Marks & Spencer Group plc (LON:MKS) shares took another hit today after Societe Generale cut its rating on the retailer to ‘sell’ from ‘hold’ and lowered its target price to 301p from 376p.
The company’s shares were in the red yesterday after reporting a 0.5% like-for-like fall in UK first quarter sales, driven by a 1.2% decline in the clothing and home business. Like for-like food sales edged down 0.1%.
READ: Marks & Spencer shares drop after first quarter sales decline, driven by troubled clothing division
The results marked an improvement on the fourth quarter, with the clothing unit supported by growth in full priced sales growth and the food business boosted by expansion of the Simply Food stores.
Despite the easing sales decline, analysts were quick to point out that much of this related to the benefit of a later Easter this year.
Societe Generale dragged shares in M&S lower today as it also warned that the firm is facing competition from “all sides” as a legacy mid-market clothing retailer.
It added: “M&S is making good progress with full price sales growth and Food space expansion, but this may not be enough to grow sales faster than operating costs from here. M&S’s management is experienced, customer focused and far from complacent, but we view the structural challenges as insurmountable.”
The bank said M&S has the added challenge of weak UK consumer confidence, which has been hit by rising inflation and a drop in real wages.
SocGen lowered its guidance for fiscal year 2018 earnings per share by 2.8% to 26.83p, which is 5% below consensus estimates.
Shares fell 2.01% to 316.60p in late afternoon trading.