Marks & Spencer has revealed a better-than-expected surge in annual profits as its turnaround pays off, but ramped up cost-cutting in the face of a soaring wage bill.

The retail bellwether reported a 58% hike in underlying pre-tax profits to £716.4 million for the year to March 30.

It notched up an 11.3% hike in like-for-like food sales over the year, with growth of 5.2% across its clothing and home arm.

The group said it was upping its cost-cutting target by another £100 million to £500 million by 2027-28 as it looks to offset rising staff wages.

“With continuing cost headwinds, notably from investment in colleague pay, the structural cost programme is critical to our profit progression,” the firm said.

It said it was in the “strongest financial health since 1997” and was confident of making “further progress” over the financial year ahead.

Stuart Machin, chief executive of M&S, said: “Two years into our plan to ‘reshape for growth’ we can see the beginnings of a new M&S.

“Food and Clothing & Home grew volume and value share ahead of the market and sales increased across stores and online.

“Both businesses have now delivered 12 consecutive quarters of sales growth and this trading momentum gives us wind in our sails, and confidence that our plan is working.”

Marks and Spencer profit
The firm recently revealed a better-than-expected surge in annual profits as the group’s turnaround plan pays off, with the retailer reporting a 58% hike in underlying pre-tax profits to £716.4m for the year to March 30 (James Manning/PA)

But he added that “there remains much work to do”.

“We need to move faster and be ruthlessly challenging on the areas where progress has been slower, building a more effective digital and technology infrastructure, accelerating the move to a truly personalised customer experience, and resetting priorities in International,” he said.

The group cautioned that profitability at its Ocado Retail joint venture was “well below the original business plan and expectations”, but that it was working closely with partner Ocado to “reset the business” and drive customer and sales growth.

It was revealed earlier this year that Ocado could take legal action against M&S unless they reach agreement over the final instalment of £190.7 million as part of the payment for the £750 million 50-50 Ocado Retail tie-up, which was launched in 2019.