Marks & Spencer slides on JPMorgan downgrade

Marks & Spencer was under pressure after JPMorgan Cazenove downgraded the stock to ‘neutral’ from ‘overweight’ and cut its price target to 550p from 600p.

The bank said it expects another quarter of negative like-for-like performance from M&S in General Merchandise and it’s also concerned that LFL growth in the food business is becoming harder to achieve.

“Whilst we continue to like the self-help story and see the potential for ongoing gross margin gains, we do think that M&S has less opportunity to reduce opex growth guidance than in previous years.”

This, combined with ongoing pressure on International profits led JPM to downgrade its full-year pre-tax profit estimate for 2016 to £666m from £706m.

It said this leaves the bank 6% below Bloomberg consensus and implies only 1% pre-tax profit growth in 2016, versus its forecast for 6% growth at Next.

JPM added that the new target price offers only 6% upside to the current share price.

At 0935 BST, Marks & Spencer shares were down 2.9% at 504.50p.