Marks & Spencer shares jump as sales get back on track

2nd April 2015


Shares in Marks & Spencer jumped in early trading on Thursday as the retailer announced that sales rose by almost 2% over the past three months.

By 09:13am the High Street stalwart’s stock was ahead by 5%, or 28.5p at 559p.

In its latest market update, for the 13 weeks ending 28 March 2015, the FTSE 100 constituent said that General Merchandise sales, which includes women’s wear, increased by 0.7% on a like-for-like basis over the period.

In addition, M& sales bounced back into growth territory with sales up by 13.8%. Its food arm also outperformed the market with sales ahead by 3.7%, up 0.7% on a like-for-like basis.

Chief executive Marc Bolland said: “We have made strong progress over the quarter. In Food we delivered another excellent performance, with sales growth ahead of the market. We continued to deliver on General Merchandise gross margin, and are pleased that we have achieved this whilst also improving General Merchandise sales. M& has returned to growth, as planned, with further improvement in customer metrics.”

However the fly in the ointment was international sales, which fell by almost 4% as macro-economic issues particularly in Russia and Ukraine “significantly impacted second half profit”.

Over the past 12 months shares in the firm have firmed by 13% – while the past six months has witnessed them soar by 32%. Analysts at Investec reiterated their ‘buy’ recommendation on the shares today, while the general consensus points to an overall ‘cautious buy’ recommendation.

Looking at the update Graham Spooner, investment research analyst at The Share Centre, believes investors will be hoping that this could be the long awaited “turning point for the high street chain’s clothing division”.

He said: “Marks and Spencer has a strong reputation of good value and high quality produce, and this is a reputation that should pay dividends, especially as there is the potential for people to become more conscious of some extra money in their pockets for discretionary spending. The prospective dividend yield of 3.5% is a further attraction.

“The group may have turned the corner as clothing sales have stopped falling, whilst other aspects of the business are also on the rise. For reasons such as these, we recommend Marks and Spencer as a ‘buy’ for medium risk investors looking to achieve a balanced portfolio.”

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