Final results from Marks & Spencer (MKS) came in ahead of expectations as an improved performance in the UK offset a disappointing result overseas. Underlying pre-tax profit grew 6 per cent to £661m, against consensus forecasts of £651m, thanks to significant gross margin improvement in the embattled general merchandise (GM) division.
Chief executive Marc Bolland concedes that GM sales "did not meet expectations" for the year as a whole, with a 3 per cent like-for-like decline. Yet they returned to growth in the final quarter, which he attributes to higher quality and more fashionable styles. Moreover, improved sourcing and buying measures boosted the GM gross margin by 190 basis points to 52.6 per cent. The Dutchman said this margin would rise by a further 150 to 200 basis points this year, prompting analysts to raise their earnings forecasts. Broker Peel Hunt now expects underlying pre-tax profit of £715m this year, giving EPS of 36.5p, a 2 per cent upgrade.