M&S beats forecasts with big surge in growth

The retailer also revealed staff will share a bonus pot of 80m, which includes handouts of between 200 and 500 for around 50,000 store staff.

Britain's biggest clothing retailer said sales at British shops open at least a year surged in the 13 weeks to March 27 despite "very bad trading conditions".

That beat analysts' average forecast of 1.7 per cent growth, helped by strong demand for formalwear and knitwear and a boost from the first day of the post-Christmas sale which was included in third-quarter results last year.

M&S welcomes new chief executive Marc Bolland, poached from Bradford's Wm Morrison, in May. Executive chairman Stuart Rose said: "We will hand over to him (Mr Bolland) in a strong position. This is a good set of results by any measure.

"We are through the worst ravages of the recession."

General merchandise sales were up 9.1 per cent and food sales up 1.8 per cent.

M&S now expects pre-tax profits for the 53 weeks to April 3 of between 680m and 690m, including 60m from an extra week of trading this year and taking into account the bonus payout.

M&S said its "self-help" measures were beginning to pay off, with total UK sales up 6.2 per cent and online sales soaring by 48 per cent in the quarter.

The bonus, which will be the first paid to store staff since 2008, reflected "out-performance" against its targets.

"By making our business more efficient and doing the painful things...we have been able to reward our staff," said Sir Stuart.

The group saw its sixth consecutive quarter of growth in food, helped by the introduction of new ranges such as its Wise Buys value offer. It is on track to launch 1,500 new lines this year and plans to add another 2.5 per cent of food space to stores this year. M&S is seeing food deflation of about one per cent, but said volumes are growing by four per cent.

Analyst Charles Pick at stockbrokers FinnCap said this could mean a boost for Leeds food manufacturer Northern Foods, which counts M&S as its biggest customer.

"(This is) all positive for UK food manufacturers who supply M&S, where the two that spring to mind as having large exposures are Northern Foods and Uniq," he said,

Clothing had a "particularly purple patch", with market share growing 1.1 per cent to 11.9 per cent. Lingerie, menswear, womenswear and childrenswear all grew market share. M&S now has more than a quarter of the UK lingerie market.

Sir Stuart said performance in clothing reflected people trading back up, after initially buying based on price during the recession.

"A lot of them are now moving back into value, which is price times quality," he said.

International sales fell 5.9 per cent in the fourth quarter, hit by particularly weak trading in Ireland and Greece.

Sir Stuart said consumer spending was likely to be "pretty flat" this year as a new government takes steps to rein in borrowing, adding M&S is cautious about the outlook for this year.

"They (consumers) want clarity on where they are going," he said. "They know the UK has got too much debt.

"They would like to know how it's going to be paid back and what effect it's going to have on them. It's the uncertainty that people do not like."

Shore Capital analyst Kate Calvert said while the sales performance beat expectations, investors fear M&S might have to increase pension contributions.

"Sales performance in general merchandise is excellent," she said.

"(But) costs appear to have gone up too, international is weak and there is nothing on the pension deficit."

Hitting out at 'tax on jobs'

Sir Stuart Rose waded into a political row over a hike to National Insurance contributions.

The Tories plan to block the bulk of a planned April 2011 one per cent rise for people earning more than 20,000.

On Gordon Brown's criticism of business leaders' backing for the Tory plans, Sir Stuart said it was "unfortunate".

"National Insurance is a tax on jobs – there might be other ways to

skin a cat."

He said the increase would cost M&S about 10m annually, but insisted M&S's support for the Tories was only based on the National Insurance argument.

"We are not a political organisation."

He added: "There's an opportunity for government to look at waste. If this company had not taken out 300m of cost over the last year we

would not be in the position we are today.

"There's an opportunity to look at the total pot of money."