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Wed, May 21, 2008 - Page 10 News List

M&S profit rises on food and fashion

, BLOOMBERG

Marks & Spencer (M&S) Group Plc, the UK's biggest clothing retailer, said annual profit rose 25 percent to the highest in more than a decade after it remodeled stores and added outlets to bolster sales of food and women's fashions.

Net income climbed to £821.7 million (US$1.6 billion), or 48.7 pence a share, in the year ended March 31, from £659.9 million, or 38.5 pence, in the prior 12 months, the company said yesterday in a statement.

That beat the £749 million average estimate of seven analysts compiled by Bloomberg. Profit included a one-time pension gain of £95 million.

Business in the first seven weeks of the new fiscal year has been “mixed” with sales showing a “marked improvement” this month after a “difficult” April, chief executive officer Stuart Rose said in the statement. The London-based retailer has redesigned about three-quarters of its outlets to win market share as increased living costs erode consumer spending.

“The business is on a much sounder footing these days, but M&S needs to show it can re-establish its premium trading performance, albeit within an increasingly difficult market,” analyst Matthew Taylor at UBS AG in London said in a Friday research note. UBS has a “neutral” rating on the stock.

Sales at stores open at least a year fell 1.7 percent in the last quarter of the fiscal year, the second straight decline after two and a half years of growth, M&S said in yesterday’s statement.

Competitor Next Plc this month reported an 8.9 percent drop in first-quarter same-store sales.

Revenue from general merchandise, which includes garments and home furnishings, declined 3.1 percent at stores open at least a year in the fourth quarter, beating the 4 percent median estimate of nine analysts surveyed by Bloomberg News.

Food sales dropped 0.5 percent on that basis, compared with the median estimate for a 1 percent drop.

M&S rose 2 pence, or 0.5 percent, to 417 pence in London trading yesterday. The stock has slid 44 percent since rising to a record high of 749 pence last May.

British retail sales of clothes, shoes and textiles fell 0.1 percent in March from a year earlier, the first annual decline since 1998.

A gauge of UK consumer sentiment fell last month to the lowest in more than 15 years, GfK NOP Ltd said on April 30.

Financial pressure on consumers is “set to continue,” Next said this month. The Bank of England has cut its main interest rate three times since December to stave off a recession.

Rose, 59, was appointed to the role of CEO in 2004 to fend off a takeover plan by Philip Green.

He revived the company with redesigned women’s wear and stepped-up advertisements.

Marks said in March that Rose will become executive chairman in June, attracting criticism from some investors, who said the roles of chairman and CEO should be kept separate.

The extension of Rose’s role until 2011 will give him enough time to determine a succession plan, and the company will then return to a separation of the jobs, the retailer has said.

Marks & Spencer, which has more than 600 UK stores, had remodeled about 70 percent of its outlets by Christmas.

The retailer plans to get as much as a fifth of sales from overseas in the next five years, up from about 8 percent now, by investing in developing markets such as in eastern Europe.

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