Marks and Spencer Group PLC (LSE:MKS) should come out of the current recessionary environment a better business, said Shore Capital.
The broker made its comments after the food and clothing retailer laid out ambitious targets in an investor presentation.
M&S set out “several ambitions for the business to expand in a number of avenues out to 2028," said analysts at Shore.
Included in those was increasing its market share gain in clothing and home (C&H) and food by 1% each in the medium term.
Analysts Clive Black and Darren Shirley added an investment programme will increase margins in C&H and food via the development of its store estate and digital capabilities.
On the store estate front, M&S said it will be closing a number of its C&H stores, focusing on its Simply Food locations.
Specifically, Shore Capital expects C&H selling areas to fall by 20% by 2028, with half of the sales in this sector coming from its online channel.
Food spaces are expected to increase by 10% to 15%, with the FTSE 250 group hoping more trolley shoppers and retail park outlets will facilitate the growth.
M&S spoke about being more efficient, taking £400mln out of its cost base, although this saving will not translate directly to the bottom line, with half of this focused on investment in food and C&H, said Black and Shirley.
Currently out of the 30mln UK customers, 16mln have sparks cards and 4mln of those use the app.
App-based customers spend four times more than those without the app, said Shore Capital, so expect development around digital experience and Sparks to meet ambitious figures of 10mln app users.
International development was targeted, especially in India, Indonesia and the Middle East through developing third-party partnerships.
“In all, a sensible plan is in place to use that builds upon the stabilisation of the business in recent years and seeks to further improve where the group can control matters,” said Shore Capital.
However, external macro factors persist in the sector, with chief executive Stuart Machin mentioning increased wages, higher energy costs and food costs of goods.
Although more detail on the outlook will be provided when results are posted in November, Shore Capital view these as “smoke signals” as evidence of downwards pressure to the financial year 2023 and 2024 consensus.