November 9, 2010 / 7:22 AM / 9 years ago

UPDATE 5-Marks & Spencer's new CEO lifts investment

* To invest an extra 850-900 mln stg over 3 years

* Aims to boost group revenue to 11.5-12.5 bln stg

* To invest in UK business, online, overseas

* H1 underlying profit 348.6 mln stg vs forecast 335-353 mln

* Shares down 0.2 pct vs European retail index up 0.5 pct

(Adds more CEO comments, links, detail, updates shares)

By Mark Potter and James Davey

LONDON, Nov 9 (Reuters) - British retailer Marks & Spencer Plc (MKS.L) said it plans to ramp up investment in its core UK business, online and overseas as new boss Marc Bolland set out his growth plans beside a 17 percent rise in first-half profit.

The Dutchman, enticed from grocer Morrison’s (MRW.L) by a 15 million pound ($24.3 million) pay deal, said he would spend an extra 850-900 million pounds over three years to lift revenue to 11.5-12.5 billion by 2013-14 from 9.3 billion in 2009-10.

“We’ll make the UK (business) more competitive but also lay the foundations ... to become in three to five years time an international multi-channel retailer,” Bolland told reporters on Tuesday.

About two-thirds of the new investment will be allocated to the clothing and food group’s British shops, where a new “Only at M&S” slogan will emphasise exclusive, innovative products like shower resistant fabrics and pasta that soaks up sauce.

The group will also step up store openings in Britain, improve in-store navigation and add more homewares and foods.

A further 150 million pounds will be spent on the group’s online business, with a goal to double revenue by 2013-14, and a similar amount will go on expanding overseas, with India and the Shanghai region of China the top two priority markets.

Marks & Spencer (M&S) said it could fund the programme from existing cash flows, while keeping an investment grade credit rating and a progressive dividend policy.

However, some analysts were concerned the expected benefits could be derailed by an uncertain economic environment.

“A few interesting developments, but a new capex increase which may unnerve some, given historical spend,” said analyst Matthew McEachran at brokerage Singer, noting the group had only recently spent money on refurbishing British stores.

At 1130 GMT, M&S shares were down 0.2 percent at 412.3 pence, lagging a 0.5 percent rise on the STOXX Europe 600 retail index .SXRP — which M&S stock has outperformed by 11 percent since May. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphic on UK retailers: r.reuters.com/kum54q

Breakingviews column: [ID:nLDE6A80WV] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

BRING ON THE EVOLUTION

M&S, Britain’s biggest clothing retailer, said it made a profit before tax and one-off items of 348.6 million pounds in the six months ended Oct. 2, just above analysts’ average forecast of 347 million in a company poll.

The 126-year-old group, which serves 21 million Britons a week from more than 650 stores and which has about 320 mainly franchised shops abroad, raised its dividend by 12.7 percent to 6.2 pence a share, the first increase for three years.

M&S had a torrid recession as shoppers switched to cheaper groceries and flocked to discount clothing chains such as Primark, whose parent company Associated British Foods (ABF.L) posted a forecast-beating rise in full-year profit on Tuesday. [ID:nLDE6A41LZ]

It has bounced back, helped by new clothing ranges and cheaper “wise buys” in food, though stores groups in general are worried tax rises and public spending cuts aimed at reducing government debt could again hit demand.

A survey on Tuesday showed underlying UK retail sales rose just 0.8 percent year-on-year in October. [ID:nSLA8ME6I2]

M&S said it expected a tougher second half as rising cotton prices compound a subdued consumer outlook.

Bolland was confident his plans would not be derailed, however, and highlighted M&S planned to save a extra 50 million pounds a year from supply chain and IT improvements.

In Britain, the group plans to add around 3 percent of new selling space per year until 2015-16, with a goal of having 95 percent of shoppers within 30 minutes of a full-line M&S store.

In food, it will add around 1,000 lines, but reduce the number of non-M&S branded lines — a key initiative of predecessor Stuart Rose — to 100 from 400.

Abroad, Bolland said M&S was looking at western Europe but had no current plans to re-acquire stores in markets such as France and Spain it left in 2001. (Editing by David Hulmes and David Holmes) ($1=.6201 Pound)

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