Bottom Line: M&S remains ahead among retailers

AS A retailing slogan for the 1990s, the adage 'Sales are for vanity, profits are for sanity,' espoused by Sir Richard Greenbury, chairman of Marks & Spencer, must beat everyday low pricing hands down.

Not that Marks is ignoring the price-conscious 1990s consumer. Its Outstanding Value campaign has meant prices were pegged, or cut, for a second year, and its mark-up fell for the third consecutive year. The difference between Marks and some of its rivals is that it has not had to sacrifice profits to do so. Improved efficiency in the stores - sales and operating profits per employee were up by 8.8 per cent and 16.6 per cent respectively - meant that operating margins improved from 12.5 per cent to 13.3 per cent.

Gross margins in Britain may have been flat for the first time in five years, but given that its sales grew more than two-thirds as fast as the high-street average, that small sacrifice was more than worthwhile.

The prospect of a rise in raw material prices is a concern for the current year but Sir Richard is undoubtedly right to point out that that is likely to hurt Marks far less than its rivals.

Its dominance of the high street does, of course, limit the potential for growth here and, even with a quarter of the pounds 1bn capital spending planned for the next three years earmarked for overseas businesses, it will be some years before they are large enough to take up the running. But the 7.5 per cent rise in British like-for-like sales in an unexciting period for consumer spending means it would be unwise to write Marks off as ex- growth just yet.

Having outperformed by 15 per cent since the beginning of February, the shares succumbed to profits-taking and fell 12.5p to 412p. On forecasts of about pounds 950m, that puts them on a multiple of about 18, a slight premium to the sector. While that is justified by Marks' strength and profits record, it means the shares are unlikely to do much in the short-term.