After a poor Christmas, the results also ease the pressure on Marc Bolland, chief executive since 2010.
British retailer Marks & Spencer raised hopes that it has finally rediscovered a winning formula as it reported a rise in annual profit for the first time in four years and its intention to return excess cash to shareholders.
After a poor Christmas, the results also ease the pressure on Marc Bolland, chief executive since 2010. Some observers have suggested that recent improvement in the M&S share price offer an opportunity for him to leave on a relative high, but Bolland said he had no plans to depart any time soon, telling reporters he "absolutely" expected to present results this time next year.
Britain's biggest clothing retailer, which also sells homeware and upmarket food, posted a profit before tax and one-off items of 661.2 million pounds ($1 billion) in the year to March 28, up 6 percent year on year and above a consensus analysts' forecast of 648 million pounds.
M&S raised its dividend 5.9 percent to 18 pence and announced the start of a programme of enhanced shareholder returns with a 150 million pound share buyback for 2015/16.
For the second year running, however, the outcome was less than the annual profit at clothing rival Next and well short of the 1 billion pounds made by M&S in its 2007/08 financial year.
Shares in M&S, one of Britain's best-known shopping chains, have risen by more than a third over the past nine months and hit an eight-year high on Tuesday. They were up 0.3 percent at 587 pence by 0854 GMT, against a 0.4 percent fall for the FTSE 100 index.
The rises reflect hopes that the billions of pounds spent by Bolland on the redesign of products, stores, supply chain logistics and its website is paying off and addressing decades of underinvestment in the 131-year-old business.
"We've always said this is a step by step approach," Bolland said on Wednesday, adding that the measures taken leave the company well placed to strengthen its turnaround.
Bolland has focused on boosting profit margins and delivered a rise in the 2014/15 gross margin for general merchandise -- spanning clothing, footwear and homeware -- of 1.9 percentage points.
The company is targeting further growth of 1.5 to 2 percentage points this financial year, which would be a reward for having sourced more goods directly from suppliers, spent less on promotions and concentrated more on full-price sales.
Last month M&S said fourth-quarter sales of general merchandise rose 0.7 percent at stores open more than a year, representing the division's first positive performance in 15 quarters.
"With general merchandise now positive and, we believe, set to remain so for much, if not all, of 2015-16, more exciting times could be ahead for shareholders," Shore Capital analyst Clive Black said.
However, some analysts still see major challenges ahead.
"The elephant in the room continues to be M&S's ability, or lack thereof, to recruit and retain younger shoppers," said Bryan Roberts, of Kantar Retail.
Underlying sales in the M&S food business have outperformed the wider market with 22 consecutive quarterly rises.
The gross margin on food rose 0.3 percentage points in 2014/15 and the company expects growth of up to a tenth of a point in 2015/16. It raised the target for new Simply Food stores from 200 to 250 in the three years to March 2017.
M&S cautioned that its international business will be hit in the short term by the weaker euro and tough macroeconomic backdrop, particularly in its Middle East region, but flagged long-term growth opportunities across several markets, including France and India. ($1 = 0.6454 pounds) (Editing by Kate Holton and David Goodman)