Marks & Spencer could be at dawn of new golden age, say analysts

Marc Bolland, chief executive of Marks & Spencer
Marc Bolland, chief executive of Marks & Spencer
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MARKS & SPENCER could be at the start of an exciting period of rising sales, strong cash flows and profit upgrades, a leading retail analyst has said.

The group is widely expected to post its first improvement in annual results in four years when it presents its results to the City on Wednesday. Analysts expect the retailer to post full-year pre-tax profits up 4 per cent to £648m, after its key clothing division registered its first rise in sales last month following 14 consecutive quarters of decline.

In April a much talked about 1970s-style suede skirt worn by TV presenter and model Alexa Chung helped lift its general merchandise arm to a 0.7 per cent rise in final quarter like-for-like sales.

The move prompted the chain’s beleaguered chief executive Marc Bolland to say the business was “trading with self confidence.”

Clive Black, analyst at Shore Capital, told The Yorkshire Post: “We are of the view that M&S will‎ report and increase in profits, which is a relief and good news.

“More importantly is whether M&S has carried the decent momentum in quarter four into quarter one of the current year.

“If so then we may be at the start of an exciting time of rising sales, margins, strong cash flows and profit upgrades.

“In such a scenario M&S, which now has relatively low capital expenditure, could see free cash flow mushroom, so supporting a distribution to investors, be it higher dividends, a special dividend or a share buy-back.”

Last month the retailer said its spring and summer collections were well received and that its Autograph and Limited Edition brands were trading strongly.

The company’s food business also saw like-for-like sales in the 13 weeks to March 28 rise by 0.7 per cent, helped by record Valentine’s sales.

The retailer said the specialist positioning of its food business continues to deliver results in a deflationary market, caused by the ongoing supermarket price war.