Marks and Spencer's (MKS) shares found modest support on the release of third-quarter numbers from the high-street chain. Total UK sales fell 2.2 per cent, reflecting a 2.1 per cent contraction in food sales and a 2.4 per cent slump in clothing and home sales. But analysts at Shore Capital praised the performance against what remains a difficult retail market – particularly as the group tries to simultaneously implement its wider transformation plan.
It's likely that many were relieved this wasn’t a profit warning. For now, full-year guidance remains unchanged, while Shore Capital says that "the medium-to-long-term transformation programme, which now has most of the main management characters in place, is on track". Indeed, unchanged annual guidance suggests that, like many other retailers, M&S enjoyed a rally in trading in the immediate run-up to Christmas, despite a sluggish start to the quarter.
While Shore Capital warns that "there is a whole lot more to do" and that negative sales growth is "not a place where management wishes the business to be", this third-quarter performance was better than expected, particularly when it comes to the food business. After M&S declared a swathe of price cuts across the food division at the half-year results last November, analysts at Shore Capital reckon the 2.1 per cent dip in food sales actually disguised some important volume improvement. Meanwhile, the decline in apparel sales was likely the result of the general malaise that gripped the sector – and especially clothing retailers – in mid-November. And, frankly, that number could have looked far worse.
The fourth quarter still holds plenty of unknowns. For that reason, Shore Capital is maintaining its FY2019 pre-tax profit and EPS forecasts, specifically £528m and 25.1p.
