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Marks & Spencer (full-year results 23 May)
Marks & Spencer (M&S) is expected to report earnings of 27.8p per share, down 8% year-on-year, while revenue rises 1.5% to £10.79 billion. M&S remains in the throes of a turnaround strategy, as it looks to make its long underperforming clothing division more competitive. Continued expansion for its food division has helped to keep revenue moving higher at this part of the business, but the move online is taking longer than thought. Meanwhile, competition from other stores in the mid-price part of the spectrum has limited performance. Margin improvements are crucial, but this is a longer-term process, however continued store closures will help reduce some fixed costs. M&S currently trades on a forward price to earnings (PE) ratio of 10.7, indicating a relatively undemanding valuation, but there is much work to be done.
M&S shares have steadily declined for the past three years. Rallies to the descending trendline from the 2015 high have been seen several times over the past year, with the latest running into trendline resistance around 300p. A failure to break above this would suggest a fresh turn lower, down towards the 2018 low at 261p. Above 300p, the price would target 307p and 314p, then 328p.
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