Marks & Spencer Holds Profit Guidance as Food Strength Offsets Clothing Weakness, Shares Up 3%
Marks & Spencer Group maintained its full-year profit guidance despite third-quarter food-driven sales growth counterbalanced by softer clothing performance, Deutsche Bank noted. Shares climbed 3% on analyst endorsements from Deutsche Bank and Shore Capital highlighting resilient Christmas trading and potential undervaluation after recent weakness.
1. Trading Update: Food Strength Offsets Clothing Wobble
Marks & Spencer’s third-quarter trading update showed food sales driving group performance, with the food division delivering mid-single-digit like-for-like growth over the 13 weeks to January 2. Clothing and home sales, by contrast, slipped low-single digits reflecting softer Christmas demand and ongoing promotional activity. Overall group revenue edged up modestly, reflecting the resilience of food sales which accounted for just over half of total revenue in the period.
2. Full-Year Profit Guidance
Despite a slightly softer-than-expected performance in the clothing and home division, Marks & Spencer confirmed its full-year underlying profit forecast of £600 million to £650 million. This guidance was maintained on the back of strong food margins, which improved by around 30 basis points due to continued cost efficiencies and favourable product mix.
3. Analyst Backing and Valuation
Following the trading update, broker comments from Deutsche Bank and Shore Capital highlighted the resilience of Marks & Spencer’s profile and argued the stock remained undervalued. Deutsche Bank noted that the unchanged profit guidance was a positive surprise, while Shore Capital pointed to ongoing investment in supply chain automation and store refurbishments as catalysts for long-term recovery.