Marks and Spencer Group PLC (LSE:MKS) shares rose 3% on Monday after analysts at Citi upgraded the retailer to Buy, arguing that investors are underestimating the structural momentum behind its recovery in both clothing and food.
Citi lifted its target price to £4.40, which implies around 12 times estimated earnings for the 2027 financial year. With the shares still 18% below their pre-Cyber incident level, the bank sees an attractive entry point for a business that, in its view, has found its footing.
On the clothing side, the data appears to support the turnaround story. Citi points to proprietary app and survey analysis suggesting M&S is gaining traction with younger customers.
If that sticks, the bank believes it could add about 1.5 percentage points to like-for-like sales each year.
Food is also doing more heavy lifting. According to Citi’s modelling, M&S is benefiting from a larger share of ‘bigger baskets’ as more consumers choose to trade down from restaurants. That shift could add 4 to 5 percentage points to like-for-like food sales annually.
Citi believes these two trends leave the business well-positioned to outperform should the UK economy soften.
The analysts also expect foreign exchange tailwinds and some modest operational leverage to support further margin gains, potentially taking the company beyond the targets laid out at its last Capital Markets Day.
New estimates for adjusted pre-tax profit are now 7% and 13% ahead of consensus for 2027 and 2028, respectively, even after factoring in the impact of the cyber incident.
The market has already responded positively, and while there is still some uncertainty in the broader retail environment, M&S looks increasingly like a company getting more things right than wrong.
In afternoon trading, the stock was up 10.8p at 353p.