Financial Trading Blog
Stock of the day 04/07/2016 – Marks & Spencer Group PLC
It’s certainly been a busy 2016 for M&S. The early in the year ousting of Marc Bolland, following another set of weak Christmas sales, may have caused a new face to take charge (M&S-lifer Steve Rowe) but has so far brought about little material change in the company’s fortunes. Yet despite a series of miserable updates M&S had managed to settle in a relatively stable trading bracket for most of the year, bouncing between £4 and £4.50 in the 5 months to the end(ish) of May.
(Source: IT-Finance.com 04/07/2016)
That soon ended following the company’s full year results on May 25th. Rowe, unveiling his new strategy for M&S going forwards, warned that lowering clothing prices and increasing the number of staff in stores (2 of his proposed changes) would impact the company’s profits, news that was unsurprisingly investor-repellent. That meant M&S plunged almost 20% in the week following its announcement, a 4.3% rise in underlying profit to £689.6 million countered by Rowe’s aforementioned warning AND 2.9% drop in clothing and homeware sales across the year.
Hovering between £3.50 and £3.80 post-results things soon got worse for Marks & Spencer as Britain voted to leave the EU. The Brexit referendum result caused a violent reaction among the company’s investors, sending the stock another 20% lower to at one point hit a 76 month nadir of £2.56. Marks & Spencer sits at a current trading price of £3.06 (IT-Finance.com, 04/07/2016).
In terms of the company’s first quarter figures on Thursday expectations aren’t high. Just as its Christmas was spoilt by a warm winter, 2016’s wet summer is forecast to have been a major drag on M&S, with analysts anticipating a 4% fall in like-for-like sales. Not only that, but Rowe will be forced to address the elephant in the room, with investors keen to hear how the Brexit will impact the UK retail sector.
Marks & Spencer Group PLC has a consensus rating of ‘Hold’ with an average target price of £4.34.
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