Shares in Marks and Spencer Group PLC (LSE:MKS) rose 3% to 338p on Thursday, as investors took comfort from unchanged full-year guidance and supportive commentary from analysts despite a softer showing in clothing over Christmas.
Research notes from Deutsche Bank and Shore Capital argued that the Christmas update was resilient in the circumstances and that the stock remains undervalued following recent weakness.
Deutsche said Marks and Spencer had “managed to hold its full-year profit guidance expectations”, helped by a stronger-than-expected performance in Food, where higher gross margins offset weaker clothing profits.
Food like-for-like sales rose 5.6% in the third quarter, broadly in line with forecasts, while Clothing, Home and Beauty sales fell 2.9%, compared with Deutsche's expectation of modest growth.
Even so, the bank noted that market expectations had softened in recent weeks and that guidance being left unchanged was reassuring.
It highlighted that the shares are trading on about 10 times forecast 2026 earnings, which it sees as attractive given improving trends and the resolution of recent inventory and systems issues following last year’s cyber-attack.
Deutsche reiterated its 'buy' recommendation with a target price of 435p, well above the current level.
Shore Capital struck a similar tone, describing the update as “good news” and leaving its forecasts unchanged.
It expects Marks and Spencer to deliver profit before tax of £655 million in the current year, broadly in line with consensus, and said there was no reason to adjust its longer-term estimates.
While Fashion, Home and Beauty sales fell 2.5% over the 13-week period, Shore Capital said this reflected weak high street footfall and external pressures rather than brand issues, pointing to encouraging online growth and strong early demand for new season ranges.
Food, by contrast, continued to gain volume and market share, with sales up 6.6% and like-for-like growth of 5.6%.
Both houses argued that the investment case rests less on the current year and more on delivery in 2027 and beyond.
Shore said that on its 2027 forecasts, the shares trade on a price-to-earnings ratio of less than 10 times, which it views as a “gross undervaluation” compared with peers such as Next, Sainsbury’s and Tesco.