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Marks & Spencer sees share price plummet after issuing profit warning

The British multinational retailer has seen its share price tumble more than 9% on Thursday morning after its Q3 results showed the company suffered a major sales slump.

Marks & Spencer (M&S) reported a significant decline in sales in its third quarter (Q3) results on Thursday, forcing the company to issue a profit warning that sent its shares tumbling more than 9%.

However, full year guidance was left unchanged, although gross margins are expected to be around lower end of guidance, largely offset by its cost reduction programme

M&S is trading at 198p as of 11:50 GMT on Thursday.

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M&S sees sales slump

In the 13 weeks to December 28, M&S saw sales fall by 0.6% to £2.8 billion, with international revenue 2.3% lower at £251m.

‘We delivered an improved performance in Q3 across both main businesses,’ M&S CEO Steve Rowe said. ‘The Food business continued to outperform the market and Clothing and Home had a strong start to the quarter, albeit this was followed by a challenging trading environment in the lead up to Christmas.’

‘As we drive a faster pace of change, disappointing one-off issues - notably waste and supply chain in the Food business, the shape of buy in Menswear and performance in our Gifting categories - held us back from delivering a stronger result,’ he added.

M&S will report its full year results on May 20.

Berenberg upbeat about M&S outlook

Ahead of its disappointing set of Q3 results, analysts from Berenberg upgraded their rating for the stock from ‘sell’ to ‘buy’ and issued a target price of 250p a share.

The Hamburg-based investment bank admitted that the retailer must overcome challenging market conditions in 2020 and address its weakness online, with its ‘legacy store estate restricting M&S's ability to adapt to the changing retail landscape’.

Berenberg, however, welcomed the appointment of Richard Price as M&S’s new managing director for clothing and home. Prior to joining M&S, Price served as CEO of F&F clothing at Tesco.

Analysts at the bank also noted that the company’s joint venture with Ocado will provide long-term growth opportunities for M&S’s grocery business and improve its online presence.

Based on M&S trading at 198p a share, analysts from Berenberg believe that the stock has a potential upside of 26.3%.

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