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* H1 underlying profit 268 mln stg vs forecast 252 mln
* Raises general merchandise full-year gross margin forecast
* Lowers full-year cost growth forecast
* Q2 non-food like-for-like sales down 4 pct, food up 0.2pct
* Shares climb 9.7 pct (Adds detail, CEO, analyst, fashion blogger comment, shares)
By James Davey
LONDON, Nov 5 (Reuters) - A glimmer of improvement inwomen's clothing helped British retailer Marks & Spencer to post its first rise in first-half profit for four years,though analysts said it is too soon to declare a turnaroundafter years of false dawns.
Shares in the high street stalwart, down 17 percent over thepast year, jumped by nearly 10 percent after results showedprofit margin gains, with cost cuts and rising sales of upmarketfood offsetting a deepening decline in sales of generalmerchandise, spanning clothing, footwear and homeware.
The key womenswear category, however, achieved a 1.3 percentsales uplift in the first five months of the half-year to Sept.27. At stores open more than a year, womenswear sales were up0.7 percent over the five months.
Chief Executive Marc Bolland said the company's revampedwomenswear had won praise in the fashion press and that salesshowed that female shoppers were being drawn back to its stores.
A poor September dented the first half performance, asunseasonably warm weather kept high-margin winter items such ascoats, knitwear and boots on shop shelves.
Analysts noted the green shoots but said it is too soon tosay that Bolland is finally delivering a turnaround, though theCEO raised the profit margin forecast for non-food products,lowered guidance on cost growth and upped the dividend.
"These results are probably the first for a long time thatwill not result in forecast downgrades," BESI Research analystTony Shiret said.
WEAKNESSES
Others, meanwhile, said that the retailer's weaknesses hadnot gone away.
"Beyond the flagship stores, many still feel like museumswhere older people go to browse black slacks," said PhilDorrell, director of retail consultancy Retail Remedy. "But MarcBolland may have done just enough to avoid the rocks - for now."
Bolland has sought to improve the quality of M&S womenswearby working closely with suppliers, reducing the number ofsub-brands and cutting promotions, but non-food sales fromstores open more than a year still fell for the 13th quarter ina row.
He told reporters that consumer research showed thatcustomers now believe M&S is "back in style" with fashionableclothing. "We wouldn't have had that four years ago," he said.
Sasha Wilkins, founder of the LibertyLondonGirl.com fashionblog and former executive style editor at the Wall StreetJournal, said that M&S style director Belinda Earl had created amuch clearer brand identity.
"They have just looked at every single area of the brand andmade it more relevant to the British consumer," she said.
Bolland, poached from grocer Morrisons in 2010, hasspent more than 2.3 billion pounds ($3.7 billion) to addressdecades of underinvestment, revamping products, stores, awebsite, logistics and marketing.
M&S general merchandise sales at stores open more than ayear fell 4 percent in the 13 weeks to Sept. 27, its financialsecond quarter. That compared with a consensus analysts'forecast of a 3.7 percent decline and a first-quarter drop of1.5 percent.
WEATHER WOES
M&S said the mild September weather knocked about 2.5percent off non-food sales in the second quarter.
Rival Next also cited the weather when it cut itsprofit forecast last week and fashion firm SuperGroup issued a profit warning. Growth at Primark slowed, butthe discount chain said on Tuesday that it was unconcerned bythe weather.
Many British retailers also face the challenge ofcost-conscious shoppers' changing their habits, turning awayfrom traditional stores towards the internet and discountchains.
However, M&S's gross profit margin in general merchandiserose by a better than expected 150 basis points in the firsthalf, benefiting from lower prices from suppliers and fewerin-store discounts. The company also said it was reining incosts.
As a result, first-half pretax profit before one-off itemswas 268 million pounds, ahead of analysts' average forecast of252 million pounds and up from 262 million pounds last year.
M&S also raised its guidance for non-food gross margin forthe full 2014-15 year to growth of 150-200 basis points, from100 basis point previously, and lowered its guidance onoperating cost to 3.5 percent growth from 4 percent.
The group ended the first half with free cash of 71 millionpounds and raised its interim dividend by 3 percent to 6.4pence. It said it would update on further potential shareholderreturns when it publishes full-year results in May.
The trends support the prospects for higher cash flow andshareholder returns, one major M&S investor told Reuters. "There's the first glimmer of that being possible in theseresults. But M&S is still flagging a very tough environment andI don't think anyone's expecting sales to roar away," he said.
M&S's food business, which contributes more than half ofgroup sales, is performing better than clothing, with its focuson quality and innovation setting it apart from the widergrocery industry. Its like-for-like sales rose 0.2 percent inthe second quarter - a 20th consecutive quarterly increase.
M&S forecast online sales would return to growth byChristmas after falling 4.6 percent in the second quarter.
Shares in the company were up 9.7 percent at at 434.7 penceby the close, valuing the business at 7.2 billion pounds.(1 US dollar = 0.6263 British pound) (Additional reporting by Paul Sandle and Li-mei Hoang; Editingby Anna Willard and David Goodman)
