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Weather-beaten Marks & Spencer to disappoint investors

M&S could deliver a profit warning when it updates the market on first-quarter trade next week.

 
Weather-beaten Marks & Spencer to disappoint investors

The past few months may have been a washout for Marks & Spencer (MKS.L), analysts warn ahead of a trading statement next week, and the poor weather could force the company to revise down its full-year profits guidance.

The retailer, which has seen womenswear sales in particular disappoint this year, is set to publish a first-quarter trading update on Tuesday, with its annual general meeting on the same day.

‘We wouldn't be surprised to see gross margin guidance of 0 to +25bp for the full year... revised downward to flat. The market would see that as a profit warning,’ says Marc Zwartsenburg of ING, who nonetheless has stuck with his ‘hold’ rating on the shares.

Freddie George of Seymour Pierce says there are ‘very clearly… better investments elsewhere’. He has downgraded his ‘low end of the range’ forecast for pre-tax profit of £690 million to £665 million. Earnings per share would fall as low to 31.7p under this scenario.

Like most companies, M&S’s share price has dropped sharply since March, having climbed at the start of the year. Over the past 12 months though, the share price is down 8%, as spooked customers spend carefully in the deepening downturn in the UK and elsewhere.

But fortunately, the market has been well briefed for disappointing figures next week, says George, who also has a ‘hold’ rating on the shares. ‘Although it is fashionable to lay into M&S at present, we suspect that there is limited downside to the share price and unless there is a monumental surprise the 300p level is unlikely to be breached. We do have concerns that there is likely to be limited upside to short and medium term earnings.’

Andrew Hughes at UBS notes that the rain will have affected not only fashion sales, but food too. However, the string of sports and royal events in recent months will have offset this. Hughes is among a minority of analysts who rate the shares a ‘buy’ (most say ‘hold’).

The Financial Times last week reported that the departure of Kate Bostock, head of M&S’s non-food business, could be announced at the AGM next week. UBS’s Hughes noted that these reports remained unsubstantiated.

M&S shares are 1.1% lower today at 325p.

7 comments so far. Why not have your say?

Jn

Jul 06, 2012 at 12:58

The rain would have affected most retailers.

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dogdays

Jul 06, 2012 at 14:17

The quality of the M&S range has gone down whilst the prices have gone up. They will now pay the price of failure.

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harban

Jul 06, 2012 at 15:42

I have bought 6 different outfits in March, but have to return all of them because they were too long for me,

Previously, the sizes were XL, L, Standard , Short, extra short,

But now all the outfits are of 1 size

I bought 2 more dresses , last week. I thought i might pay the tailor, to change the size,

But it is too much work and too expensive.

I like the colour, design and material, BUT I HAVE TO GET TALLER TO WEAR THOSE DRESSES .

I will be returning them this week.

I have heard other women in the dressing room complaining the same thing, Since when, have all the women become one size.???

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s mclaughlin

Jul 06, 2012 at 15:51

not surprised

every time i go into M&S menswear struck by just how dowdy the clothes are - Next for example is much more in tune

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invsb

Jul 07, 2012 at 21:35

They'll be handing over retail space to HSBC branches in their stores soon. Don't they think they could use the space for selling clothes or food?

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alan franklin

Jul 08, 2012 at 09:33

I stopped buying from M and S when they stopped most of their buying from British manufacturers. Prior to that I bought many quality presents, like shirts, for foreign relatives and friends, proud to give them something first class that was "Made in Britain."

Now we all buy the same asian products at a fraction of the price in America. M and S dumped on its British suppliers so I have abandoned them.

Overpriced, over-rated and heading down, down down. Serves them right.

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Hilary hames

Jul 08, 2012 at 23:06

Marks is still my favourite fashion retailer but am 65 so not suprising and I notice when I read reviews of the Per Una clothes I buy that everyone is a minimum of mid forties and most older.

However I could sort M&S out. There are, in Per Una hardly ever any 10s and 12s but masses of 18s 20s 22s as those get left

Also, I am normally a 10 but last year dropped to 8. I couldnt buy size 8 trousers in my M&S always had to order. There is no call apparently - so I went more and more to Next where there is never that problem.

So far as the food is concerned its hard to beat and now more affordable than it once was. However I work next door so often pop in for 'bargains' after work. its always the same stuff left over, so why dont they just order less!

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