Marks & Spencer beat second-quarter sales expectations but chief executive Marc Bolland remained cautious about prospects. Despite Bolland’s wariness, and a rise in costs such as marketing, analysts upgraded their forecasts ahead of a strategic update next month.

M&S reported UK like-for-like sales up 5.3% in the period - general merchandise was up 7% and food 3.7%. Total group and UK sales both climbed 6.5%.

Bolland said: “Customers are returning to quality and we have grown share across all parts of the business but we are coming out of recession and we don’t yet know what will happen with the spending cuts. Then we have the VAT rise in January. We need to be cautious.”

He said that an autumn advertising campaign was “hugely successful” and pulled in an extra 1.8 million customers. Bolland said he would work hard to “keep our opening price points” and expects “customers will continue to come to us for value and quality”.

M&S Direct generated a sales rise of 49% and the Shop Your Way multichannel ordering service has been rolled out to 434 stores.

Credit Suisse analyst Tony Shiret changed his long-standing underperform recommendation to neutral and increased his profit forecasts by 6% and 7% for this year and next. He still worries M&S “is poorly positioned for the challenges of the next decade” but acknowledged: “The company is also able to execute better and has some shorter term levers offering downside support.”