Stock of the day 20/05/2016 – Marks & Spencer Group PLC

Whilst nowhere near BHS hit before its collapse, the closure of another high street store will likely have caused more than a bit of concern at the struggling Marks & Spencer.

Can the company spark a recovery with its full year results next Wednesday?

A terrible end to 2015 left the company at £4.52, a low M&S quickly plunged past as its weak Christmas figures (clothing sales dropped 5.8% year-on-year, bad enough to see Marc Bolland finally get given the boot) sent the stock all the way to £4.06 by the start of February.

Brief flashes of growth across the middle of February and the start of March couldn’t stick, soon Marks & Spencer was circling fresh 18 month lows of £3.91. Yet as April got underway things began to pick up, the company’s gains predominantly fuelled by its fourth quarter update.


(Source: IT-Finance.com 20/05/2016)

Revealing the its first statement of the Steve Rowe-era, investors showed a willingness to cut the new CEO, who only took over at the start of April, some slack, the stock surging to a 2016 high of £4.48 as Rowe blasted the company’s 2.7% drop in like-for-like clothing sales as ‘unsatisfactory’. Just as worryingly like-for-like food sales, Marks & Spencer’s perpetual silver lining, unperformed analysts’ forecasts, coming in flat for the 13 weeks to March against the 0.3% growth expected.

Yet, as mentioned, investors reacted to this news relatively well, seemingly buoyed by the Bolland-less nature of the company’s latest update , the increase in food market share (up to 4.3%) and the (very) slight signs of a turnaround in the clothing division (that 2.7% fall less than half of the decline seen the previous quarter).

Since then the stock has had mixed fortunes; by the start of May M&S had fallen away from its high, at point sinking as low as £3.96. However, news of a management reshuffle by CEO Rowe, as well as reports that the company had abandoned its plans for a flagship store in Amsterdam, have lifted Marks & Spencer to a current trading price of £4.40 (IT-Finance.com, 20/05/2016).

In terms of its full year update it will be interesting how much attention investors give to the headline data and how much breathing room they are willing to allow Rowe, given that he hasn’t had much time to make an impact. The key to Wednesday’s report will likely lie in Rowe revealing his strategy for the new financial year, something that may help overcome any ugly figures.

Marks & Spencer Group PLC has a consensus rating of ‘Hold’ with an average target price of £4.88.