Marks and Spencer sees profits and sales fall

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Media captionM & S's Mark Bolland reveals that customers tend to spend their money on staying in on Saturday night rather than going out

Marks and Spencer has reported a fall in both profits and sales, blaming the "challenging economic environment".

The retailer made a pre-tax profit of £320.5m in the six months to 1 October, 8% lower than the same period last year thanks to declining non-food sales.

While its like-for-like UK sales were up 0.5% for the half year as a whole, they declined 0.7% in the final three months.

The British Retail Consortium said industry-wide sales fell in October.

While M&S's food sales rose during the six months, those of its clothing lines and other products declined.

'Welcome relief'

Despite the fall in half-year profits, M&S's results were in line with market expectations, and its shares rose 4.1% in early trading, but later fell back to be 2.3% up in afternoon exchanges.

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M&S chief executive Marc Bolland said the company had made the decision not to pass on all of its higher costs to consumers.

He said the retailer had taken "decisive action" to offer better value to customers.

Mr Bolland added that, while he remained cautious about future trading, M&S was "well set up" for the Christmas period.

The retailer's results have been welcomed by analysts.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "With much of the retail pain already priced in, the numbers have come as a welcome relief to M&S investors."

Stockbrokers Oriel Securities said M&S had delivered a "strong performance" in its second quarter.

It added in a statement: "We remain convinced that M&S is on the right track with the customer proposition and that it has the right team in place to deliver this recovery."

In contrast, discount retailer Primark reported annual revenue up to September 2011 increased 13% to £3bn, while like-for-like sales were up 3%.

However, operating profit fell 8% to £309m, partly because of high cotton prices which the company had absorbed and not passed on to consumers. Heavy High Street discounting was also a factor.

Associated British Foods, which owns the Primark brand, said cotton price inflation was easing, but would not be felt until the beginning of next year when it brings in its new range.


The British Retail Consortium said like-for-like UK retail sales in October were 0.6% lower than the same month last year.

BRC director general Stephen Robertson said: "This is evidence of the basic weakness of consumer confidence and demand and is worrying this close to Christmas."

He urged Chancellor George Osborne to use his autumn statement to announce a limit to rises in business rates, and not increase fuel duty.

Howard Archer, chief UK and European economist at IHS Global Insight, said the weak retail sales data would increase fears that the wider economy was heading back towards recession.

He said: "Retailers will be desperately hoping that consumers loosen their purse strings over the critical Christmas spending period to have a good time after a difficult year.

"However, it is hard to be optimistic about the prospects for consumer spending."

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