What the analysts are saying about Marks & Spencer’s full-year results.
“While these results are not terrible, neither are they particularly stunning. In our view, there is a degree to which they show M&S is happily muddling along in the middle and is finding it increasingly difficult to generate strong growth from the UK business.
Behind the headline figure, the business remains a game of two halves. Food is seeing good progress with some strong results in both total and like-for-like performance. Meanwhile, general merchandise sales are far weaker and performance across the range is patchy.
Looking ahead, M&S has much more work to undertake if it is to accelerate growth, and nowhere is this truer than in clothing. While M&S has made some good progress on home and food we feel it still lacks a clear sense of direction on the clothing front, especially in womenswear. Until this is remedied growth in both sales and profits will remain under pressure.”
Neil Saunders, Conlumino
“M&S has reported preliminary results today, which are better than our forecasts. However, management is striking a less bullish tone on future years with, as rumoured in the press last week, the revenue uplift from their 3-year growth plan now set at £1.1bn to £1.7bn, compared with the £1.5bn to £2.5bn set out in November 2010. Pre tax profit of £705.9m is 2.4% better than our forecast £689.4m and consensus of £694m (range £675m-£706m, per the M&S corporate website
Whilst FY2013 guidance is as before at +3.0%, 2014E has been reduced to 2.5%, with “a further reduction thereafter”. This is partly as a response to the popularity of online shopping, but in our view reflects lower levels of confidence.
International profits were disappointing, at £133.4m vs. our £150.6m estimate. This was mainly due to performance in Ireland, Greece and the Czech Republic and Eastern European business, which is undergoing restructuring.”
Jean Roche, Panmure
“The M&S statement today is rather self-congratulatory in tone: “Marks and Spencer performed well in a challenging economic environment and made good progress in delivering our strategy” and they will claim a small beat to expectations, with underlying PBT of £706m (vs £714m the year before), thanks to some fancy footwork on the interest charge. But even £706m relied on some formidable cost control and some would claim that a lot of other costs have been swept below the line, over and above the Greek asset impairment. Going backwards in profits is never a good thing, whilst the flat dividend tells its own story.
The weekend press was softened up for the slowdown in new store openings next year, but there is no mention of the much-mooted revision to the 2013-14 sales targets and there is comment on current trading ahead of the Q1, even though everybody knows that things have started badly (a year ago M&S was quick to claim a good start to the year, after the fine weather in April 2011). That leaves the new store revamp programme to talk about and it’s good to see M&S pressing on with that, even if a 2.5% sales uplift versus the control group sounds feeble (given the weak underlying LFL sales).”
Nick Bubb, independent analyst
“Progress is being made on key strategic initiatives, especially around cost efficiency which should afford protection whilst sales fluctuate. Management indicate they are pleased with the progress on key targets. Certain key changes are well underway now and, despite continuing adverse conditions, our view about the potential for progress in FY’13 is unchanged, albeit phasing is H2 weighted. However, management have downgraded their 3 years sales target by 30% given the backdrop. In truth most forecasts had already done the same prior to today.
Supported by cost/efficiency gains, though, underlying growth rates ahead of those in FY’12 look to be well supported.”
Matthew McEachran, Singer Capital Markets
Marks & Spencer has delivered FY2012 PBT broadly in line with expectations. Management confirmed strategic revenue targets look optimistic and trimmed expectations, a point already reflected in market forecasts. The plan continues, although we struggle to see M&S outperforming the sector.”
John Stevenson, Peel Hunt