M&S' half year sales results show an increase of 1.4% to £5b, with underlying profit before tax up 6.1% to £284m. However, in General Merchandise, sales were slightly down.
Marc Bolland, chief executive, says: “We delivered good underlying profit growth in the first half and made strong progress against our key priorities. In General Merchandise we decided to improve profitability by focusing on gross margin, delivering another significant increase, which in part resulted in slightly lower sales. As a consequence of good performance and strong cash generation we have decided to increase our dividend.”
General Merchandise gross margin was up 285bps. Unseasonal conditions, together with M&S' decision to focus on full price sales and discount less in the second quarter, impacted performance, with sales 0.4% lower, or 1.2% lower on a like-for-like basis. M&S.com sales were up 34.2% with growth across all key metrics. As a result of higher than planned sourcing gains and lower discounting, M&S has increased the full year gross margin guidance to up 200 to 250bps.
UK operating costs were up 2.2% in line with expectations and M&S' full year guidance remains unchanged at +4%. Overall, UK operating profit was up 14.6% to £306.2m.
International sales were down 0.9% to £506.6m with operating profit down to £24.7m. Performance in M&S' owned markets was significantly impacted by the adverse movement in the Euro exchange rate, while the challenging macro-economic conditions, particularly in M&S' Middle East region, continued to affect the performance of its franchise business.
Group underlying profit before tax was up 6.1% to £284.0m. Non-underlying adjustments to profit were £68m net charge (last year £11.8m net credit). Statutory profit before tax was £216.0m (down 22.7%).