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Marks & Spencer Group plc (MKS) Ordinary 25p

Sell: 434.00pBuy: 434.10p6.80p (1.57%)
FTSE 1000.62%
Market closed. Prices as at close on 17 April 2014.
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HL comment (10 April 2014)

Fourth quarter trading statement: The update has been well received by investors, despite the fact that the story largely remains the same. Strategically, M&S is continuing its push into overseas markets (although the position in China is challenging) whilst also driving further into its online offering, where it remains behind some of its more developed competitors. Meanwhile, Food remains a strong contributor to profits, and guidance on profit margins has also been nudged higher. By contrast, General Merchandising is still under pressure, with some improvement in Clothing somewhat overshadowed by a reduction in gross margins due to promotional activity. Nonetheless, the new Chief Executive and the general M&S turnaround story is being given the benefit of the doubt by investors. Today's share price rise adds to a 20% hike over the last year, which compares to a 5% jump for the wider FTSE100. Market consensus opinion has more recently improved on the stock, buoyed also by the ongoing UK economic recovery, and now comes in at a buy.

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Financial Highlights:
  • Total UK sales improved 1.5%.
  • Total Food sales advanced 2.5%.
  • General Merchandise total sales were up 0.2%. On a like-for-like basis, sales fell 0.6%.
  • Overall clothing sales increased by1.3% and up 0.6% on a like-for-like basis.
  • M&S.com sales increased by 12.5%.
  • International sales gained by 4.7%.

Negative Points:
  • Accompanying management outlook comments expressed an element of caution. "Despite some improvement in consumer confidence, we remain cautious about the outlook".
  • Non-food sales fell for an eleventh consecutive quarter.
  • M&S's performance was held back by Easter not falling in its fourth quarter, as it did last year.
  • Unlike some rivals, M&S does not have a material online food proposition.
  • Continuing pressure on consumers' disposable income remains a concern for many British retailers.

Positive Points:
  • "We are encouraged by womenswear, which is showing clear signs of improvement and performed ahead of clothing," said Chief Executive Marc Bolland. The company relaunched its womenswear range last autumn and said sales were notably up on last year.
  • The retailer's food business delivered its 18th consecutive quarter of growth.
  • M&S.com delivered a good performance with total sales up 12.5%.
  • The group's international business reported a strong quarter with overall sales up 4.7%. India, China and the Gulf were the stand out performers. The retailer has embarked on a new overseas push with plans to open 250 new stores around the world over the next three years with the aim to grow international revenues by 25% and profits by 40%.
  • Management focus is firmly centered on transforming M&S into an international multi-channel retailer.

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