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Last Updated: Tuesday, 11 April 2006, 16:15 GMT 17:15 UK
Sales jump sustains M&S revival
M&S store
M&S is increasing its market share
Marks and Spencer (M&S) has reported a stronger-than-expected rise in sales, indicating that the retailer's recent revival is continuing.

Like-for-like sales - which strip out the effects of new store openings - grew by 6.8% in the first three months of the year, M&S said.

Sales of general merchandise - which includes clothes - were up by 8.2%, while food sales rose by 5.6%.

However, M&S chief Stuart Rose said the trading environment remained tough.

Progress 'pleasing'

M&S said that it expected profits for 2005/6 to be in the range of 745m to 755m. This takes into account expected staff bonus payments of 70m, which includes a 20m bonus to be split between the firm's 52,000 shop assistants.

The 6.8% rise in sales for the first three months of the year follows a 2.9% rise in the previous quarter.

Stuart Rose
This is a journey, that's why I don't use the recovery word. We're making steady progress
Stuart Rose, M&S chief executive

For the year to 1 April, total like-for-like sales were up by 1.3%, with general merchandise down by 1% and food sales up 3.6%.

The forecast-beating sales figures gave M&S shares a boost on the London market, helping them to close 22 pence, or 3.9%, higher at 586p.

"All the important numbers in today's statement are stellar, showing that the recovery is in full flight," said Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers.

But Mr Rose was more cautious in his assessment.

"We are pleased with the progress we are making, but there remains much to do," he said.

"The trading environment remains difficult and we do not expect this to improve in the next financial year."

Rising market share

M&S's strong rise in sales is in marked contrast to the performance of many other shops on the UK High Street.

(Mr Rose) is certainly doing a lot better than the opposition
Richard Ratner, Seymour Pierce

Figures published on Tuesday by the British Retail Consortium (BRC) showed that like-for-like sales for the retail sector as a whole were 1.4% lower in March than a year ago - the biggest fall since July last year.

Many big names are struggling in the current trading climate. Last month, fashion retailer Next reported an 8.9% fall in like-for-like sales for the seven weeks from 29 January to 18 March.

Mr Rose said that industry data for the 12 weeks to 5 March showed the M&S's market share in the key womenswear sector was up to 10.9%, from 9.3% in the same period last year.

Richard Ratner, senior retail analyst at Seymour Pierce, said M&S's performance in non-food sales had been "way ahead" of forecasts.

"(Mr Rose) is certainly doing a lot better than the opposition, he's keeping his stocks much tighter and he's concentrating much more on what we call full-margin sell-through - that's selling goods at full price rather than having to discount them."

Store revamp

Mr Rose became M&S's chief executive in 2004 when the company was fending off a takeover approach from retail tycoon Philip Green, and his reforms have been credited with reviving the retailer's fortunes.

Its recent advertising campaign - which features the model Twiggy - has also been seen as a success in boosting sales.

"We are selling more goods, we are taking market share and this is not a bad set of results, although I would say this is against a comparatively weak performance last year," Mr Rose told the BBC.

He added that M&S had greatly improved its product range, and said that the firm was now aiming to revamp its stores.

"We said we'd work on product and I think we've really moved our product forward," he told the BBC.

"We said we'd work on our environment - that for us is making our stores look better. We're currently spending 570m this year alone refurbishing a third of our (store) portfolio, and we will continue that into 2007-8."

"This is a journey, that's why I don't use the recovery word. We're making steady progress."

M&S, like other retailers, has come under fire for allegedly squeezing its suppliers to keep prices in its shops low.

Mr Rose acknowledged that suppliers were being asked to cut their profit margin - but argued that bigger volumes meant they were being paid more overall.

"We went back to our suppliers and say: 'You're having to work hard... you're having to take a margin which is a bit less than you used to get, but you're selling more goods and you're therefore taking more pound notes home'," he said.

M&S chief Stuart Rose comments on the rise in sales

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