Credit: M&S

Why M&S' first profit growth in four years isn't all it seems

It could be a good time for the long-criticised M&S boss Marc Bolland to get out.

by Jack Torrance
Last Updated: 07 Jan 2016

After a long period of stagnation and decline, Marks & Spencer announced today its profits had finally risen, for the first time in four years. The retailer's underlying profit before tax was up 6.1% to £661.2m in the 52 weeks to 28 March, seemingly on the back of its booming food division.

'We are transforming M&S into a stronger, more agile business – putting the right infrastructure, capabilities and talent in place to drive our strategic priorities,' said chief executive Marc Bolland. The company also announced a £150m share buyback, the first since 2007, which should put a smile on investors' faces. Shares were up 1.28% to 593p in mid-morning trading after a dip just after the open.

The news is a boost for Bolland, its boss of five years, rumours of whose imminent demise have been circling for a long while now. This begs the question of whether the Dutchman, previously of Morrisons fame, could quit while he is ahead. Though he insists he plans to remain in place to deliver next year's results, it would certainly be a good moment for him to consider jumping ship.

For while its topline profits are good, there are signs that M&S isn't the rampaging racehorse shareholders would perhaps like it to be. Despite announcing a return to quarterly growth in general merchandise (which includes womenswear) last month, like-for-like sales growth in that category was down 3.1% in the year.

Online sales, which should really be booming at this stage, were down 2%, something M&S blamed on problems at its Castle Donington distribution centre and a difficult transition from its previous website. Its overseas division isn't doing great either, with international sales down 2.1% on a constant currency basis.

Capital expenditure – used to modernise stores and improve the company's digital technology – was slashed by around £183m to £526.6m. One way to spin this is that it's a savvy way of keeping costs low, but it also means less investment in the business's long-term future.

After years of questions over whether M&S's poor performance could force Bolland out, these latest profit figures could be a good opportunity for him to quit while he's ahead.

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