Marks & Spencer set to reveal first profit increase in four years

Marc Bolland's turnaround plans for British department store group Marks & Spencer appeared to have finally paid off, as the group is predicted to report its first increase in full-year profit later this week.

The group is expected to announce a 4 percent increase in underlying annual pre-tax profits to 648 million pounds for the year to March 28, 2015 during its meeting on Wednesday, according to analysts, compared to 623 million pounds for the year to March 28, 2014. M&S shares have grown by a third over the past nine months, reaching a seven year high in April, which suggests that Bolland's billions pound investments on product design, stores, logistics and improving its website have paid off.

M&S to announce first profit increase this Wednesday

M&S's announcement may include a guidance on potential cash return, according to the Financial Times who spoke to people close to the group. Analysts suggest that M&S may deliver an extra 200 million pounds to investors, although the group may chose not to disclose how much it pays out through either a share buy-back or special dividend. Fraser Ramson, an analyst at Nomura believes that M&S has scope to return up to 250 million pounds in special dividends.

The potential cash return is predicted to be dependent on the improvement in sales of general merchandise and apparel, which increased 0.7 percent at stores open more than a year during M&S fourth quarter, the category's first positive outcome in 15 consecutive quarters. The group also predicts the gross margin for general merchandise to grow between 1.5 and 2 percentage points in the year to March 2015.

The improvement in M&S performance is most likely to lead to a bonus for the group executive team, including Bolland, who may receive up to 2 million pounds as well as a payout for the group's employees, who missed out on receiving a bonus last year. Bolland attributes the improvement in sales to the changes made to M&S's products quality and style, in particular changes made to the apparel category. M&S's spring/summer 2015 collections are said to be right on trend, with the 199 pounds suede skirts being high in demand.

However, Bryan Roberts, an analysts at Kantar Retail warns that a complete turnaround at M&S can only be found when the group consistently reports growth within its general merchandise sales. "The occasional screamer into the top corner doesn't negate smashing the ball over the bar for the last four years," hesaid to Reuters.