RBC Capital has upgraded its recommendation on shares in Marks & Spencer Group to 'overweight' from 'sector perform', raising its price target by 15p to 300p at the same time.
It reflects a more optimistic view of M&S’s future growth prospects, despite a 17% drop in share price from recent highs due to concerns over the UK consumer and cost outlook.
The Canadian bank's reassessment comes amid signs of a brighter UK consumer outlook, with easing cost pressures and potentially peaked interest rates.
It notes M&S’s appeal to an older, affluent demographic, alongside efforts to widen its appeal across various age groups, positioning the retailer for potential market share gains.
A key factor in RBC’s positive stance is M&S’s competitive food offer. Compared to rivals such as Waitrose, M&S’s mainly own-label food range is competitively priced, with recent improvements in systems, store standards, and logistics.
Additionally, RBC highlights M&S’s Clothing & Home segment, noting significant improvements in its full-price sales mix.
This is attributed to enhanced women's fashion offerings, better buying, inventory control, and a stronger digital presence. RBC suggests that ongoing supply chain improvements will support sustained double-digit operating margins in this segment.
RBC has also increased its EPS forecasts for M&S based on the retailer’s continued momentum, particularly in womenswear, adjusting its price target based on a combination of DCF and SOTP analysis.
In afternoon trading the shares were up 1.9% at 247.4p.