Marks & Spencer's first-half mixed as food outweighs weak womenswear

Marks and Spencer Group has increased underlying profits in the first half of the year as strong food counterbalanced weak clothing sales.

The FTSE 100 retailer released its half year results to 26 September on Wednesday, with overall sales up 1.4% from the previous year on a constant currency basis to £5bn, driven by a 1.7% increase in UK sales. Underlying profit before tax increased 6.1%.

The strong sales growth was primarily from growth in the food business, with the retailer saying it outperformed the market by approximately three percentage points.

The company also reported a large jump in online activity, with M&S.com sales up 34.2% and website traffic up 20%.

However international revenues were down 5.1%, and while sales in Asia continued to grow, the company’s performance in Europe was significantly impacted by the exchange rate as it absorbed the costs instead of increasing prices.

General merchandise sales, mainly women's clothing, also dipped 0.4% overall and 1.2% on a like-for-like basis due to challenging trading conditions in the UK retail sector, resulting in high levels of promotional activity in the first quarter.

In the second quarter the company shifted its focus on full price sales and discount less which had an impact on its performance.

However, while underlying profits rose, the company reported a 24.3% decline in statutory half-year profit before tax of £170.7m, down from £225.6m the previous year.

Chief executive Marc Bolland said the company has made strong progress against its key priorities.

"Our food business again outperformed the market by over 3% points as our focus on quality and innovation continues to set us apart.

"In general merchandise we decided to improve profitability by focusing on gross margin, delivering another significant increase, which in part resulted in slightly lower sales.

Bolland said due to the retailer's good performance and strong cash generation it has increased its interim dividend to 6.8p per share.

Industry analyst Bryan Roberts at Kantar Retail said the combination of unhelpful weather and deepening competition in the fashion market were to blame for M&S's weak general merchandise sales figures.

"Any M&S CEO will rue the day that former boss Lord Rose famously declared that “weather is for wimps”.”

However he said there is an upside to the figures.

“Profitability is being assisted through a long-overdue consolidation in procurement and more disciplined discounting.

“Food, meanwhile, continues to tick along respectably thanks to ongoing innovation and seasonal excellence."