Marks and Spencer’s to reveal new strategy?

Marks & Spencer will reveal its full-year figures on Wednesday 20 May, and the market is anticipating a new strategy plan to mark the five-year anniversary of Marc Bolland as CEO.

Marks & Spencer's
Source: Bloomberg

The Marks & Spencer Group share price has been rising steadily since January, despite the poor figures from the Christmas period. The food division revealed a small increase in sales, but the clothing and online divisions reported a drop of 5.8% and 5.9% drop respectively.

Problems at the distribution centre were to blame for the decline in online revenue – this division has become one of the key indicators for supermarkets. The disappointing Christmas numbers came two months after the firm revealed a 2.3% increase in first-half underlying profits – the first rise in four years.

Marks and Spencer’s food division has been the success story of the group, and the clothing division has traditionally been a drag on the overall performance. The woman’s clothing department eked out a small rate of growth in the first five months of the years, and the market took this as a signal that the unit is on the mend.

Marc Bolland has made it a priority to improve the notoriety of the clothing division and especially the womenswear operation. The aim is to compete with high street fashion houses and move away for the supermarket image.

Mr Bolland is expected to launch a new strategy for the group this month, and the focus will be on a healthier line of foods. The UK supermarket sector has come under pressure recently, and Marks and Spencer’s is at the higher end of the spectrum, while Sainsbury’s, Tesco and Morrisons are left to fight it out with Aldi and Lidl.

When Marks and Spencer’s report its annual figures, the market is anticipating revenue of £10.31 billion and adjusted net income of £538 million. These forecasts represent no change in revenue and a 3.3% drop in adjusted net income.

The supermarket group will also reveal its second-half numbers on the same date, and the market is expecting revenue of $5.4 billion and adjusted net income of £316 million. The first-half numbers came in ahead of estimates, and revenue was £4.9 billion and adjusted net income was £216 million, while the market was anticipating £4.8 billion and £171 million respectively.

Equity analysts are very bullish on Marks and Spencer’s, and out of the 31 recommendations, 14 are buys, 11 are holds, and six are buys. The average target price is £5.56 which is a touch below the current price. Investment banks are bullish on Tesco, and out of the 26 recommendations, ten are buys, 11 are holds, and five are sells. The average target price is 240p, which is 5.7% above the current price.

Marks and Spencer’s shares have been in an aggressive upward trend since October, and the current level of £5.70 has been an area of resistance over the years. If it is breached, it will bring £6 into play, and if that mark is cleared traders will look to the £6.60-70 region. If the stock fails to breech £5.70, a pullback to the £5.40 area is likely, and if that mark is punctured £5 will be in sight.

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