Berenberg ups Marks & Spencer to 'buy' ahead of Q3 update
Marks & Spencer got a boot on Tuesday as Berenberg double-upgraded its stance on shares of the retailer to ‘buy’ from ‘sell’ ahead of a third-quarter trading update this week.
FTSE 250
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FTSE 350
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FTSE All-Share
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General Retailers
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Marks & Spencer Group
257.80p
17:15 24/04/24
The bank said it expects the update to show "a significant improvement" in Clothing and Home and "ongoing positives" in the food segment.
Following a poor first half for C&H, which saw like-for-like sales fall 5.5%, Berenberg expects an improvement in LFL sales in the third quarter, driven by better availability and a stronger market backdrop. It noted that management already reported at the interims a big improvement in C&H sales growth in October.
In addition, Berenberg said the recent announcement that Richard Price, an experienced merchant, will join the business in 2020 to lead the clothing and home business is "a significant positive", while the Ocado joint venture provides a longer-term growth opportunity in the grocery business.
"While challenges certainly remain, including online weakness, execution risk in the Ocado JV, the legacy store estate restricting M&S’s ability to adapt to the changing retail landscape, and a less-than-watertight balance sheet, we believe this is more than priced in," it said.
The bank lifted its FY21/FY22 earnings per shares forecasts by 7%/13% and its price target to 250p from 160p.
At 0940 GMT, the shares were up 3.2% at 219.70p.