Broker tips Marks & Spencer shares as a ‘buy’ as online and food sales continue to rise

7th January 2016


As Marks & Spencer updates the market Ian Forrest, investment research analyst at The Share Centre, explains why he is backing the retailer…

Marks & Spencer announced third quarter trading figures this morning, covering the period up to Boxing Day, and along with it came news of the departure of chief executive Marc Bolland.

Like-for-like UK sales were down 2.5% although investors should acknowledge that online revenues rose 21%.

Food saw a 0.4% improvement, while general merchandise recorded a 5.8% drop due to unseasonal weather and stock availability.

However, investors should note that the group stated profit margins at the latter business would be better than previously expected.

The company has once again reported that general merchandise was facing challenging trading conditions, with unprecedented levels of promotional activity across the market.

These results were certainly a mixed bag, as expected, but the departure of Marc Bolland will provide an opportunity for a fresh approach and further change.

As a result, we continue to recommend Marks and Spencer as a ‘buy’ due to the strength of the growing food business, the significant potential to increase profitability in general merchandise, rising disposable incomes and the healthy dividend.

The lower oil price, along with a growing UK economy, should continue to be supportive of results ahead.

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