UK: Fashion and food drive 40 percent profit growth at Marks & Spencer

DUBLIN: Marks & Spencer, the largest clothing retailer in Britain, said Tuesday that first-half profit rose 40 percent on women's fashions and food sales, and it announced plans to open its first stores in China.

Net income climbed to £393.2 million, or $820 million, in the six months ended Sept. 29, from £281.3 million a year earlier, the company said. The shares rose the most in a year.

Stuart Rose, the chief executive, said that the company would buy back 10 percent of the stock and accelerate its expansion in Asia after quarterly sales rose at the slowest pace in two years.

Marks & Spencer, based in London, redesigned shops and used the pop music group Take That in its commercials to increase revenue after higher borrowing costs and the wettest British summer on record hurt demand.

"Despite a difficult backdrop, these are a robust set of figures," Richard Hunter, head of British equities at Hargreaves Lansdown Stockbrokers, wrote in a note. Marks "is putting a number of strategic blocks in place to shore up future growth."

The company raised its first-half dividend by 32 percent to 8.3 pence a share. Marks said it figured on capital spending of between £1 billion and £1.1 billion in the next two financial years as it added space at a faster rate than previously expected. The cash will also fund extensions to existing stores.

Marks & Spencer spent £490.6 million during the first half, mainly on new stores and renovations.

Shares in the retailer rose 21 pence, or 3.32 percent, to close at 653 pence in London. The stock had dropped nearly 8 percent this year after more than doubling in the two years through 2006.

A one-time pension gain of £95 million meant profit beat the £313 million median estimate of eight analysts surveyed by Bloomberg News. Pretax profit before the pension credit rose 12 percent to £451.8 million, ahead of the £444.5 million that was the median of 16 analysts' estimates.

Five Bank of England interest-rate increases since August 2006 and rainy weather curbed British consumer spending this summer. The higher cost of borrowing has prompted retailers including clothing seller Next to say that the second half of this year will be tougher as rising mortgage repayments erode disposable incomes.

"Do I think it's a bit tougher out there? Yes," Rose said. "It's not all down to the economy." Warmer weather during October compared with last year affected sales, the CEO said. "Not many women bought thermal underwear last week."