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Marks & Spencer shares are continuing to pull their socks up this morning, extending their breakout from a 5-month downtrend thanks to Q4 results which weren’t quite as pants as markets had feared from the UK’s underwear-retailer of choice. Even though the results represents a quasi-full-year profits warning, investors have given them a warm welcome to the first set of financials under new CEO Mr Rowe.
General merchandise sales may have dropped 2.7% on account of a competitive retail environment and uncertain economic backdrop but this represents a healthy beat on consensus of more than -3% and gross profitability thankfully saw a marked improvement. Comparable Food sales remain under pressure (zero growth), international sales also outperformed domestic and and it looks like currency pressure in Europe will have taken its toll on FY group margins.
But hopes appear high that a bottom has been seen and that new leadership and strategic change (better focus?) can help the shares maintain their recovery course. All eyes on the earnings and strategy update next month No pressure Steve!
Mike van Dulken, Head of Research, 7 Apr
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