It was the news that rocked suburbia: Marks & Spencer’s (LON:MKS) plans to close up to 60 clothing stores over the next five years in a bid to resurrect the retailer’s fortunes.
But while the Daily Mail asks ‘Is Your M&S Under Threat?’, in certain quarters of the Square Mile, the revival plan has received a far more positive response.
In fact one leading broker as gone so far as to upgrade its recommendation post the results.
American brokerage Citi moved to ‘buy’ on the stock saying it was now “more confident of the store plan”, though it also cited the firm’s free cash flow and dividend yields as underpinning its positive stance.
“We see limited downside to the shares at this level and upside from potential upgrades of around 25% over the medium term if Marks delivers,” said analyst Assad Malic.
In plain English, he reckons the worst may be over for the share, which have lost 34% in the last 12 months amid worries over its place as one of the High Street’s mainstays.
Last week, while unveiling its cost-saving plans, the company said pre-tax profit had fallen 19% to £231mln.
The closure of the stores and cuts at head office are all part of a strategy aimed at finding economies of £150-£200mln a year.
Citi remains in the minority of brokers. Of the 22 analyst polled by the Broker Forecasts site only six are ‘buyers’ of the stock, while there are 12 ‘sellers’. The remainder think Marks is fully valued.
As worries have grown over the retailers prospects and it has been hit by cheap competition online and from cheap and cheerful chains such as Primark, so the consensus price target has fallen. It is down from 479p to 343p today.
Lifted by the Citi upgrade, Marks shares were on Monday morning 3% higher at 337.3p.