Shoppers have begun their long march out of recession, two of Britain’s biggest retailers said yesterday on the back of strong trading performances.

Cautiously upbeat forecasts on the prospects of consumer spending by Marks & Spencer and Next stirred hopes that shoppers were putting the grim memories of last year behind them. Shares in Marks & Spencer rose 20½p, or 6 per cent, to close at 361½p after it reported a better-than-expected first-half profit of £306.7 million. Next rose 102p, or nearly 6 per cent, to £19.12 after it upgraded its profit forecast for the year.

Sir Stuart Rose, the executive chairman of Marks & Spencer, said: “I think we’ve been through the worst of the downturn.” He said that customers were “fed up with being fed up” and were looking for excuses to indulge themselves, having cut back on spending during the recession. Last year M&S held two one-day 20 per cent-off sales in a desperate attempt to clear stock.

Sir Stuart said that M&S was likely to avoid blanket sales this year. “Last year [consumers] were sitting with their backsides on sofas watching the television with their mouths open ... We intend to trade at full price this Christmas.”

However, he was otherwise cautious on the Christmas trading period, because of last year’s volatility in sales. On the chances of the economy coming out of recession this year, he said: “I have no more of a clue than you do, but I do know that as long as consumers don’t get spooked and they don’t lose their jobs in too great numbers, then they will be feeling OK. Last year was Armageddon.” He added that a possible double rise in VAT next year, higher income tax and the uncertainty of the general election would hinder recovery.

Simon Wolfson, the chief executive of Next, said that 2010 would bring “subdued” growth, in contrast to the decline forecast by many commentators. He said: “It’s not about perception; it’s about reality. The reality is the consumer has had a year to rebuild personal finances, nearly a year of lower mortgage rates and employment hasn’t fallen by as much as people thought it would.

“The consumer is a bit better placed than they were a year ago. The flip- side is that consumers are saving more, using savings from low inflation and lower mortgage rates. The net effect is that spending levels are flat year-on-year. Consumers are being very sensible. We can expect to see that lasting for some time. They’re not going to rush out to get themselves in the mess they were in two years ago.”

Deloitte, the accountancy firm, predicted yesterday that retail spending would fall by 1.5 per cent next year, which would exceed previous expectations. Richard Hyman, a strategic retail adviser to Deloitte, said: “This is still an outstanding performance, which reflects a bedrock of fundamental confidence that few might have expected.”

M&S and Next led the FTSE general retailers up by more than 4 per cent yesterday.

Observers were also looking to M&S to divine Sir Stuart’s preference for a successor as chief executive when he becomes a non-executive chairman next year. He heaped praise on John Dixon, a protégé who is in charge of M&S’s food operation and is a leading candidate. Mr Dixon has led an aggressive price-cutting strategy since his appointment last year. Sir Stuart said at the time that the company had had an “accident” in food and had become too expensive for the economic climate.

Under Mr Dixon, the retailer introduced Wise Buys, a value range, and this week unveiled its first price comparison advertisements — a staple of downmarket rivals — to claim that it is cheaper than Waitrose.

M&S has reported four consecutive quarters of improving like-for-like sales trends. Although still negative year-on- year, the decline has become less steep. However, it is still lagging Waitrose, its premium rival. Sir Stuart said: “We want to be aggressive about talking about this — many people don’t know we’re cheaper on 1,200 items.”

Steven Sharp, the executive director of marketing for M&S, defended the price comparison advertisements from accusations that they were “grubby” for an upmarket retailer. He said: “The market’s a bit grubby. We have done this to correct a misconception. There’s a tendency for customers to think Waitrose is cheaper. It’s simply not true. It was important for us to correct that injustice.”

Sir Stuart believes that customers feel able to splash out on Christmas food. He said: “People are fed up with eating cheap, not very exciting food. They all want to treat the family at Christmas and they will want to indulge themselves and, hopefully, we will be in the right place to capitalise.”

He suggested that VAT could exceed 17.5 per cent. “The fact of the matter is we’re skint as a country and the Treasury needs revenue,” he said.

Sir Stuart added that M&S was “the only retailer on the high street” to show the 2.13 per cent reduction on receipts — hinting that rivals had used it to enhance their profit margins.

The company cut its interim dividend by 33 per cent to 5½p. Sales in the six months to September 26 rose by 2.8 per cent in total, helped by a 12.2 per cent increase from its international division. Like-for-like sales in Britain fell by 0.9 per cent, with fashion and homewares recording a 1.4 per cent decline.

Tony Shiret, of Credit Suisse, said: “The weakness of the comparatives and the favourable conditions encountered in [the first half] industrywide mean that this was never likely to be the period when the longer-term debates about M&S would come to a head.”

Topping the bill

Stephen Fry, John Sergeant, Joanna Lumley and Jennifer Saunders will star in Marks & Spencer’s latest Christmas adverts, which asks celebrities to choose their most essential ingredient for the festive season. Fry declares his special treat is: “A little mince. Well, it’s only once a year.” Absolutely Fabulous stars Saunders and Lumley are seen larking around in a kitchen, saying their top festive pastime is: “Stuffing ... your face, sweetie.”

Philip Glenister, the Ashes To Ashes actor, who also appears, says that he enjoys “that girl prancing around in her underwear”, referring to Noémie Lenoir, the model, who is a regular in M&S adverts.

James Nesbitt, Twiggy and Wallace and Gromit also feature among the well-known faces in the campaign, which gets under way next week.

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