Marks & Spencer has reported a better than expected jump in profits but warned that measures in last week’s budget could cost the company £120m next year.

The British retail chain’s pre-tax profits hit £407.8m for the six months up to October, up 17% on the same period last year, bolstered by sales rising 8.1% for food and 4.7% for clothing and homeware.

However, the M&S chief executive, Stuart Machin, warned that the “long-term impact on the company’s customers and suppliers was uncertain”. He predicted £120m in extra costs next year because of increases in employer national insurance contributions (NICs) and the minimum wage announced by the chancellor, Rachel Reeves, last week.

Reeves plans to increase employers’ NICs by 1.2% to 15% from next April, while the minimum wage will rise by 6.7% to £12.21 an hour and 16% to £10 for workers aged 18-20.

Speaking to journalists on Wednesday, Machin said the retailer expected the minimum wage increase to result in £60m extra costs, while the NICs rise would add another £60m.

The chief executive, who took the helm in May 2022, said M&S had planned for the minimum wage increase and would try to absorb the extra costs by looking for savings elsewhere in the business rather than passing them on to consumers.

He called the wage increase “a good cost” and said he understood Reeves had difficult choices to make.

It comes as the company reported a 10% increase in labour inflation this year, which it said was partly offset by structural cost reductions but would require further investment in efficiencies and automation.

The bumper profits for M&S mark the latest stage in a remarkable turnaround for the business, which has 240 full-line stores and 325 food outlets, in recent years.

They come two years after the company suffered a 24% fall in half-year profits as the cost of living crisis hit sales, while the business warned of a “gathering storm” as rising wages, energy, packaging and transport costs threatened its earnings.

However, under Machin the group has opened larger stores, cut prices on household basics and offered bigger packs, which have all contributed to better sales.

In May it reported that its full-year profits for 2023-24 had increased by 41%, with sales up across the business by more than 9%, and bosses describing M&S in “the best financial health it’s been in decades”.

Commenting on Wednesday’s results, Machin said: “Executing our strategy to ‘reshape M&S for growth’ has again delivered an increase in customers, sales value and volume, market share, profit and returns. Both food and clothing have now delivered market share growth for four consecutive years.”

The bumper half-year figures lifted shares by almost 8% in early trading on Wednesday, although it later eased back to a 3% rise.