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M&S raises non-food margin forecast despite another sales dip

[LONDON] British retailer Marks & Spencer on Wednesday raised its annual forecast for non-food profit margins, its strategic priority, despite reporting another dip in quarterly underlying sales in the troubled division.

The 131-year-old firm also beat forecasts for first half profit and increased its dividend.

M&S said sales of general merchandise, spanning clothing, footwear and homeware, at stores open over a year, fell 1.9 per cent in the 13 weeks to Sept 26, its fiscal second quarter.

That compares to analysts' forecasts in a range of flat to down 2.0 per cent, with a consensus of down 1.2 per cent, and a first quarter fall of 0.4 per cent.

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The sales outcome reflected unseasonal conditions and a decision to focus on full price sales, M&S said.

M&S's non-food division increased its gross margin by a greater than expected 2.85 percentage points in the first half and the firm raised its full-year guidance to up 2 to 2.5 percentage points from up 1 to 1.5 percentage points previously.

Rather than chasing unprofitable sales, chief executive Marc Bolland's general merchandise strategy is primarily to focus on gross margins - the difference between the price M&S pays for goods and the price it sells them - through improvements in sourcing operations.

M&S reported a 6.1 per cent rise in first half underlying pretax profit to 284 million pounds (S$610 million), ahead of analysts' average forecast of 270 million pounds.

Second quarter like-for-like sales in M&S's food business rose 0.2 per cent, a 24th straight quarterly increase.

M&S raised its interim dividend by 6.3 per cent to 6.8 pence. "We delivered good underlying profit growth in the first half and made strong progress against our key priorities," said Mr Bolland.