Marks and Spencer’s warning of tougher market conditions has prompted broker Peel Hunt to slash its target price by 55p to 120p and cut its rating to add from buy.
Underlying interim profits of £205mln were lower than expected and “the looming sector headwinds are too much to push back” said the broker adding that the real pain will be felt next year, it adds.
Rising wages, increased energy costs and currency issues are all causes for concern and its forecast for March 2024’s profits has dropped to £310mln from £400mln.
Sales growth in clothing and home was 4% and food 3% and Peel Hunt believes M&S’s plan “is absolutely the correct strategy” with the supermarket giant keeping prices low for food allowing protection of key products and maintaining the ReMarksable brand.
However, the cost of this strategy for the London-based company is a 1.1% decrease in gross margin.