Marks & Spencer has regained its crown as the UK’s biggest womenswear retailer for the first time in four years, helping drive a much better than expected 56% increase in profits. The retailer also confirmed it would pay out almost £20m to shareholders in January, its first dividend since 2019, as pre-tax profits soared to just over £360m, well ahead of analysts’ expectations. The company credited its better than expected performance to a healthy rise in the number of items sold, reduced discounting on food, and better than expected full-price sales of clothing, as well as cost reductions, which it said had improved profit margins. M&S shares rose more than 9% on Wednesday, making it the biggest riser on the FTSE 100. Underlying sales of clothing rose 5.5% at the chain in the six months to 30 September, with particularly strong performances in holiday wear and denim, while profit margins increased to more than 12% from 9.8% as fewer items had to be sold on discount. The strong sales helped M&S overtake Next to become the UK’s biggest seller of womenswear in terms of value. Primark remains the number one in terms of the number of items sold. Food sales at established stores rose almost 12%, as M&S said it had increased the number of items sold at a greater rate than the big supermarkets, helping it to gain market share. Sales of its budget range Remarksable soared 45%, with the basic items within that range, such as butter and milk, found in one in five customers’ baskets. Stuart Machin, the chief executive of M&S, said the chain was experiencing a strong start to Christmas trading, with sales of women’s partywear up 50% and a 25% increase in seasonal food to order. However, he said customers had said they were uncertain about the post-festive period. “The majority of customers say they are not sure what is going to happen next year … They are slightly cautious, and that’s why we are also slightly cautious.” The stronger than expected figures will lift hopes for a better than expected festive season for retailers, who make the bulk of their profits in the final quarter of the year, after Next and Primark also reported strong figures. The online specialist Asos, in contrast, is seeing sales decline. While analysts lifted their annual profit forecasts, M&S indicated that it did not expect profits in the second half of the year to increase. It said it would continue to invest in price and the opening of new stores and closure of old ones, while deflation and “erratic weather” could have an impact, as well as high interest rates and major global events. The group’s house broker Shore Capital said the half-year profits were 39% ahead of its prediction and that it was upgrading its expectations for full-year profits by 12% to £646m. “To misquote the great and recently retired Michael Caine, AKA Charlie Croker of the iconic British movie The Italian Job, M&S ‘blew the bloody doors off’ in [the half-year],” the analyst Clive Black said in a note. Machin said sales growth had been supported by a £30m investment in cutting prices on food items and upgrading the quality of 500 lines, while on clothing the group had “backed lines with authority across core and seasonal product” at the same time as improving its style and value credentials. Performance was also aided by the continuing revamp of the group’s store estate, including the closure of four ageing branches in the half-year and the relocation of two – in Leeds and Liverpool – as well as a new site in Croydon. A further six stores were refurbished. One blot on the figures was a rise in M&S’s share of losses at Ocado Retail, its online grocery joint venture. Its loss from the venture mounted to £23.4m in the half from £0.7m a year before as its total losses surged to more than £80m, partly as a result of a warehouse closure and lower than hoped for sales growth. One benefit for M&S is that an expected final payment related to the acquisition of a 50% stake in Ocado’s retail arm is now unlikely to be due. While talks over the payment with Ocado continue, M&S’s half-year profits were boosted by a £64.7m credit after it said it did not now expect to have to make the payment next year, thought to have been as much as £191m.