UK: Marks & Spencer Sales and Profitability Surprise as Bolland Makes His Mark.

The gross margin in fiscal 2012 will be as much as 25 basis points higher than last year, helped by fewer markdowns on clothing and reduced food waste, the London-based retailer said today. A 3.9 percent drop in same-store sales of non-food items in the 13 weeks ended April 2 was better than the 6 percent median estimate of 15 analysts surveyed by Bloomberg.

The shares rose the most in about 11 months. Bolland, who took over less than a year ago, has boosted senior management with the addition of former Tesco Plc and Inditex SA executives, increased marketing on clothing brands and is adding 1,000 new food lines such as gluten-free sandwiches to stoke sales.

“The margin guidance is stronger than we had anticipated,” John Stevenson, an analyst at Peel Hunt in London, said in a note. He raised his recommendation on the shares to “hold” from “sell.”

Marks shares rose as much as 20.6 pence, or 6.1 percent, to 360.8 pence, the steepest intraday advance since May 10, 2010. The stock was up 19.8 pence at 360 pence at 12:30 p.m.

The retailer expects business conditions to become “increasingly challenging” this year because of a squeeze on consumer incomes and rising commodity prices. Still, consumer confidence didn’t worsen in March as people seek out quality and “buy once, buy well,” Bolland said on a conference call.

“We have seen no March blip, or dip,” the CEO said. “People want to celebrate events more than ever. Because of maybe a bit of negative news, they get a bit tired of that, and we’ve seen positive sales during events.”

The drop in the general merchandise unit’s same-store sales was caused by the quarter starting and ending five days later than in the previous year, meaning that the first days of the post-Christmas clearance sale weren’t included, Marks & Spencer said. Adjusting for this, sales rose 0.7 percent, it said.

Operating costs this year will be about 5 percent higher, while the company increases its square footage by 2 percent in the U.K. and 10 percent abroad, Marks & Spencer said.

Bolland said last week he was planning to re-enter France after a decade-long hiatus by opening a department store on Paris’s Champs-Elysees, starting a French-language website, and planning Simply Food outlets in and around the capital city.