Financial Trading Blog

Stock of the day 02/11/2015 – Marks & Spencer Group PLC



Stuck in an all-too familiar downward spiral, can Marks & Spencer spark some investor interest with its half year earnings release on Wednesday?


Up until the end of May M&S had been somewhat resurgent. A strong fourth quarter trading update at the start of May, a post-election Tory-win boost and, most importantly, the first increase in profits since 2011 in its full year results in late-May helped lift the company to a 2015, and near 7 and a half-year, high of £6. Since then, however, the stock has lost its swagger.

A slide across June pushed M&S back below £5.50, before its Q1 interim statement at the start of July provided a sharp reminder that, despite that positive full-year report, all is not well at the company. That statement contained a 0.4% fall in like-for-like general merchandise sales (i.e. Marks & Spencer’s much-criticised clothing division), something that couldn’t adequately be countered by a meagre 0.3% rise in like-for-like food sales.

Marks & Spencer Group PLC Chart November 2015
(Source: IT-Finance.com 02/11/2015)

Following that disappointing update the company’s woes continued with the market-turmoil of August and September, causing M&S to hit a 7 and a half month low of £4.75 towards the end of the latter month. Its managed to lift way from those lows in the intervening weeks, despite a website leak, and is now trading at £5.20 (IT-Finance.com, 02/11/2015).

In terms of its half-year results on Wednesday, analysts are expecting a 0.7% rise in profits to £270 million. However, investors’ real focus will lie elsewhere; its general merchandising division is expected to widen its decline from the aforementioned 0.4% fall in Q1 to a 1.5% slip in Q2. Even more worryingly, its food division, normally a stable source of good news, is expected to post a meagre 0.2% improvement year-on-year, a stark contrast to 2014’s 3.6% increase.

Marks & Spencer has a consensus rating of ‘Buy’ with an average target price of £5.89.

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