Shore Capital argues that Marks and Spencer Group PLC's (LSE:MKS) shares look “materially undervalued” compared with peers such as Next, Sainsbury’s and Tesco, after the retailer committed £340 million to a new automated food distribution centre in Northamptonshire.
The broker described the project as a “landmark” investment that should lower costs and improve product availability, supporting M&S’s ambition to double the size of its food business. It repeated its “house stock” stance.
The 1.3 million square foot facility, based at the Daventry International Rail Freight Terminal and scheduled to open in 2029, will serve as a national hub for long-life grocery products.
Automation will feature heavily, with pallet cranes, shuttle systems and “hands-free” cage picking all aimed at boosting efficiency.
Food has been one of the retailer’s stronger divisions, with recent share gains supported by robust grocery trading. Excluding its 50% stake in Ocado, M&S controls just over 4% of the UK food market.
ShoreCap noted that while earnings would be hit in the current financial year by one-off costs, it expects momentum to resume by 2027. “The forthcoming distribution centre is a helpful piece in the jigsaw,” the broker said.
The group is also reshaping its estate, targeting 420 larger “fresher” food outlets and 180 more productive full-line stores by 2028.
Sustainability is being built into the Northamptonshire hub, with an EPC A+ rating, rooftop solar panels, rainwater harvesting and charging points for electric vehicles.
The shares rose 0.6p to 357.94p.