Marks & Spencer trading update: what the analysts say
As Marks & Spencer recorded a 2.4% increase in third-quarter sales today (10 January), the industry's reaction to the results was largely positive, despite seeing margins hit by a highly promotional landscape. Here is a flavour of what leading retail analysts had to say about M&S' recent performance.
Caroline Gulliver, analyst, Espirito Santo
Finance director Alan Stewart is proving his mettle having achieved additional cost savings over and above the GBP60m of cost savings identified at the time of the interim results. The scope for further cost savings during a "challenging" 2012 will be key as M&S starts to implement parts of its recovery programme.
Richard Hunter, head of equities, Hargreaves Lansdown Stockbrokers
In particular, the Direct business saw a significant increase in sales, whilst M&S also pulled the rabbit out of the hat with its food offering. International sales were also robust and, from an investment perspective, the dividend yield of 5.5% is a further attraction. On the downside, the update provides details on sales rather than profits, where the previous trading update had reported a decrease in profits where the company chose not to pass on the full extent of rising costs to customers. In addition, the home sales business was weak, and the traditional Christmas fillip has now passed to be replaced by the wider economic malaise which is troubling many of its rivals.
Neil Saunders, analyst, Conlumino
"These results demonstrate that while M&S is far from being in the premiership in growth terms, it can still play a reasonably good game. That said, with a tough outlook for 2012 it needs to work much harder on its general merchandise offer if it is to further extend its share without resort to discounting."
Matthew McEachran, analyst, Singer Capital Markets
Although not yet evident, management are making progress on the new strategy, and we soon expect to see some benefits flow through to sales and profit from enhancement to the stores, the brand segmentation, and the navigation. This applies to Clothing, Home and Food. Although not fully detailed today, we believe management are pleased with the new store concepts over peak. Multichannel is also developing under Wade-Gery, which we view as a critical change over the next 2-3 years, particularly as this will widen their appeal with younger and more tech-savvy shoppers.
Paul Mumford, senior fund manager, Cavendish Asset Management
"Marks & Spencer's showing is particularly heartening; with a strong performance in its food division more than offsetting a slight drop in like-for-like clothing sales. Overall, the core business looks solid. More noteworthy are the impressive 8% like-for-like growth in international sales, and the whopping 22% like-for-like growth in direct sales. The company's outlook may be cautious, understandable given the current climate. But with a reasonable rating, an attractive yield of 5.5 per cent, and a share price well below previous highs of GBP7, the stock represents good value in a neglected sector. The company is well-positioned for an eventual recovery in consumer confidence and in time may well look attractive to potential US buyers, especially given the recent share buy-back.
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