CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Marks & Spencer suffers credit rating downgrade ahead of its full-year results

The British retailer will unveil its full-year results on Wednesday, with the retailer coming under scrutiny for its Covid-19 response after it joins list of ‘junk’ investments by Standard & Poor’s.

Marks & Spencer (M&S) will unveil its full-year results on Wednesday, with the retailer coming under scrutiny for its Covid-19 response after joining list of ‘junk’ investments by ratings agency Standard & Poor’s (S&P).

The British retailer isn’t alone on S&P’s ever-growing list of companies deemed risky for lenders, with the ratings agency stripping 24 companies of their investment grade status in 2020 amid the economic fallout from the virus.

In fact, the agency believes that it will likely be forced to downgrade as many as 111 companies to junk status this year, including the likes of British Airways, Virgin Money, ITV and fellow retailer Next.

Since the downgrade, M&S has a credit rating of BB+ which will likely increase its cost of borrowing, putting added pressure on the retailer amid a challenging trading environment.

The company’s balance sheet is also not on the most secure footing, with M&S holding around £1.65 billion worth of debt on its books.

Investors are eager for an update on the company’s performance on Wednesday and what steps its management will take to strengthen the financial well-being of the company.

M&S closed at 85p per on Tuesday.

Covid-19 will weigh heavy on retail sector, says Morgan Stanley

In a note to clients, analysts from Morgan Stanley explained why they believe the retail sector will be weighed down by the Covid-19 crisis for some time and are not convinced that an easing of lockdown restrictions will see retail stocks rebound.

‘We do not subscribe to the view that easing of lockdown measures represents the beginning of the end of COVID-19’s impact on the retail industry,’ Geoff Ruddell, equity analyst at Morgan Stanley, said. ‘Changes to consumers’ lifestyles, and thus their spending behaviour, are likely to last much longer.’

‘We expect social distancing measures, of varying degrees of severity, to continue until a vaccine has become widely available (hopefully in summer 2021),’ he added.

But analysts at Morgan Stanley remain optimistic about M&S, with the US-based investment bank upgrading its rating for the stock to ‘overweight’.

Morgan Stanley did lower its target price for the stock to 160p per share, but that still implies a potential upside of 86% based on where the stock closed on Tuesday.

M&S puts spring stock in hibernation

Most fashion retailers are stockpiling spring lines in preparation of massive stock clearance sales for when shops are allowed to reopen in June.

But in order to avoid participating in an all-out discount war, M&S and other large retailers like Next and Debenhams have instead decided to store a proportion of spring clothing and home products in warehouses until next year – in the hope that fashion trends haven’t moved on too much.

British retailer Next said that it had identified £330 million worth of stock from its season that could be 'carried forward' into 2021 - representing around 15% of its total stock for the spring and summer seasons in 2021.

‘This product is generally basic products, for example summer t-shirts and chinos,’ Next said in a statement.

Ready to start trading shares? Open a live account or practise on a demo.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.