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M&S and McColl’s likely to benefit from government designation of ‘essential’ retailers, says Peel Hunt

Published: 13:51 19 Mar 2020 GMT

Marks and Spencer Group PLC - M&S and McColl’s likely to benefit from government designation of ‘essential’ retailers, says Peel Hunt

High street giant Marks & Spencer Group PLC (LON:MKS) and supermarket chain McColl’s Retail Group PLC (LON:MCLS) are set to benefit if the UK government moves to designate certain outlets as “essential retailers” during the coronavirus outbreak, say analysts at Peel Hunt.

In a note on Thursday, the broker said it was “clear that the direction of travel is towards a more draconian approach from the UK government”, which may include similar action to that of France, which has designated a list of outlets that are to be kept open including supermarkets, pharmacies, banks, petrol stations and hairdressers.

“The situation in the UK is likely to be similar”, Peel Hunt said, adding that the attainment of ‘essential’ status will offer M&S an opportunity that is “far bigger than that reflected by the current share price”.

Analysts said McColl’s was in a similar situation, with its current share price not reflecting the opportunity to stay open as an essential retailer.

“Community retailing is even more valuable at the moment and we would expect these stores to be very busy”, they said.

“M&S and McColl’s aren’t high-quality retailers right now, but the share prices are far too pessimistic and thus rank as very interesting”, the broker added.

Meanwhile, B&M European Value Retail SA (LON:BME) was another firm that Peel Hunt expected to “make the cut” in achieving essential status.

Another likely candidate was Pets at Home Group PLC (LON:PETS) due to their large share of the pet food market.

Lastly, Peel Hunt said there was a fifty-fifty chance that WH Smith PLC (LON:SMWH) could receive ‘essential’ designation due to the “hundreds of Post Offices in its stores”.

Shares in M&S were up 1.9% at 116.4p in mid-afternoon trading, while McColl’s soared 20.9% to 22.6p.

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