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Oct. 1, 2009, 12:11 a.m. EDT

Marks & Spencer Sees Tough Business Ahead

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By Lilly Vitorovich

LONDON -- Marks & Spencer Group /zigman2/quotes/206225481/delayed UK:MKS +3.97% PLC reported better-than-expected fiscal second-quarter sales, driven by the introduction of less expensive food and revamped clothing and housewares ranges, but the U.K. retailer cautioned that business will remain difficult well into next year due to the economic downturn.

Shoppers at the flagship London store of Marks & Spencer, which posted better-than-expected sales.

Marks & Spencer, a bellwether for British consumer sentiment, joins a growing list of retailers, including John Lewis Partnership PLC, Next /zigman2/quotes/200704121/delayed UK:NXT +2.20% PLC and Debenhams PLC to warn of difficult conditions ahead due to rising joblessness and likely higher taxes in the U.K.

Second-quarter group sales rose 2.7%, largely thanks to a 9.6% rise in international sales and a 30% jump in online sales. The company also raised its outlook on annual profit margin thanks to better stock control, sourcing and supply chain management.

"Whilst there is more visibility in the marketplace and consumers appear more confident, we continue to be cautious about the outlook," said Stuart Rose , executive chairman and chief executive. "We expect 2010 to be a tough year and we will continue to run the business accordingly."

While the market has "bottomed out," rising unemployment and taxes are a major concern, Sir Stuart told reporters in a conference call.

Marks & Spencer has been hit hard over the past 18 months by the economic downturn as shoppers either cut back spending on non-essential items or sought less expensive food and clothing elsewhere. As a result, the company has revamped its food offer and availability, and introduced a budget range of grocery products. It has also cut capital spending, laid off 1,230 staff and closed some stores.

Marks & Spencer is also facing strong competitors on the internet. Online fashion retailer Asos /zigman2/quotes/209092221/delayed UK:ASC +4.60% PLC Wednesday booked a 47% jump in sales for the six months to Sept. 30 as shoppers snapped up its range of clothing, shoes and bags.

Write to Lilly Vitorovich at lilly.vitorovich@dowjones.com

/zigman2/quotes/206225481/delayed
UK : U.K.: London
157.30 p
+6.00 +3.97%
Volume: 4.77M
May 14, 2021 4:35p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
£3.08 billion
Rev. per Employee
£134,851
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/zigman2/quotes/200704121/delayed
UK : U.K.: London
8,086.00 p
+174.00 +2.20%
Volume: 225,973
May 14, 2021 4:35p
P/E Ratio
36.44
Dividend Yield
0.00%
Market Cap
£10.31 billion
Rev. per Employee
£138,653
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/zigman2/quotes/209092221/delayed
UK : U.K.: London
4,960.00 p
+218.00 +4.60%
Volume: 302,480
May 14, 2021 4:35p
P/E Ratio
27.55
Dividend Yield
N/A
Market Cap
£4.94 billion
Rev. per Employee
N/A
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