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M&S trading update: what the analysts say


Marks & Spencer Trading Updates

Powered by Guardian.co.ukThis article titled “M&S trading update: what the analysts say” was written by Sarah Butler, for theguardian.com on Thursday 2nd April 2015 09.09 UTC

Analysts react to Marks and Spencer’s fourth quarter trading update in which the retailer revealed the first rise in like-for-like sales of general merchandise in more than four years.

Bryan Roberts at Kantar Retail

While the general merchandise numbers might be the cause for muted celebration, the overall verdict is that the stars have aligned for a single quarter and we await consistent repetition of this feat before we can proclaim a recovery.

“What is heartening is the progress we have seen in recent store visits in terms of aspects of the range, merchandise and store fit. That said, womenswear needs to be consistently better across the whole range. The occasional screamer into the top corner doesn’t negate smashing the ball over the bar for the last four years.”

Tony Shiret at BESI

Our sense is that M&S has benefited in these numbers from the quantum of buying gains put in place in GM. This has allowed the late period promotional activity that has contributed to the group getting back into positive sales territory. The actual product has in our view not yet shown continuation of the more positive trends we noted in A/W 14 before the weather got too warm.”

David Jeary at Canaccord Genuity

Our central view remains that M&S is a mixed blessing business. The Food division has shown its credentials and strong customer appeal through a sustained run of positive quarterly like-for-like sales growth. In contrast, and despite the undoubted efforts to change its fortunes, the general merchandise division been a sadly disappointing corollary, with an equally sustained run of negative quarterly like-for-like sales. Returning to sustainable positive like-for-likes and stopping market share erosion in GM remain key sentiment drivers for us. Just as one swallow does not a summer make, one quarter of positive like-for-like does not a trend make.”

Kate Calvert at Investec

We see a material gross margin opportunity in general merchandise, driven by better buying, lower markdowns and general efficiencies. A convincing return to positive general merchandise like-for-like growth is likely to be taken well by the market.”

Clive Black at Shore Capital

That general merchandise is now potentially turning the corner, admittedly against very favourable multi-year comparatives, is to be warmly welcomed. Indeed, could we now finally be at the point where we can talk about the commencement of an upgrade cycle from M&S?

“From the doldrums, M&S is potentially on the threshold of being added to our positive watch list with better trading winds ahead, a company that may just capture the benefit of the consumer in the UK in particular ‎experiencing rising real living standards.”

James Collins at Stifel

We think the combination of better trading, in-line gross margins, and lower costs should result in a 1%-2% upgrade to March 2015 consensus underlying profit, taking it somewhere in the £650m-£655m range versus the current level of £640m.”

Jamie Merriman at Bernstein Research

The strong performance in general merchandise like-for-like is a strong sign of improvement for M&S and unexpected given recent market share trends.

“M&S UK results (both GM and Food) beat expectations and cost growth is lower than previously guided, but challenges in the international division due to euro weakness and political uncertainty in eastern Europe will likely offset these benefits, suggesting minimal change to consensus expectations.”

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About Carl William Brown

In tristitia hilaris, in hilaritate tristis! Carl William Brown is a webmaster, trader, teacher and writer. He founded both Daimon Club and Fortattack.

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