Marks & Spencer Group Plc reported first- half earnings that beat analyst estimates and increased its profitability forecast as the U.K. retailer procures more products direct from manufacturers to cut costs.
Underlying pretax profit rose 6.1 percent to 284 million pounds ($438 million), the London-based company said in a statement Wednesday, compared with the 271 million-pound average estimate of 21 analysts in a Bloomberg News survey. Gross margin for the year will widen by 2 to 2.5 percentage points in the general merchandise unit, it said, raising the forecast by 0.5 percentage point.
“In general merchandise, we decided to improve profitability by focusing on gross margin, delivering another significant increase, which in part resulted in slightly lower sales," Chief Executive Officer Marc Bolland said in the statement. Second-quarter same-store sales of general merchandise -- mainly clothes -- fell 1.9 percent, missing estimates.
Bolland’s decision to modernize the company’s information systems and simplify its supply chain is bearing fruit. M&S is using the additional cash it has generated to fund a 150 million-pound share buyback, which began in July, as well as to open new convenience food stores to meet growing demand. The retailer raised its first-half dividend by 6.3 percent to 6.8 pence a share.
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