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M&S says general merchandise sales dip but margin story intact

British retailer Marks & Spencer reported a dip in first-quarter underlying sales in its clothing, footwear and homewares business on Tuesday, a minor setback for the group after a return to growth in the previous three months.

The 131-year-old firm did, however, maintain its guidance for the 2015-16 year, including a rise in the general merchandise gross margin of 1.5 to 2 percentage points.

Chief Executive Marc Bolland has stressed that his strategy is to primarily focus on profit margins rather than driving sales growth as he seeks to turn around the general merchandise division at the high street giant.

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Oli Scarff, Getty Images

Updating on trading ahead of its annual shareholders' meeting at London's Wembley Stadium later on Tuesday M&S said sales of general merchandise at stores open over a year fell 0.4 percent in the 13 weeks to June 27.

That compares to analysts forecasts in a range of flat to down 2.5 percent, with a consensus of down 1 percent, and growth of 0.7 percent in the fourth quarter of M&S' 2014-15 year, the division's first growth in nearly four years.

"In a challenging and promotional quarter, we continued to focus on improving product quality and style. We remain on track to deliver the improvement in gross margin previously guided," said Bolland.

First quarter like-for-like sales in M&S's food business rose 0.3 percent, a 23rd straight quarterly rise and in line with forecasts.

The food business is benefiting from a focus on product innovation and providing for special occasions, outperforming the wider market.

Shares in M&S have risen 25 percent over the last year on hopes the billions of pounds spent by Bolland on the redesign of products, stores, logistics and the website to address decades of under investment will pay off.

They closed Monday at 547 pence, valuing the business at 9 billion pounds