Marks and Spencer Group PLC (LSE:MKS) has picked up another vote of confidence in the Square Mile, with Citi upgrading the retailer to “buy” and setting out a case that its turnaround still has further to run.
The US bank says investors are underestimating the structural tailwinds in both M&S’s food and fashion businesses.
Its analysts point to sustained momentum in the food arm, where market share gains have been steady, and signs of gradual progress in clothing, long the group’s problem child.
Citi acknowledged that the timing of its call raised eyebrows, given that the financial impact of M&S’s recent cyber incident remains unclear.
Other concerns include the risk that the fashion recovery could take longer than hoped and the drag from a fragile UK consumer backdrop. Even so, the broker argues that these risks are outweighed by the operational improvements already visible in the business.
The upgrade follows investor meetings, including with North American funds, where Citi says the appetite for the M&S story was evident. In its view, the market is still not giving full credit for the improvements underway.
For a stock that has already rallied hard in recent years, another “buy” recommendation from a heavyweight broker may be just the reassurance investors need to keep faith in the recovery narrative.
The shares rose 1.5% to 374p.