Marks & Spencer boosted by Barclays note

Retailer Marks & Spencer got a boost as Barclays initiated coverage of the stock at ‘overweight' with a 410p price target, which implies 14% potential upside.

The bank acknowledged that like the rest of the UK general retail sector, M&S currently faces some significant headwinds given weakening consumer sentiment and FX pressures on input prices, especially in the demand-elastic Clothing & Home segment.

However, it highlighted the fact that M&S Food has a good track record over many years, noting that the company is becoming increasingly food-focused over time. In addition, Barclays said it sees plenty of opportunity to add more stores, 200 in the next two years on a base of around 600.

It also pointed out that recent stores have been performing well with sales in new stores 17% ahead of plan at the 1H16/17 stage.

Barclays said that in Clothing & Home, the turnaround plan is likely to offset headwinds.

“M&S cannot avoid the industry headwinds although its older and wealthier customer base might give it some protection.

“However, the new CEO has outlined a comprehensive and sensible plan to improve its store estate and its product offering. Initial results appear encouraging with M&S delivering its first full price market share gains in over five years.”

At 1300 BST, the shares were up 1.7% to 359.60p.