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Shoppers pass a Marks and Spencer shop in central London, on January 6, 2009.

CARL DE SOUZA/AFP/Getty Images

Marks & Spencer bucked the gloom in British retail, posting a seventh consecutive quarterly rise in underlying sales as its older and more affluent customers, coping better with a squeeze in disposable incomes, warmed to new products.

Marc Bolland, chief executive officer of Britain's biggest clothing retailer, which also sells housewares and upmarket foods, said on Wednesday that British consumer confidence, although low, had not deteriorated over the past two months.

"What we are seeing is that people are keen to protect their summer holidays and therefore are reducing their spend in some areas, they are cutting back on dining out," he said.

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This was playing to M&S's strengths in premium food, where 500 new products were launched during its fiscal first quarter, including a new Italian range and more healthy eating options.

M&S said in a trading update ahead of its annual shareholder meeting that sales at British stores open over a year, excluding VAT sales tax, rose 1.7 per cent in the 13 weeks to July 2.

That compared with forecasts for a rise of 1-2 per cent, according to a company poll, and a fourth-quarter rise of 0.1 per cent. Like-for-like general merchandise sales, spanning clothing, footwear and housewares, were flat, while food sales were up 3.3 per cent.

"M&S has delivered a good performance in challenging conditions," said Mr. Bolland, whose strategy is focused on product innovation, as well as expanding online and abroad. He is also working to improve stores, marketing, logistics and technology.

"For us, we bring out new things but we bring innovation out with a very strong price as well, the combination of those works very well for us," he said.

M&S said it had won 0.2 percentage point of market share in clothing, marking 17 consecutive months of gains, and 0.1 point in food.

The 127-year-old group, which serves 21 million Britons a week from around 700 stores and has over 350, mainly franchised, stores overseas, said its guidance for 2011/12 was unchanged, even though it, like rivals such as Debenhams, started its summer sale early.

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"We just followed the market but we were certainly not the first one in [a sale] we were one of the last ones in," said Mr. Bolland.

The first quarter included a strong April when trade was boosted by warm Easter weather and spending ahead of the Royal Wedding, a more subdued May and a June boosted by the sale, which started two weeks earlier than last year.







Liberum Capital analyst Simon Irwin, who cut his 2011/12 earnings forecast 5 per cent, said apparel markets were likely to remain overstocked, making it harder to pass on the full effect of higher input prices.

M&S, whose average selling prices were 7 per cent higher in the first quarter, said trading conditions would stay tough due to pressure on consumers' incomes and high commodity prices.

British shoppers are grappling with rising prices, subdued wages growth, a lack of credit, job insecurity, a stagnant housing market, government austerity measures and fears of interest rate rises. This has led to a recent spate of retail failures and more are expected.

Retail sales showed sluggish year-on-year growth of 1.5 per cent last month with demand for big-ticket items remaining weak, an industry survey found on Wednesday, adding to worries about second-quarter GDP growth.

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Elsewhere in the retail sector, luxury group Burberry beat forecasts for first-quarter sales, while fast-growing British fashion chain SuperGroup posted an 89 per cent rise in full-year profit.



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