Stock of the day 02/07/2015 – Marks & Spencer Group PLC

It’s been a good year for Marks & Spencer, one that has seen the stock at times only £1.50 away from the highs it reached back in 2007; it announces its Q1 2015/16 interim management statement next Tuesday.

M&S managed to rise from a low of £4.40 in the middle of January to £5.70 at the start of May, with big gains across March and the start of April contributing to the company’s robust growth. The defining event of Marks & Spencer’s 2015 so far has been the full year results it announced on May 19th. After a long run of stagnation at best, and sales declines at worst, M&S posted a slender 0.4% increase in its group sales to £10.3 billion, the first such rise in 4 years.


(Source: IT-Finance.com 02/07/2015)

Combine this with 6.1% growth in underlying pre-tax profit to £66.1 million and investors helped carry the stock to a whisker away from £6, peaking at £5.9975 at the end of May. However since then M&S has taken a tumble, with comments about the health of the grocery sector at the start of June helping push the stock to a current trading price of £5.47 (IT-Finance.com, 02/07/2015).

Whilst its full year results were music to investors ears, the same issues that have plagued Marks & Spencer for the past half a decade remain ever present. For all the furore over the 0.4% rise in group sales, its general merchandise division, aka its much beleaguered clothing department, saw its sales fall by 2.5% year-on-year with a 3.1% decline in like-for-like sales. Compare this to the 3.4% rise in its continually robust food division, and it’s clear where the thrust of Marks & Spencer’s (slender) growth came from in 2014.

In terms of its Q1 results next Tuesday, the company is expected to report flat like-for-like sales for the UK, but with a focus on its online investment that should finally begin to yield better sales results in 2016. How far this will win over investors is unclear, but the markets reacted well to what was a marginal increase in sales back in May, so as long as the signs are pointing in the right direction there is the chance for growth. Marks & Spencer’s has a consensus rating of ‘hold’ with an average target price of £5.87.

Thursday’s stock news:

One of the big winners on a quiet Thursday was healthcare specialist BTG. Broker Peel Hunt was clearly impressed with BTG’s recent business, raising its ratings to ‘buy’ after commenting that the strength of its pipeline should boost its upcoming sales performance going into 2016. This saw the stock jump by 6% away from its recent 2015 lows, to a 3 week high of £6.82.

In another broker upgrade, Jimmy Choo leapt 4.4% to a 3 and a half week high of £1.58 after Barclays gave the stock an ‘overweight’ rating and a target price of £2.08. The main reason behind this upgrade was Barclay’s prediction that the fashion company will see a 14% increase in earnings per share over the next 5 years with 5% annual growth in like-for-like sales.