M&S gets back its old sparkle

STORES group Marks & Spencer provided overwhelming evidence of its recovery, unveiling the best Christmas sales in years and a strong increase in takings over the entire autumn period.

'We are very pleased and very excited. It's been good so far and there's a lot more to do,' said chairman Luc Vandevelde.

Underlying sales of clothing, gifts and goods for the home rose 10.4% in the seven weeks to 12 January, the best rate of growth for about a decade. The increase was driven by a bumper season for M&S's core womenswear business, where sales rose almost 11%. Excluding the impact of new space, group sales were 8.3% ahead, helped by a strong performance from food.

The figures far outstripped City forecasts and prompted a 2% increase in the share price to 368p, the highest-rising stock in the FTSE 100 index.

'We have turned a vicious circle into a virtuous circle. Our customers are coming back and finding the products they have always liked at M&S,' said Vandevelde.

Takings were also strong in the 15 weeks to 12 January, boosted by an 8% rise in clothing sales and healthy contributions from homewares and food. Excluding the impact of new space, group sales were 7% ahead.

Vandevelde warned that the current rate of growth is unlikely to be sustained, but declared himself confident about the future. 'We expect the market growth rate to come down to about 5% and within that we hope to do very well,' he said. 'The initial reaction to our new spring ranges has been very positive and a lot more new stuff is coming in. I am very confident of continued growth.'

Recovery in the core clothing business was attributed to the popularity of the new Perfect range, specialising in classic women's clothing, and the George Davies-designed per una range. This represented 15% of the revenues from women's clothing in the 90 stores where it appeared, and Vandevelde said the range is to be given an extra 40% of selling space by the end of March.

M&S also said that it would unveil details next week of its plan to return £2bn to shareholders in March. The scheme is not contingent on the disposal of Kings supermarkets in the US.

Today's sales growth prompted City analysts to upgrade their year-end profits forecasts by about 5%. Tony Shiret of CSFB expects pre-tax profits to 31 March of £620m.