By Laura McGuire
M&S’s success will not be a “flash in the pan”, analysts have said as the retailer is crowned one of the top stock picks of 2024.
The food and clothing retailer climbed to the top of the FTSE 100 on Tuesday after BNP Paribas said it would be a “likely Christmas winner” and a top performer this year.
It’s the Percy Pig maker’s latest applause from markets following a stellar year on the London Stock Exchange and at the till.
The company posted a nearly £100m rise in profits in its half-year results, as shoppers splashed on its trendy bags and food.
Victoria Scholar, head of investment at Interactive Investor, said: “M&S is on track to report a bumper Christmas including spending in its clothing and home division which has been performing much better, catching up with its consistently strong food division.
“It has been opening new bigger stores, going against the grain in retail which is generally shifting more towards e-commerce.”
“M&S wants to focus on fewer, larger, department store-like shops, cutting back on the number of total stores, but making its remaining shops bigger and more impressive.”
Over the past year, the 140-year-old British retailer clawed its way back into the hearts of shoppers.
Just three years ago it was drowning in a sea of losses due to the pressures of the Covid-19 pandemic and customers falling out of favour with its frumpy fashion design.
M&S also said it had “historically” suffered from a high cost and under-invested supply chain with the group now cutting the number of suppliers it uses to get rid of trapped stock and speed things up.
Track all markets on TradingView
Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, said that M&S is a classic ‘self-help’ story.
“It has morphed from being seen as a basket case to a credible player in both food and clothing, with a strong strategy and improving fundamentals,” he explained.
“The early signs are that this self-help programme is working. The company has been able to cut costs while improving its service levels and gaining market share; all against the backdrop of declining consumer confidence. The result is improved sales and margins.”
He added: “Crucially, investors believe these improvements are sustainable and aren’t just a flash in the pan. The turnaround plan is still in its early stages, suggesting there could be more to come providing management continue to execute well.”
Praise for the brand comes ahead of the company’s Christmas trading update which is set to be published next Thursday.
Russ Mould, investment director at AJ Bell, said: “To examine whether the high street bellwether is maintaining its momentum, the first number to which analysts and investors alike will look is the total sales figure for the third quarter.
“A year ago, that came in at £3.6bn. Analysts will then assess the implied year-on-year growth rate in the headline sales figure and — more importantly — the like-for-like sales growth rate.”
Jonathan De Mello, head of retail at JDM Retail added: “Most encouragingly for M&S has been the strong above-inflation growth they have seen in non-food — and particular fashion.
“This indicates that they have potentially finally cracked the ever-elusive code of harmonising their food and fashion shopper bases; which they have historically struggled to do.”
