Shares in Marks & Spencer Group (LON:MKS) have lost ground in today’s session as RBC lowered its rating on the blue-chip retailer amid challenges for the company’s food business. The update comes after the FTSE 100 group posted its half-year results earlier this month, revealing that its sales had continued to fall and saying that it expected little improvement for the full year.
As of 10:23 GMT, Marks & Spencer’s share price had given up 0.71 percent to 307.40p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.09 percent lower at 7,010.83 points. The group’s shares have added about 1.6 percent to their value over the past year, as compared with about a six-percent fall in the Footsie.
RBC trims stance on M&S
RBC lowered its rating on M&S from ‘outperform’ to ‘sector perform’ today, also trimming its price target on the shares from 330p to 320p. Proactive Investors quoted the analysts as saying that they did not expect the retailer’s food sales to regain momentum until “well into next year” given “price deflation in an inflationary sector” and the company choosing to promote less at a time when the sector was becoming “more promotional”.
Regarding the clothing the business, the broker expects the group to perform “broadly in line with the sector on an LFL [like-for-like] basis and further improve its buying and inventory control” while cautioning that it still lagged behind in terms of online capability and penetration.
RBC, however, reckons that M&S’ cashflow generation remains good with falling net debt and “a working capital opportunity around year end, providing confidence in the dividend outlook,” as quoted by Proactive Investors.
Other analysts on retailer
Investec trimmed its rating on M&S to ‘sell’ last week, and lowered its valuation on the shares from 285 to 240p. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average price target of 306.63p.