Marks & Spencer shares slide as retailer delivers “mixed” market update

8th January 2015

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Shares in Marks & Spencer dropped 4% on Thursday after the retailing giant’s latest market update was poorly received.

The FTSE 100 constituent reported that general merchandise has endured a tough period in the 13 weeks to 27 December, where sales dropped 5.8% quarter-on-quarter.

In addition, despite an overhaul of its website, the blue-chip’s international and online offering also failed to inspire as online sales dipped by 5.9%. Food sales however edged ahead by 0.1% over the period and group chief executive Marc Bolland said that the business’s full-year profit guidance remained unaltered.

However traders were not convinced by his assurance and by late morning trading, the group’s stock had slipped by 18.9p to 444.3p.

In a statement Bolland said: “M&S had a very good Christmas in Food. We delivered record Christmas sales, strongly outperforming the market. We had a difficult quarter in General Merchandise, dominated by unseasonal conditions and an unsatisfactory performance in our e-commerce distribution centre.”

However while Cantor Fitzgerald reiterated its ‘sell’ recommendation on the shares, brokers at The Share Centre are still calling M&S a ‘buy’.

Looking at the firm’s latest numbers, Ian Forrest, investment research analyst at The Share Centre admitted the results were “mixed”, however he highlighted that the food division’s like-for-like sales tally of 0.1%, represented an outperformance of 3% relative to peers and included a record performance in Christmas week.

He added: “The group’s general merchandise division saw like-for-like sales drop 5.8%. The company blamed this on warm weather in October and November, followed by disruption to a distribution centre in December. “We continue to recommend Marks & Spencer as a ‘buy’ for investors. Given the number of issues in different areas of the business, it is perhaps remarkable that full year profit guidance was maintained. There is still work to do in the group’s general merchandise division, however food sales remain very strong. The falling oil price, which should increase consumers’ disposable incomes, could benefit the company. In volatile markets the prospective dividend yield of 4% is also attractive for investors.”

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