The fashion retailer has defied the recession but says price increases will challenge value retailers

M&Co, one of the country’s biggest privately owned fashion retailers, doubled profits last year but has warned of a “shakedown” in the value sector.

Like-for-likes at the 300-store retailer, which trades in many market towns, surged 8.3% in the year to February 26 - during much of which time the UK was mired in recession - helping lift operating profits to £15m on sales up 11.8% to £182m.

M&Co attributed its success, which partly represented recovery from the previous year, to factors such as improved fashionability and marketing campaigns. Womenswear and kidswear performed especiallm well and the retailer sold more product at full price than it ever had before.

“Customers clearly appreciated not only the quality of products but the value for money on offer,” the retailer reported.

Profit margins increased as a result of the sales growth and tight stock controls and bank borrowings were cut by £17.6m to £25.7m.

However, the retailer - which rebranded from Mackays Stores -said that while the new financial year got off to a good start, conditions have tightened since the General Election, particularly in its Scottish heartland.

M&Co said in a statement: “We see the whole retail market getting tougher with price increases in all areas affecting everyone at a time when there may be more employment uncertainty and low growth in the economy.

“The race to the bottom in prices is not one that we have ever subscribed to and now that prices are going up much more than inflation there is bound to be a bit of a shakedown in the market as value becomes the issue.”

Retail Week Knowledge Bank senior partner Robert Clark said that M&Co had done well in improving its competitiveness and had correctly identified the play-off between style, quality and value as a key issue facing the sector.

He said M&Co’s market town locations also provide an advantage because there is less direct competition and the retailer can differentiate itself more easily.

M&Co also reported that it has made a “further allocation” of shares to its employee share incentive scheme “in recognition of the contribution that all staff have made to these excellent results”. About 2,300 staff members are M&Co shareholders.

M&Co is the third biggest family-run fashion retailer behind Sir Philip Green’s Arcadia and the Lewis family’s River Island. The business has earned M&Co owner and managing director Ian McGeoch and his brother a place in the Sunday Times Rich List, which values the pair at £107m.