Hargreaves Lansdown

Marks & Spencer Group plc (MKS) Ordinary 25p

Sell: 479.70pBuy: 479.90p04.80p (1.01%)Ex-dividend
FTSE 1000.02%
Market closedPrices as at close on 25 November 2014Prices delayed by at least 15 minutes | Switch to live prices |
* Please note that there can be occasions when the Selling price shown may be temporarily higher than the Buying price. This can sometimes happen when the stock market is closed but it can also happen at other times for a variety of reasons. However, when the stock market is open and you place a trade, the selling price available to you will never be higher than the buying price. Live prices will be available when you place a deal with us during market hours. Please check these and contact us if you are unable to deal online.

HL comment (5 November 2014)

Half year results: The profit increase and improvement to gross margins have taken investors by surprise, with the share price strongly ahead in early trade. Even so, with General Merchandising sales down, food sales up and online yet to gain traction, the summary is a familiar one, even if the initial share price reaction may suggest some optimism on prospects. Unseasonal weather conditions have inevitably been mentioned, along with currency headwinds and a cautious near-term outlook. There are, however, some signs of promise. Gross margin has shown a strong improvement, in part due to the tight control of costs which M&S is currently undertaking, whilst the roll out of more Simply Food stores over the next three years aims to capitalise on the way the market is developing. In addition, the group is confident that it is set for the impending Christmas period, whilst the extra cash generation has enabled a modest raising of the dividend, which even at the current level of 4.2% is attractive as the investor chase for yield continues. M&S is still a work in progress, with opinion divided as to whether the strong yield is sufficient incentive to be "paid to wait" until any full recovery becomes evident. The share price performance has tended to reflect this quandary, having dipped 17% over the last year, as compared to a 5% drop for the wider FTSE100. Despite today's warm reaction to the update, until such time as prospects become more visible and sustainable, the present market consensus opinion is likely to remain rooted at a hold, albeit a strong one.

Read more share research from Hargreaves Lansdown

Financial Highlights:
  • Marks & Spencer reported a 2.3% rise in underlying  pre-tax profit to £268 million in the period to 27 September.
  • Group sales rose 0.5% to £4.9 billion.
  • Gross margin has shown a strong improvement, in part due to the tight control of costs which M&S is currently undertaking.
  • Like-for-like General Merchandise sales were down by 2.9%.
  • M&S.com sales fell by 6.3% during the period as updates continue to be made to the platform.
  • International sales dropped 3.4% on a reported currency basis, in part due to currency headwinds and unseasonal conditions across Europe.
  • An improvement in cash generation during the first half year resulted in an interim dividend of 6.4 pence being declared, up from 6.2 pence paid a year earlier.

Negative Points:
  • UK non-food or General Merchandise like-for-like sales fell by 2.9%. This is now the 13th consecutive quarter during which GM or clothing and homeware has declined. M&S said the "unseasonal weather resulting in high levels of promotional activity across the market" had hit performance.
  • Sales at M&S.com, which was relaunched earlier this year, slid by 6.3%, however the retailer said its online business is "on track for growth ahead of peak trading period". Competition in the online arena remains intense.
  • The group's push overseas has yet to convince, given the difficulties which other retailers such as Tesco have now run into. Ongoing challenges in Ireland remain present, while its franchised business has been impacted by currency and political issues in its Middle East region, and lower shipment timing issues.
  • Unlike some rivals, M&S does not have a material online food proposition.

Positive Points:
  • M&S Chief Executive Marc Bolland said: "M&S delivered sales growth and increased profit in the first half despite a tough market, particularly in September. We are pleased with the progress we have made against our key priorities for the year: general merchandise gross margin, improving womenswear, driving food growth and cash generation."
  • Growth (1.3%) in the important Womenswear category was reported on an "improving trend". 
  • UK gross margins improved, in part due to the tight control of costs which M&S is currently undertaking and a strong improvement in General Merchandise.
  • M&S said it will speed up Simply Food store openings from 150 to 200 over three years.
  • Group capital expenditure spend down by £44.1 million year-on-year following the completion of a number of large infrastructure projects.
  • The dividend payment remains attractive in the current low interest rate environment - a yield of 4.2% as of 5 November 2014 (not guaranteed).

Register to receive Marks & Spencer share research updates direct to your inbox for free

All yield figures are variable and not guaranteed.

Deal now Deal for just £11.95 per trade in a ISA, SIPP or Fund & Share Account

Wealth 150 fund

The Wealth 150 is a list of what we believe are the best funds in all the main sectors. For a fund to be selected for the Wealth 150 it must pass a rigorous selection process, and we continually monitor the list to ensure it only contains the best funds.

Wealth 150+ fund

The Wealth 150 is a list of what we believe are the best funds in all the main sectors. For a fund to be selected for the Wealth 150 it must pass a rigorous selection process, and we continually monitor the list to ensure it only contains the best funds.

As investment returns depend on two factors - performance and charges - we have identified from the Wealth 150, the funds we believe offer the very best combination of outstanding performance potential and the best prices. These are the Wealth150+ funds. In many cases these super-low charges are only available through the Vantage Service - a unique benefit to Hargreaves Lansdown clients.

Core Tracker fund

The Core Trackers list represents what we believe are the very best trackers in each of the main sectors. We analysed each fund's management, process and performance to find the best combination of quality and cost. We want to ensure that the fund has not only tracked its index closely in the past, but that it has the best potential to track well in the future. In many cases these super-low charges are only available through the Vantage Service - a unique benefit to Hargreaves Lansdown clients.