of products, stores, supply chain logistics and the website will pay off. But his critics argue increasing gross margins alone is not a source of long-term growth.

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