Analysts trimmed the price target to 150p from 160p as valuation is fair but “no longer in the bargain basement, as it was in mid-2020”.
The bank said M&S is making good progress in Food and is benefitting from its improved valued for money perception, as well as from its new product development, while there’s also upside risk for Ocado profit forecasts given sustained strong customer demand and Ocado's range advantage.
The joint venture is expected to deliver £70mln of annual synergies which should continue to benefit the group’s Food segment operating margin.
However, the Clothing & Home business remains challenged and its market share decline has accelerated through the pandemic as it has sought to manage inventory and cashflow.
“We feel this approach may have compromised its ability to offer as much newness as some others in the sector. We remain concerned that its offer is now less price competitive and feel that reshaping the store estate to match customer demands and the ongoing channel shift to online may prove difficult to execute,” analysts commented.
“We anticipate that the International business will continue to be impacted by restriction due to the pandemic, as well as reductions in franchisee stock requirements. Although we think M&S has taken the right step moving to the higher return franchise model, we expect that it will require further investment in localising ranges and reducing prices.”
Shares dipped 3% to 134.85p on Monday morning.