Marks and Spencer’s share price took a hit this morning (10 January) after the retailer reported worse-than-expected third-quarter sales figures, despite strong demand for food over Christmas. CEO Mark Bolland was, however, upbeat about the group’s food performance, which he said “continued to perform strongly”. Analysts, however, were largely disappointed with the results.
Seymour Pierce analyst Freddie George
“The trading update for the quarter was worse than expected and we are downgrading our ‘low end of the range’ FY13 pre-tax profit by 3%. The company blames the poor performance on an increase in discount activity. We are concerned that the stores during the critical and important two weeks before Christmas would have had the footfall but did not get the spend. On guidance, we suspect most analysts will be reducing their FY13 pre-tax profits by at least 5% with consensus being between GBP675m and GBP680m.”
Investec analyst Bethany Hocking
“The Q3 statement was released last night, and is disappointing reading. General Merchandise (GM) like-for-like was -3.8% and food like-for-like +0.3% – both of these are below consensus and this marks the sixth consecutive quarter of GM like-for-like declines. We will confirm forecast changes later, but expect to cut FY13E by c.2% to c.GBP655m and, more importantly, FY14E by c.5-7% to c.GBP675m-GBP690m. We had been (slightly) warming to the stock, but the statement demonstrates the size of the challenge ahead to stem the declines at M&S. Sell.”
“Although these results cover a longer period than those released for other retailers, and therefore take in some of the weaker pre-Christmas trading dates, they nevertheless make for dismal reading. Indeed, it is difficult to take many positives from them.
“We see food performance as credible, although not stunning. That said, there is no doubt that the competitive environment in food will only become tougher in 2013; as such, M&S needs to keep innovating and wowing the consumer if it is to grow its share. We are confident that the food team will deliver this performance.”
Shore Capital analyst Darren Shirley
“There is no doubt that this statement is disappointing from a trading perspective, particularly in General Merchandising (GM) in the UK. As such, following this announcement we are putting through downgrades to our CPTP estimates, albeit small ones due to still effective control of the business.
“With respect to food, we see a slowdown in trade but it is important to point out that through price cuts, promotions and mix, M&S is recording flat average selling prices, so implying that all of the like-for-like sales growth was volumes based; something that few of its Big Four peers will be able to match. For the 14 weeks to the 5 January M&S recorded like-for-like volume growth of 0.9%; a commendable performance to our minds.”