First profit increase for M&S in four years

While food sales rose by 3.4% over the year, clothing and homewares fell by 2.5%



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20 May 2015

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Marks & Spencer in the UK has increased its profits for the first time in four years due to a decrease in capital spending and better deals with its suppliers.

Sales rose just 0.4% to £10.3bn following a tough period for M&S clothing. However this was offset by a 3.4% rise in food sales. Clothing and homewares sales fell 2.5% over the year. Underlying sales only rose in the final quarter of the financial year.

The retailer said it would return £150m to shareholders, after underlying profit before tax rose 6.1% to £661.2m in the year to 28 March.

Chief executive of M&S Mark Bolland, said the company’s food business had enjoyed an “outstanding year in a difficult market” and that its clothing and homewares division had been able to significantly increase its profit margins despite a sales performance below their expectations.

Operating profits at M&S’s overseas business dived nearly 25% to £92m, amid political and economic difficulties in Russia and elsewhere. Sales also fell by 2% for the online side of the business.

According to Ken Odeluga, a senior market analyst at Marks and Spencers will now be the envy of other UK retailers like Tesco and Sainsburys, who have experienced a fall in profits of late.

“The grocery-to-clothing-to-home wares high street retailer has emerged from the UK supermarket pack with a slim but clear lead of late, with a consistent (albeit marginal) like-for-like growth in food sales, and a recent victory in its years-long battle to turn around its clothing business. Its complete results for year to the end of March lend credence to the hope that it might well have consolidated this slight lead over its rivals further.

“M&S has been sure to point out that the food gross margin for the year has expanded by 30 basis points. It might not sound like much, but it would be the envy of struggling grocery retailers like Tesco and Sainsbury’s and Marks is fully aware of that. As are M&S’s investors,” said Odeluga.



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