Marks and Spencer sees first profit rise for four years

Marks and Spencer shopfront Image copyright PA

High Street retail giant Marks and Spencer has reported its first rise in annual profits for four years, saying it has made "good progress".

Underlying profit before tax rose 6.1% to £661.2m for the year to 28 March, better than analysts' forecasts.

Its food business had an "outstanding year", M&S said, but sales of general merchandise - which includes clothing - were below expectations.

However, sales of womenswear rose in the final quarter.

Chief executive Marc Bolland told the BBC's Today Programme that the improved results came despite the most difficult retail market in 15 years.

He also said that the company was confident in the strength of its clothing range.

"We've never had more design capability," Mr Bolland said.

Analysis: Kamal Ahmed, BBC business editor

Profits are up at Marks and Spencer - but at a cost.

Capital expenditure on modernising shops and an online revamp has fallen to £526m for the year compared to £710m last year. But it still totals over £3bn in the last five years.

Compare that to £700m at Next over the same period.

M&S investors will be pleased that gross margins are improving, meaning that M&S is resorting to fewer money-off promotions to drive sales. Dividends are also up.

But there are still major question marks over the vital womenswear department. Yes, the final quarter of the year saw sales up, but online problems over Christmas and the third warmest autumn on record all weighed heavily on sales over the year, which were down.

The chief executive, Marc Bolland, knows that he has to show consistent growth in womenswear before he can pronounce "job done".

Like-for-like sales - which strip out changes in store space - of general merchandise fell 3.1% over the year.

M&S said it had suffered from the mild weather last autumn - the third warmest on record - which had hit sales of knitwear and coats.

However, it said sales had returned to growth in the January-to-March period. It also said profit margins had seen "strong improvement".

Food sales rose 0.6% on a like-for-like basis, and despite intense competition, M&S said it had outperformed the market.

Online sales were down 2% over the year, with M&S being hit by problems at its distribution centre over the key Christmas trading period. However, sales increased in the fourth quarter.

M&S said it was raising its dividend by 5.9% and also announced a £150m share buyback programme.

Analysts broadly welcomed the news.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "The increase in the dividend and the announcement of a share buyback programme are both supportive and indicative of future confidence in prospects, whilst the company also continues to bear down on costs."

Shares in Marks and Spencer were up 2p, or .34%, at 587.50p in afternoon trade.

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