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Stuart Rose, fresh from the Chelsea Flower Show, displayed his usual ebullience during Tuesday’s presentation of Marks & Spencer’s annual results. The UK retailer notched up 5 per cent sales growth in the year ending in March and over £1bn in pre-tax profits, a milestone last reached a decade ago.

The bloom, though, is fading. Like-for-like UK retail sales – over 90 per cent of total revenue – fell 2 per cent year-on-year in the second half and costs are soaring. Suffering UK shoppers are not Mr Rose’s only worry. Investors want reassurance that, having turned M&S round, he has put the retailer on a sustainable growth path. Such reassurance is only partly forthcoming.

Mr Rose has, for the moment, ruled out a UK acquisition. Rightly so – Next, for example, would merely duplicate M&S’s existing presence in town centres. Instead the retailer will pursue organic growth in the UK and expand internationally, where sales are growing fast. Mr Rose has done much to restore the lustre of M&S’s brand – overseas franchises exploit that.

But this kind of growth does not come cheap. M&S will spend up to £900m on capital expenditure this financial year and, even when the current round of store modernisation is complete, expects maintenance capex to outstrip annual depreciation of at least £350m. Before dividends and buybacks last year, free cash flow barely scraped into positive territory. And over the next few years, the boost to sales from store refurbishments will start to fade as the programme reaches an end. Put brutally, every £1 of extra sales will cost more to achieve.

M&S’s model has strengths. Its balance sheet is healthier than most of its highly leveraged quoted peers, and it owns more of its property. The challenge for Mr Rose now is to differentiate M&S even further from its rivals by turning accounting profits into cash flow.

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