By James Davey
LONDON (Reuters) - British retailer Marks & Spencer (L:MKS) has posted its best non-food sales performance for nearly four years as it starts to put its online distribution problems behind it.
The company said sales of general merchandise, spanning clothing, footwear and homewares, at stores open more than a year rose 0.7 percent in the 13 weeks to March 28, its fiscal fourth quarter.
The outcome was the first time in 15 quarters M&S has not posted a fall in non-food like-for-like sales.
It was also better than analysts' average forecast of down 1.2 percent and followed a third-quarter decline of 5.8 percent, which reflected unseasonal weather in October and November and disruption at its e-commerce distribution centre.
Marc Bolland, chief executive since 2010, has spent billions of pounds addressing decades of under-investment at M&S, overseeing a redesign of products, stores, logistics and its website. But a new clothing team he set up in 2012 has so far failed to deliver a sustained increase in sales.
However, a food business outperforming the wider grocery market and improving profit margins both in non-food and food have kept investors onside, with M&S shares rising a third over the last six months and recently hitting a seven-year high.
"We have made strong progress over the quarter," said Bolland, whose stated strategy is to focus on gross margin, rather than chase unprofitable sales.
M&S said it saw good progress on general merchandise gross margin in the fourth quarter, with full-year guidance unchanged at up by between 150 and 200 basis points. It said it had promoted less and focussed more on full-price sales.
M&S.com sales returned to growth with sales up 13.8 percent.
Like-for-like sales in M&S's food business rose 0.7 percent, a 22nd straight quarterly rise and ahead of analysts' average forecast of a rise of 0.3 percent.
Full-year gross margin guidance for food was maintained at up 10 to 30 basis points.
The group also improved its full-year cost guidance from a rise of 2.0 percent to a rise of 1.5 percent.
However, M&S said macro-economic issues particularly in its Russia, Ukraine and Turkey franchise partnership, coupled with further weakening in the euro, had significantly impacted second-half profit in the international division, where fourth-quarter sales fell 3.8 percent.
Analysts are on average forecasting a pretax profit of 641 million pounds in the year just ended, up from 623 million in the previous year. That would be the first rise in four years.
Full-year results will be announced on May 20.