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Marks & Spencer Half-Year Profit Beats Forecasts

Marks & Spencer, unveiling a forecast-beating set of half-year results, announced a 1 billion-pound ($2.08 billion) share buyback on Tuesday and a major push into China and India.

Shares in Britain's largest clothing retailer by sales traded 1 percent higher in opening trade, outperforming a 0.4 percent fall in the DJ Stoxx index of European retailers.

Marks & Spencer, one of the British high street's best known brands, said it would also be spending as much as 1.1 billion pounds this year and next on developing the group.

Its interim dividend rose 31.7 percent to 8.3 pence per share.

"These decisions reflect our confidence in the strength and future prospects of the business," Chief Executive Stuart Rose said.

Rose, who has staged one of Britain's most notable company turnarounds in his three years as M&S CEO, said current trading was satisfactory although the short-term economic outlook remained uncertain.

Britain's second-largest fashion group Primark, owned by Associated British Foods, on Tuesday also expressed confidence going into the crucial Christmas trading season, saying its stores had started the autumn well.

But they appeared to be the winners in Britain's apparel sector, with data from the British Retail Consortium showing total British retail sales growth slowed to its weakest pace in nearly a year in October.

Marks & Spencer's profit before tax rose 11.5 percent to 451.8 million pounds in the 26 weeks to Sept. 29, slightly ahead of analysts' expectations.

"Marks & Spencer has reported a strong set of interim results," Numis analyst Jose Marco said in a note.

Confident

Marco was confident M&S could turn like-for-like growth of more than 3 percent in the next few years due to its store modernisation programme, the long maturity of Simply Food stores and rapid growth in home shopping, he said.

Sales at M&S Direct, its Internet shopping site, were up 60 percent since its relaunch in March 2007 with a target of 500 million pounds of sales from the business by 2010.

Sales of general merchandise at its UK stores open at least a year rose 2.3 percent. Comparable food sales rose 0.5 percent in the six month period.

Rose also unveiled a major push into international markets, a turnaround in the retailer's strategy after the previous management staged an ignominious exit from continental Europe five years ago.

Marks and Spencer planned to invest in major developing markets including China and India and had decided to enter China on a wholly-owned basis, Rose said. A deal to expand into China would be announced in the next financial year.

"We believe there is a significant opportunity to grow out International business going forward and are targeting a 15 to 20 percent contribution to group revenues in the next five years," Rose said.

Morgan Stanley analyst Claire Kent has said she believes an aggressive international approach could provide M&S with faster growth with its biggest opportunities China, India and Russia.