Marks and Spencer Group PLC's (LSE:MKS) recovery story has hit a digital bump, but Berenberg thinks the setback is temporary.
The broker kept its 'hold' rating and 406p target price ahead of half-year results due on 5 November, describing M&S as an “extended self-help opportunity” rather than a structural growth play.
The first half of the year bore the scars of April’s cyberattack, which shut the retailer’s website for several weeks.
Berenberg estimates adjusted pre-tax profit of around £111 million, which is lower than the consensus prediction of £125 million, both steep falls from the £408 million last year.
The Fashion, Home & Beauty arm is expected to show the sharpest drop, with profits of £42 million versus market forecasts of £65 million, while Food should fare better at £120 million, slightly ahead of consensus.
Even so, customer loyalty seems intact. Berenberg highlights that M&S has held onto shoppers through a mix of better fashion ranges and its trusted food offer.
Style perception scores have climbed across womenswear and lingerie, particularly among younger customers. In food, higher waste and distribution costs dented margins, but the division remains comfortably above its 4% target.
The analysts cut this year’s profit forecast by 11% to £643 million, below consensus, but expect a 51% rebound in 2027 as the group regains lost ground.
They note investors appear willing to “look through” this year’s weakness, with the price-to-earnings multiple falling from 18 times in 2026 to 12 times in 2027.
With annual capital spending of around £650 million earmarked for store upgrades and tech renewal, cash returns are likely to stay modest for now.
Berenberg sees M&S’s long-term progress hinging on like-for-like sales growth at home rather than overseas expansion. After a bruising year, the retailer still has plenty to prove, but the resilience of its customers — and its brand — may yet be its strongest asset.