Marks and Spencer Group PLC's (LSE:MKS) first-half results may have been muddied by one-off effects, but both Deutsche Bank and UBS see reasons to stay positive.
The retailer’s £184 million pre-tax profit was flattered by a £100 million cyber insurance payout, masking a slightly weaker underlying showing of around £84 million, mainly due to tighter margins in food. But that, analysts say, is largely beside the point.
Deutsche Bank’s Adam Cochrane says the focus now shifts to the second half, where management expects profit to be at least in line with last year’s £468 million.
Food sales are back on track, while excess clothing stock should be cleared by the fourth quarter. The bank keeps its 'buy' rating and 435p price target.
UBS takes a similar view, arguing that the “cyber episode is now in the rear view” and the story has returned to growth and market share.
It highlights strong food share gains in the first half, with more to come over Christmas. The retailer plans over 20 new store openings in the second half and has approved more than 50 in its pipeline.
With net funds of £176 million and a 20% rise in the interim dividend, UBS says the balance sheet is in its best shape for a decade.
UBS sees scope for upside next year as investments in food distribution and logistics start to lift margins, and as the clothing and home division steadies.
At 385p, the shares trade on roughly 11 times UBS’s 2027 earnings estimate, offering what the broker calls one of the best risk-reward profiles in the UK retail sector.