M&S revamp pays off with profit boost from food sales

Marks & Spencer has reported much better-than-expected profits for the first half of the year, as the retailer continues to revamp its brand.

Profit before tax rose 56% to £326m in the six months to 30 September, driven by higher food and clothing sales.

M&S has been focussing on upgrading its shops, clothing lines and digital offer as part of a big turnaround plan.

Despite the recent boost, its boss warned that the retail giant remains cautious about the year ahead.

Its chief executive Stuart Machin said that high interest rates, slowing price rises, global conflict and erratic weather could hit trading.

Food sales were up nearly 15% in the period, after stripping out the effect of new shops opening.

It comes after M&S lowered the prices of hundreds of its food products as inflation - the rate at which prices rise - has squeezed many customers.

Clothing sales also got a boost after "improved style and value perceptions" among shoppers, it said.

Looking ahead, Mr Machin said that it was now expecting a good Christmas with customers "responding positively" to its ranges.

He said sales of party food and clothes were both up, with many of its customers telling the firm they are preparing for bigger family Christmas celebrations.

"Customer food to order is up 25% on last year and in clothing, men's and women's partywear is significantly up. Spirits are high for Christmas," he said.

But he said he was still conscious of household budgets being squeezed in the run-up to the key trading period, and promised that any falls in food costs would be passed on to customers "immediately".

M&S has seen a surge in its share price recently, allowing it to return to the FTSE 100 index four years after being relegated.

The retailer has been battling to regain its crown as the UK's most important High Street brand after years in which its popularity dwindled.

Overall, sales across the company went up by 10.8% to £6.13bn in the six months to 30 September. However, it did say that losses on its tie-up with online grocer Ocado had deepened.

Ocado - which is a joint venture between M&S and the tech firm Ocado Group - cost the company £23.4m in profits in the first half of the year.

It comes months after executives at M&S told shareholders they were "not happy" with how the online retailer was performing.

Mr Machin said on Wednesday he was still positive about its potential, although it would take "three years plus" to realise it.

Richard Lim, boss of the Retail Economics consultancy, said challenges would remain for M&S, particularly because of rising interest rates, which next year "will continue to squeeze middle and higher income households as well".