With a lacklustre set of group sales, a stronger showing in food and a lower capex forecast, Marks and Spencer booked a mixed set of fourth-quarter numbers this morning (17 April). The City response has been equally mixed. Here are the thoughts of some of the leading lights in the investment community.
“We expect trading conditions in UK general retail to remain tough over the medium term, given ongoing pressures on the consumer and the intense competitive environment. The more affluent and older than average socio-demographics of the M&S customer base, however, means we expect demand to be relatively resilient. Significant self-help opportunities also exist, particularly in strengthening the on-line offer and more fully exploiting the M&S brand internationally.” – Charles Stanley analyst Sam Hart
“Although there is a sales shortfall in Q4 this is mainly due to availability issues in Womenswear (fixable) and the withdrawal from Technology. Cost savings more than offset the sales miss and guidance for FY13 is better than we had factored in. With pilot stores performing well and now costing less to refit, we are comfortable with our buy recommendation and have moved our target price to 415p after the sector re-rating.” – Singer Capital Markets analysts
“Overall this is a fairly muted set of results which underlines the continued softness on the high street. At a headline level M&S has shown reasonable progress but most of this has been driven by the growth of the food business and underlying general merchandise sales remain in negative territory. … Food is the undoubted star of the show and here M&S is firmly on the front foot. Product innovation is excellent, campaigns around seasonal events such as Valentines, Mother’s Day and Easter have been compelling, and stores – especially newer ones – are doing a good job of engaging the customer. This has put M&S is a good position to take advantage of consumers’ willingness to trade up in food.” – Neil Saunders, managing director of Conlumino
“Q4 trading figures are weak, although costs appear to have saved the day, with no change to FY12E expectations…. For FY13E we have the first guidance – net net, this is negative, with cost growth worse than our forecast. The only good news is the downgraded capex guidance, from c.GBP1bn to GBP825m, as the company manages to do the same for less. Overall, however, this is a disappointing statement, and we place our forecasts, target price and rating under review.” – Bethany Hocking and David Jeary, Investec Securities