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LONDON (Alliance News) - Marks & Spencer PLC is the biggest gainer among FTSE 100 companies Tuesday after reporting flat pretax profits for the first half of the year but an uptick in group sales.
M&S said that once again its food business offset lagging fashion sales.
The retailing group reported broadly flat pretax profit of GBP280.6 million for the first half of the year, ended September 28, compared with GBP280 million in the same period last year. It reported a net profit of GBP249.6 million, compared with GBP220.0 million a year before, largely due to lower income tax expense compared with the prior year.
The company maintained its interim dividend at 6.2 pence per share.
M&S said it remained cautious about the outlook for the remainder of the year due to continued pressure on consumers' disposable incomes, but said its overall expectations for the full year remain unchanged.
The food business is not a problem for M&S. Its continues to boom. However the group continues to see falling clothing sales, which has now experience its ninth consecutive quarter of declining sales.
"We are well set up for improvements in the general merchandise arm, including design improvements, new campaigns and a broad range of products," Bolland told journalists in a conference call on Tuesday.
As expected, the department-store chain said that general merchandise sales on a like-for-like basis fell a further 1.5% in the first half of the year.
In sharp contrast, the M&S food division reported like-for-like sales growth of 2.5% in the first half, driven by a strong second quarter.
Besides its food division, M&S also reported a strong performance from its international business, and M&S online.
International sales were up 8% in the first half, driven by a strong performance in India, China and Russia.
The group's multi-channel sales rose 29%, boosted by an increase in the number of customers and a better rate of conversion, as well as an increase its inline clothing market share.
M&S said that mobile sales grew by over 70%, while tablet sales grew by a huge 140%, and now account for around 25% of overall sales compared, with only 11% a year ago. It also said that click-and-collect has significantly increased over the last year or so.
The group reported first half revenues of GBP4.88 billion, compared with GBP4.70 billion a year earlier.
Chief Executive Officer Marc Bolland launched a three-year plan back in 2010, with hopes of turning around M&S's declining general merchandise sales and rebuilding its image as an international, multi-channel retailer.
In a bid to attract a younger female audience to buy its clothing, M&S splashed out on a high-profile advertising campaign for its womenswear autumn/winter collection.
However, the drive failed to live up to expectations, with a number of well-respected analysts warning that M&S is continuing to lose market share in women's fashion, and shares in the company began to decline.
"Our investors know our strategy. We have always said that our journey will take a couple of seasons and collections, but the direction we are pursuing is style and quality," Bolland said Tuesday.
"Although only in store for three weeks of the half year, our Autumn/Winter collection has been well received by customers, and we have seen some early signs of improvement," he added.
Bolland refrained from going into any more detail, but said he is confident in the range's trend-led products, and said that its new womenswear and menswear 'Best of British' clothing lines have been trading strongly.
Bolland said that the group is well-prepared for the key Christmas trading period, with the hiring of 12,000 temporary staff, the addition of 800 specific lines for food, and 300 lines added to its gift shop collection. He said the general merchandise division is well positioned for dresses and occasion-wear.
Marks & Spencer said that it is continuing to invest in the long-term transformation of the business, and from 2014-15 will move to a lower, more sustainable long-term investment level of around GBP550 million per annum.
Last month, M&S said that it has opened food stores in cities such as Amsterdam and Paris, and revealed plans to open another 150 Simply Food outlets throughout the UK within the next three years.
M&S recently revealed that William Adderley, son of the founder of home-furnishings retailer Dunelm Group PLC, has become the biggest single private investor M&S, now holding just over a 3% stake in the company, a move which Bolland said he is very pleased about.
M&S were up 3.3% Tuesday morning, trading at 503.13 pence per share.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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