Marks and Spencer Group PLC (LSE:MKS) is forecast to report lower profits that mask a “relatively effective first half”, said house broker Shore Capital, as the retailer prepares to release its half-year results on Wednesday 9 November.
Analyst Clive Black said he believes that the FTSE 250 company should report an adjusted pre-tax profit of around £199mln, below last year’s £269.4mln for the same period, which was boosted by the business rate relief.
Growth is expected in the UK Clothing & Home (C&H) and Food businesses, with M&S “palpably executing better in-store and online,” although inflationary pressures point to weaker margins.
M&S Food continues to work towards being a broader grocer and so investment in pricing is expected to remain a feature of its commercial strategy, the analyst said.
In clothing, full-price sales should be ahead year-on-year, with less product going into ‘sale’.
But as the company warned on costs last month, full-year adjusted profit forecasts have been cut 2% to £405mln, and by 32% for 2024 due to a host of macroeconomic uncertainties, including energy costs, interest rates and borrowing costs, currencies and weaker consumer confidence.
M&S, which is currently in the midst of a row regarding its flagship Oxford Street store, is in control of what it can control, Black said.
“External headwinds are extreme and we cannot yet say we have reached the darkest day before the dawn,” the broker said.
Despite this, when the "darkest moment" does arrive, Shore Capital believes M&S is one of several FTSE-350 UK retailers, including JD and Tesco, that will merit investor interest.