Marks & Spencer PLC (LON:MKS) shares were in demand after its trading statement, but what did the brokers make of the retailer’s Christmas trading statement?
The response has been a mixed on the better-than-expected festive performance, although Liberum was quick out the traps with its repeated ‘sell’ recommendation.
“We fear that for M&S the outlooks gets tougher still,” said analyst Tom Gadsby.
“The plan to close 10% of clothing and home space is very long term, in our view, and we see further erosion of clothing margins in the meantime.”
He reckons the stock is worth no more than 250p compared with the current price of 340p.
Investec said it was “too early to call a victory” for Marks with a slowdown in consumer spending predicted later this year. It too repeated its ‘sell’ advice to clients as did Cantor Fitzgerald.
Elsewhere, the response was a little warmer to the first quarterly rise in M&S clothing sales for two years.
Peel Hunt’s John Stevenson in a note entitled ‘back to black and back on track’ repeated his ‘buy’ on the retailer with a 500p a share price target.
The analyst urged boss Steve Rowe to enjoy a celebratory cigar as his turnaround strategy appears to be working.
But he added added: “Much remains to be done on product and fending off the competition.
“The action that management is taking is beginning to gain traction with shoppers.
“The shares should reward that, in our view, especially given they are so lowly rated, and are an integral part of our buy list.”
Veteran retail analyst Tony Shiret, of Haitong Research, was also a ‘buyer’, although his price target was a slightly less punchy 375p.
“We have been positive on M&S on largely tactical grounds, seeing CEO Steve Rowe’s strengths as execution based, allowing profit stabilisation and recovery against weak comparatives,” said Shiret.
“At this stage we do not really believe that M&S will get to a point where it is capable of long term sales-based growth given its starting point and the relatively un-dynamic nature of what has been proposed so far in the UK.
“But we believe that today is a good day for Mr Rowe and the company.”
Of the 15 analysts logged as following Marks by the Broker Forecasts site, seven are ‘sellers’ of the stock, while only four hold ‘buy’ recommendations. The remainder have ‘neutral’ calls.
The consensus price target – 400p six months ago – has come down to 336p, suggesting the City thinks the stock is fully valued.