A year ago the Marks & Spencer interims on November 5 were a damp squib, but today the shares have taken off like a rocket.

For the second year running Marks & Spencer has issued its interim results on Nov 5 and there certainly weren’t many sparklers in last year’s results, with underlying pre-tax profits down by 9% to about £262m (after £14.5m of double-running costs on the new ecommerce warehouse in Castle Donington) and UK General Merchandise sales still down in quarter-two, by 1.3% like-for-like.

It is, therefore, a measure of just how low expectations are for M&S these days that, despite the soft comps, the City expected underlying pre-tax profits to be over 3% down in the first half at £252m, and that the modest beat of £268m (2% growth) was treated as a triumph by the embattled chief executive Marc Bolland, who had promised that this was going to be a year when the focus of the business turned “from transformation to delivery”.

But the performance of general merchandise sales in the UK in the second quarter was actually even worse than the 3.7% like-for-like decline that had been generally expected, with sales down by 4% (or by 1.5% on a September-adjusted basis!), not helped by a big fall in online sales of homewares.

M&S pointed to a barely detectable improvement in womenswear sales trends, but failed to comment on sales of other clothing categories such as menswear or kidswear.

And the UK food sales growth of just 0.2% like-for-like in quarter-two wasn’t exactly exciting, even if M&S trumpeted that the performance is still about 2.5% better than the supermarket trade in general.

However, the bull case for M&S has always rested on the gross margin improvement potential in clothing and the scope for some returns of cash to shareholders (now that capex is past its peak) and M&S delivered what they wanted today.

The fireworks provided by M&S today were a stronger expected gross margin improvement in the general merchandise gross margin and a hint at the much-vaunted cash returns, via a modest but unexpected increase in the interim dividend.

There has been plenty of promotional activity from M&S on clothing of late, but not as much as last year because reduced discounting helped M&S add 30bps to its general merchandise gross margin in the first half.

And on top of that improved sourcing/buying added a bumper 120bps to the gross margin to give a total improvement of 150bps in the first half, which was above even the 100bps increase that the bulls hoped for.

Emboldened by that outcome, given that progress was expected to be second-half weighted with the move to direct sourcing only just starting, M&S increased full-year guidance on the general merchandise gross margin to up to 200bps growth.

The City was encouraged by that performance on gross margin and took some comfort from the news that operating costs in the UK were actually down slightly, excluding higher depreciation charges, with reduced staffing costs more than offsetting higher marketing costs.

Of course, all this work on margins and cost won’t come to much if sales continue to fall, but there was more confidence from M&S today about the outlook for sales.

The embarrassingly weak response to the online re-launch seems to be behind M&S at last, with online sales now running about flat on last year (after the dismal 6% drop in the first half) and Christmas likely to bring a return to growth.

And though October wasn’t easy, given the impact of the continuing mild weather on outerwear sales, the comps were at least quite soft and the weather has now turned distinctly autumnal.

Whether the worst is over for M&S remains to be seen, but there does seem to be more confidence about the product and the marketing, with M&S earning plaudits for its improved fashionability on clothing and its more cohesive and inspirational advertising.

In the past, poor merchandising and store design has let the side down, but even there some better signs are coming through, as evidenced by the work done on the new flagship store in Westfield White City.

So where does this leave Marc Bolland? Shareholders have put up with a prolonged period of disappointing sales and profits and he knows that he has no more excuses left, with all the work now done on revamping the under-invested distribution and IT systems.

But he now appears to be safe, with the eye of the world falling on the problems of Tesco instead.

Despite the sparkling 9% increase in the share price this morning, profits are unlikely to now take off like a rocket at M&S, given the headwinds from intense competition in the sector. But at least Marc Bolland knows that shareholders are not going to be burning an effigy of him on their bonfires tonight.

  • Nick Bubb has been a leading retailing analyst for over 30 years. He is a well-known commentator on UK retailing and is a founder member of the influential KPMG/Ipsos Retail Think-Tank