Marks & Spencer could add as much as £35m to gross profits by persuading occasional food shoppers to purchase more often, research by broker Oriel suggests.

Incoming chief executive Marc Bolland, who starts in May, is well placed to drive the improvement according to Oriel analyst Eithne O’Leary, who sees potential for the share price to reach 450p.

Under food supremo John Dixon M&S has already made improvements to its food division, which now sells well-known brands as well as proprietary product, and Bolland is likely to up the ante.

O’Leary said that average spend per customer at present is just £16.30 per week by regular shoppers and a “meagre” £1 a week by top-up shoppers.

She maintained: “Given that the pricing architecture has now come to a point that allows the introduction of third-party brands, we believe that M&S will be able to convert top-up shoppers to more regular users of the brand.

“Our analysis suggests that for every 1% of occasional shoppers that can be persuaded to adopt a more regular shopping pattern, 3% can be added to food sales.

“Even assuming some margin dilution from a greater third-party branded content in the sales mix, £35m could be added to the gross profit pool or 5% added to the pre-tax profit forecast for the year to March 2011.”

She added: “We believe that Marc Bolland’s excellent track record in grasping and driving the Morrisons brand can be translated to the M&S food business quickly.”

However, other brokers remain cautious about the outlook for M&S. UBS last week warned that the retailer faces some “big issues”. The broker observed: “As well as the generic UK macro and currency uncertainties, M&S may need to raise pension fund contributions following the triennial review.

“The balance sheet can absorb these, although it may reduce flexibility if the incoming chief executive concludes that more radical action is necessary in food and, or, the overseas footprint.”

Shore Capital issued a downbeat note on M&S, which it said faces “structural and operational issues”. Analyst Kate Calvert said: “These are likely to hold back a recovery and result in continued industry underperformance for several years while management addresses them.

“In addition there is a news vacuum on future strategic direction until Bolland presents his views. This is unlikely to be before the autumn.”

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