M&S Rose is £1bn man

Marks and Spencer has reached one of its City-imposed targets and posted a £1 billion profit for the first time in a decade.

The retail chain this morning reported a 4.3 per cent rise in profits in the year to March 29, to £1,007.1 million, but remains a little more downbeat about its prospects in the next 12 months.

Reporting a “mixed” first seven weeks of the current financial year, chief executive Sir Stuart Rose told the BBC he has no idea how M&S will fare in the next year, and jumped on what is sure to become a self-effacing bandwagon set rolling last week by BA’s Willie Walsh by announcing that he will not be taking a bonus.

“Despite tougher economic conditions in the second half, M&S had a good year,” said Sir Stuart. “We have returned £914m to shareholders through the buy-back of 7.4 per cent of our shares and a 23 per cent increase in our dividend.

However, he added: "We did not do quite as well as we would have liked. The Company did not meet its internal bonus targets set in April 2007 and consequently will not be paying a bonus. However, we will be paying £12.8m to store teams recognising their hard work in delivering great service and dealing with significantly increased volumes.

"We expect market conditions to remain difficult for the foreseeable future and are managing our business accordingly," he told the BBC. "Tight stock control and management of costs are a priority."

The results would have been better were it not for a 1.7 per cent fall in like-for-like sales during the final three months of the year, which was predicted by Sir Stuart in January when he was one of the first retail leaders to forecast the economic downturn.

UK like-for-like sales fell 0.5 per cent in the year as a whole, with sales of food 0.4 per cent lower. But M&S increased its shop floor space in the UK by 4.8 per cent during the year, and this will continue to rise in this financial year. Total square footage at March 29 was 2.9 million

square feet, and this should increase by 15-20 per cent this year.

International sales were far rosier; up by 16.8 per cent to £712.9m, while operating profits grew 33 per cent to £116.4m.

Sir Stuart said that, despite the tough market conditions, M&S is well positioned to compete. “We are giving our customers better value and more choice than ever before. Brand momentum continues to strengthen and we have made significant investment to improve the quality of our trading space.

“We believe there is a real opportunity to expand our business in the UK and abroad, to stretch the brand into new product areas and to develop our Direct business. Capital expenditure is planned at £800-900m this year, demonstrating our confidence in the long-term future of our business,” he said.