Marks and Spencer Group PLC (LSE:MKS) is showing clear evidence that its partway through a "significant re-invention", according to analysts at Deutsche Bank.
“There is some understandable concern with regards to some consumer and cost headwinds for FY25e, but in our view M&S sales should continue to outperform the market and cost reductions delivered this year will likely annualise,” Deutsche analyst Adam Cochrane said in a note.
The German bank rates M&S as a ‘buy’ and today upgraded its price target from 310p per share to 315p, representing some 20% upside to the current price of 261.7p.
M&S’s trading statement failed to deliver an upgrade to full-year earnings guidance, disappointing some investors,
Underlying sales from the grocery section were up 9.9% for the 13 weeks ended 30 December.
Those following of Marks will know the clothing operation is still the mainstay of the business, however, and it tends to be the swing factor. This side of the business weighed in with like-for-like top-line growth of 4.8%.
Combined, the two delivered a like-for-like increase of 8.1%. Adding in the international operations, that figure came down to 7.2%.
Looking ahead, the company said results for the year will be "consistent with market expectations". However, it also said economic growth remained "uncertain" while rising costs pushed by higher wages and business rates remained a concern.
Elsewhere in the City, Peel Hunt said in its analysis shortly after the update and before the shares began trading: "The market was probably expecting an upgrade today, so shares may be slightly off, but the company continues to impress us and finished 2023 strongly."
Clive Black, the veteran retail sector analyst who is widely followed by professional investors and trusted by industry executives, was upbeat on M&S's performance during the run-up to and over the key Christmas period.
"A modernising M&S is reverting to the positive traits those of a certain age warmly remember," said the Shore Capital analyst.
"Grounded management speaks to confidence that FY24 will be consistent with market expectations.”