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Last Updated: Tuesday, 11 October 2005, 11:10 GMT 12:10 UK
Is M&S ready to deliver?
Analysis
By Will Smale
BBC News business reporter

Marks & Spencer advertisement
M&S is using celebrities in its latest advertisements

As Marks & Spencer basks in a successful second quarter trading update on Tuesday, the market appears optimistic that the retailer is starting to turn things around.

For a company that until very recently appeared to be in sales freefall, its shares have risen strongly over the past fortnight, culminating in it touching the 400p mark on Tuesday.

On Monday its shares had closed at 384p, compared to this year's low of 319p back in May.

And its upward surge after Tuesday's surprisingly upbeat trading update took it to the symbolic level offered per share by retail tycoon Philip Green for the firm in 2004 - an offer that was rejected.

Improved clothing

Not many analysts had predicted the turn-around in sales but Robin Geffen, chief investment officer at Neptune Investment Management, had been optimistic about M&S's trading statement.

"All Stuart Rose has to do now is go on and produce an excellent six months in a row," he said.

Clothing sales were down just 0.2% against a first quarter decline of 11%, and it appears the slide has been halted.

Some credit has to go to the company's autumn clothing lines that first hit the shelves back in August.

Backed by a hefty advertising campaign featuring comedians Bob Mortimer and Jimmy Carr, actor Martin Freeman and 1960s supermodel Twiggy, M&S's most recent designs have been warmly welcomed.

Cost savings

Fashion commentators have widely declared that the latest clothes are a real return to form for M&S.

For this, Mr Rose must be allowed to take a large proportion of the credit, as they are the first collections that fully reflect his ideas rather than those of the previous board of directors.

Marks & Spencer share price

Since he took over as chief executive back in May 2004 and then saw off a hostile takeover attempt by Bhs boss Philip Green, Mr Rose has also continued with an intensive campaign to introduce cost savings and improve product sourcing and supply chains.

Yet some analysts remain less than impressed about M&S's recovery, saying clothing sales continue to trail way behind those of food, which were up 2.7%.

Rhys Williams of Seymour Pierce said there was always going to be some improvement to M&S's figures this year, as Mr Rose continued with cost savings and removing the sourcing and supply errors of past management.

Yet looking forward, Mr Williams warned it was "difficult to see where M&S is going to get additional sales from".




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