Mindful Money’s Monday share tips: M&S, Burberry, AB Foods & Barratt Developments

7th July 2014

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With UK High Street retailing giant Marks & Spencer scheduled to report its first quarter trading update on Tuesday investors want to hear continuing reports of rising sales following some troubles earlier this year.

The firm’s shares are down by 5% over the past year and by 6% in just three months however with the current chief executive and former head of Morrison’s Marc Bolland still being given the benefit of the doubt in delivering a recovery, analyst opinion currently points towards a ‘strong hold’.

Difficulties for the retailer’s website, highlighted as of its May full year results, are expected to drag on general merchandise sales. The problems arose after a £150m facelift to the site in February says Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers. He adds:  “More positively, a recent reshuffle of management may be reiterated whilst like-for-like food sales are expected to have again grown, aided by a late Easter. Furthermore, the company’s push to open stores overseas may also again feature.”

Thursday sees fashion house Burberry deliver its latest interim management statement. The prospects of the luxury goods market may be improving as the global economic recovery begins to gain a firmer footing however the business has endured a tough time, especially on the back of the slowdown in China and over the past year its shares are up just 3%.

Fashion designer Burberry

Fashion designer Burberry

Sheridan Admans, investment research manager at The Share Centre, who is calling the stock a ‘buy’, inline with the consensus view, says: “Investors will be hoping to hear how the new chief executive of Burberry, Christopher Bailey, plans to take the company forward. Key areas to address will be the termination of the Japanese licence, the progress of the beauty business, management changes and the impact of an appreciating sterling.”

Associated British Foods is scheduled to report its third quarter/nine month trading update on Thursday. Ahead of the news release, and with the share price up 73% during the last year alone, analyst consensus opinion denotes a ‘strong hold’ for the Primark owner.

In in terms of what to expect in the report, Bowman says: “Lower sugar prices are again expected to drag on the performance of its AB Sugar business. In addition, the negative impact of current strength in the UK pound could also be reiterated. On the upside, continued store openings at the group’s discount clothing retailer Primark should underwrite further divisional progress. The group’s grocery business could also again benefit from improved profitability at its Australian George Weston Foods business.”

Thursday also sees Barratt Developments publish its fourth quarter trading update and while the momentum for the house builders continues, recent weeks have witnessed shares experience some profit taking and notably the firm’s stock is off by 7% over the past three months.

While the market has the stock listed in ‘buy’ territory, with Deutsche giving the business its backing, Admans has the firm on his ‘hold’ list. He says: “Investors will expect to see increased levels of home sales and higher average prices. Going forward, the acquisition of more land banks and plots for development will be important.

“With the recent improvement in the weather, and good news surrounding the UK economy, it will be interesting to see the effects on footfall, forward sales and construction. Also comments surrounding the Bank of England’s proposal to limit mortgage to salary ratio will be welcomed.”

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