Peel Hunt downgrades M&S, highlights lack of growth in General Merchandise

“Underlying trading conditions have been infinitely better this year than last but we fear that yet again M&S has failed to read the script,” it said.

The brokerage explained that despite a very easy comparative, it’s concerned that like-for-like sales for General Merchandise remain in negative territory. It said this was “a quite breathtaking indictment of its ranges this season”.

Peel Hunt said even if the cost savings and sourcing gains come through on track, and Food stays in positive territory - neither of which is certain – that won’t hold back the tide.

“An H2 LFL bounce-back is unlikely: for us the bottom line is that without General Merchandise sales growth, the shares are likely to struggle.”

Peel added how bulls point to the strong cash generation as a reason to hold the shares but that will soon come under pressure if forecasts continue to fall and more still if extra capex is required to refresh the stores again.

It added that a 15x price-to-earnings ratio is not ridiculous but isn’t much of a discount to the sector and with no confidence in the true level of earnings per share, it’s too risky to stay with a ‘hold’.

At 1020 BST, M&S shares were down 1.5% at 491.40p.