Shore Capital has struck an encouraging tone on Marks and Spencer Group PLC (LSE:MKS) after catching up with management ahead of the crucial Christmas trading period.
It reckons the retailer remains on track despite a tough backdrop for UK clothing and a wobble in consumer confidence.
Forecasts for M&S, a house stock. are left intact at £655 million for the current year and £960 million for 2027.
The note stresses that M&S would update the market if guidance needed adjusting, and with no such signal, Shore Capital expects little change to consensus ahead of the New Year trading statement on 8 January.
Management, it says, is now “firmly focusing” on Christmas execution, even as industry data shows UK clothing demand has been soft.
A mild autumn has dented sales of heavier items such as coats and boots, while the chaotic handling of the late-November Budget has weighed on shopper sentiment, something reflected in recent Barclaycard and BRC-KPMG readings.
Despite that, Shore Capital argues M&S is handling the environment better than many rivals. It highlights efforts to protect brand perception, with carefully managed stock clearance and targeted use of the Sparks loyalty scheme.
The broker does, however, expect a larger-than-usual New Year sale as the company works through a first-half stock overhang.
In food, the tone is notably more upbeat. NIQ data to 29 November shows M&S delivering 9.2% sales growth over 12 weeks, extending market share to 3.9%, while Ocado (one-third of whose sales are M&S products) remains the UK’s fastest-growing grocer. Shore Capital’s own store visits suggest the Christmas food offer looks “well set”.
Internationally, early signs from Australia are encouraging, with strong demand for M&S food lines in Coles and a promising start for underwear ranges in David Jones.
Valuation is a key plank of the broker’s stance. Based on FY27 forecasts, M&S trades on a price/earnings ratio below 10 times, with low revenue and EBITDA multiples.
Shore Capital believes the shares look “detached” from peers such as Next and Tesco and sees potential for a material rerating if FY27 profit targets are met.