Investec rates M&S a 'buy', cuts target price

The retailer said while it enjoyed its best ever Christmas for food sales, general merchandise sales slumped 5% and like-for-like (LFL) sales by 5.8%, which analysts said implied in-store sales were down in high single digits.

As a result, total group sales were entirely flat for the 13 week period to 26 December, having risen 1.4% in the first half of the year.

The womenswear division's tribulations were blamed on unseasonal weather condition.

“With weak comps, 3Q16 was supposed to be the quarter when M&S’ finally demonstrated general merchandise was back on track,” said Investec analyst Kate Calvert.

“However, in keeping with others, the weather has spoilt the party, though self-help & a more flexible business model has limited the profit impact.”

M&S also announced that chief executive Mark Bolland will retire this year and hand the baton to well-regarded general merchandise chief Steve Rowe.

“He has significant experience across the whole business having also run the Food division and store operations historically and his appointment is likely to be well received in our view,” Calvert said.

Calvert added that the cut to the target price was based on peers de-rating of the stock to calendar year 2016 price to earnings ratio of 11.6.

However, she said the de-rating “seems excessive given M&S is capable of delivering double digit TSR through a combination of profit growth driven by self-help & capital return programme”.