Trading conditions have been favourable for supermarket chain Marks and Spencer Group PLC (LSE:MKS) this year, but the impact of Labour Chancellor Rachel Reeves’ tax-heavy Budget will be the focus of tomorrow's half-year earnings report.
Reeves declared several measures that threaten the retail industry’s bottom line, namely a sharp increase in employers’ National Insurance Contributions (NICs) and a 6.7% rise in the national minimum wage.
The Budget was immediately criticised for the additional burdens placed on the retail and hospitality sectors.
M&S shareholders will now want to hear how the new tax regime will impact margins, profits and shareholder returns.
In the lead-up to the interim report, Deutsche Bank analysts increased its M&S share price target from 350p to 430p, citing strong ongoing food sales, a pick-up in clothing sales and double-digit percentage growth in sales from its partnership with Ocado Retail.
But this was before the Budget. Meanwhile, Citi analysts said M&S is likely to be one of the worst affected by the hike in NICs.
M&S will have the opportunity to clarify the situation on Wednesday.