Marks and Spencer Group PLC (LSE:MKS) has relaunched its Sparks loyalty programme, and Shore Capital reckons it has been done with considerably more conviction than the ageing scheme it replaces.
The revamped programme ditches points in favour of a digital wallet paying direct cash rewards: £10 back on £50 spent in fashion, home and beauty, £5 on a £35 food shop, and £1 on £10 of fresh fruit.
Personalisation is powered by machine learning and generative AI, with the customer proposition expected to sharpen as shopping data accumulates. A tie-up with the Virgin ecosystem adds travel and media rewards, while M&S Credit Card holders can supercharge their benefits further.
Shore Capital, which carries M&S as a house stock at 363p, describes the relaunch as arriving on schedule and with a genuine step up in ambition.
Analyst Clive Black notes that chief executive Stuart Machin has been candid about the deterioration in the old Sparks programme, and that strong customer involvement in designing the replacement should support its relevance.
M&S describes the move as "a key strategic milestone as M&S reshapes for growth", language Shore Capital says it likes.
The cost of the deeper rewards remains unknown and will likely filter into next year's profit expectations rather than the numbers due on 20 May.
Shore's current pre-tax profit forecast for the year to March 2027 stands at £955m, but the broker flags that elevated energy costs from the Iran situation, a higher bond coupon following recent refinancing, and the initial cost of Sparks could trim that figure by £25 million to £30 million.
The broker notes there is "questionable wisdom" in adjusting formally while M&S remains in its close period ahead of results.
The wider investment case rests on what Sparks removes as much as what it adds.
Shore Capital argues that replacing a declining loyalty scheme with a modernised, AI-powered proposition removes a drag on the business and strengthens the foundations for steady progress in sales, profit and earnings.
That steady compounding, the broker argues, is central to how the shares should be valued.
The full-year results on 20 May will provide the first formal read on the profit outlook for next year. Shore Capital expects M&S to make very considerable progress for shareholders in the years ahead, with a refreshed Sparks now part of that story. The shares trade at 357p, giving a market value of £7.4 billion.