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Marks & Spencer (first half earnings 8 November)
It has not been an easy time for retailers, with Next last week giving everyone a fright. Marks & Spencer (M&S) suffered in the read across, and with its clothing line still not able to deliver the goods, it will be up to the food arm to be the group’s salvation. However, here too, times are getting tougher, and with a consumer squeeze in full flow for UK shoppers, M&S’s premium offering could well come under further pressure. At 11.9 times forward earnings the shares are not too aggressively rated, but perhaps the current valuation underrates the problems facing Steve Rowe, M&S’s CEO. Earnings per share (EPS) are forecast to fall 16.00% year over year (YoY), to 9.7p per share, while revenue rises 1.9% overall, to £5 billion.
Despite a mid-year rally, the shares continue to trade in the 313p – 360p range. A rally in September took us to the top end of the channel, before turning lower once again. If 313p is broken, then the June 2016 low at 256p could be a longer-term prospect. A move above 360p targets 391p and then 408p.