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Marks & Spencer Half-Year Results: What The Analysts Said

Published on Nov 8 2017 11:38 AM in Retail tagged: Featured Post / UK / Marks & Spencer / Steve Rowe

Marks & Spencer Half-Year Results: What The Analysts Said

Marks & Spencer has posted a 2.6% increase in sales in the first half of its financial year, with chief executive Steve Rowe saying that the business has made “good progress in remedying the immediate and burning issues” at the retailer. Here’s how the analysts saw it.

Darren Shirley, Shore Capital

“In what happens to be the first set of results to be announced since the appointment of Archie Norman as its non-executive chairman, Marks & Spencer has delivered underlying PTP for H1 FY2018 of £219m. […] In new guidance, M&S has stated slightly better gross-margin expectations, albeit we only expect tweaks to our full-year expectations, which we shall confirm later. Additionally, we see the following points as important new features of the statement: more pace, the UK’s ‘essential clothing retailer’, faster store rationalisation, slower Simply Food roll-out and substantially lower costs.”

Scott Ransley, Stifel

“Headline H1 PBT is better than expected, but the mix is disappointing, with a successful ‘one-off’ restructuring in International and operational improvements in UK Clothing being offset by a more cautious structural message in Food. We do not expect significant change in consensus numbers today, despite significant moving parts, but sentiment may be slightly weaker, as the market digests medium-term implications for UK Food prospects.”

Fiona Cincotta, Cityindex

“Marks & Spencer is looking a little less shabby in the lead-up to Christmas. It's tidied up the clothing business to the point where like-for-like sales are almost starting to grow again, all while weaning itself off a tendency to slash prices. Food, meanwhile, is also close to stemming its like-for-like sales decline, too. The numbers are all the more attractive following Next's disappointing update last week and the broader inflation-driven drop in UK retail sales.”

Catherine Shuttleworth, Savvy

“This morning’s news from M&S, while slightly ahead of expectations, highlights some of the challenges ahead for the retailer. These broadly fall into two buckets. First, the structural challenges. In large part, these relate to the retailer’s large estate of stores, many of which require investment and find themselves at the wrong end of an evolving high street. It is our view that a more radical review of the store portfolio will be required if M&S is to re-establish its position as ‘the UK’s essential clothing retailer’. Second, clarification is required about who it is targeting after the somewhat outdated 'Mrs M&S' approach. We hope to understand soon how M&S plans to reconnect with the shoppers of Britain, in recognition that the nation is changing in the way it shops and buys goods.”

Ray Gaul, Kantar Retail

“From an overall total group performance, the positive non-food result should provide optimism to the company and its shareholders. This division is the core of the group’s brand and media image, and has become a strong focus for management’s hopes of a turnaround, with several industry heavyweights joining M&S’s all-star team. Notable new hires are Jill McDonald, formerly CEO of Halfords, and Archie Norman, a restructuring specialist who takes over as chairman. [...] The Food division is performing well, despite an increasing number of obstacles. Management is clear on these challenges and appears to be ready to take on both Aldi and Lidl, who have increased the quality and the number of options available to consumers in their meals-for-tonight ranges. Likewise, the company appears confident that they can compete with Tesco and Morrisons, who have made significant strides improving their premium own-label offers.”

Barclays European Food Retail Equity Research

"Archie Norman’s appointment as chairman earlier this year prompted a sharp upwards move in the share price, and this is beginning to seem justified, given his 'unvarnished truth' approach to the situation in which M&S finds itself. Although the prospect of a five-year turnaround programme might not seem to promise rewards as rapidly as some might like, we would hope for considerably fleshed-out plans in 2018 that may encourage the market to believe that M&S can grow sales (modestly) and can generate and return cash (plentifully)."

© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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