Marks & Spencer has beaten expectations as its returns to profit growth - but its full year results show a mixed performance across the group.
Nevertheless investors were impressed with shares rising 1.4 per cent to 593p in mid-morning trade.
Marks & Spencer has beaten expectations on its underlying pre-tax profits for the year to March 2015, rising 6.1 per cent to £661.2m, while statutory PBT climbed 3.4 per cent to £660m. This is the first time it has posted growth in profits for four years.
Its international arm fared less well, with operating profit down 24.8 per cent to £92m.
Food sales were up 0.6 per cent on a like-for-like basis as the group managed to stay out of the price war which is engulfing Britain's high street supermarkets such as Sainsbury and Tesco. General merchandise like-for-like sales were down 3.1 per cent for the year, although it grew in the fourth quarter.
Group revenue was flat at £10.3bn, as sales growth in the UK was dampened by declines in M&S' international arm. M&S.com sales fell two per cent over the year however it also saw an improvement in the fourth quarter.
Additionally the retailer confirmed City speculation by committing to a share buyback programme totalling £150m.
Why it's interesting
This set of results was crunch time for Marc Bolland, who has been under pressure to turn the business around after four years of profit declines that have led to it being overtaken by rival Next.
Critics will point to continuing falls in general merchandise, the division that incorporates clothing. Although M&S has emphasised fourth quarter growth as a sign of a turnaround, Bolland admitted sales performance had come in "below our expectations". Warm autumn weather left it "disproportionately affected" due to its large market share of knits and coats, he said.
But the 190 basis point-improvement in gross margins will please investors, after a period in which the retailer was admittedly overstocked on some key items, forcing it to discount heavily.
The website has also continued to cause a headache for the business. Initially customers had struggled to get to grips with the new website and there were delays due to operational challenges at its Castle Donington distribution centre over the peak Christmas period. M&S said it "learned from this" improving its systems and logistics smangement team.
What M&S said
March Bolland, chief executive, said:
In food, we had an outstanding year in a difficult market. In general merchandise, we significantly increased the gross margin, and, while sales performance was below our expectations, we returned to growth in the fourth quarter. We continued to control costs and capital expenditure tightly, resulting in significantly improved free cash flow
M&S has posted its first profit increase in four years but today's results show it's still got a long way to go.