Marks and Spencer share price: Retailer poised for downbeat annual results

on May 19, 2014
Updated: Apr 9, 2020
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iNVEZZ.com, Monday, May 19: Marks and Spencer (LON:MKS) will be in the spotlight tomorrow, when the company reveals its final results for the year to the end of March, 2014.

The British retailer is expected to report a 7.5 percent drop in annual pre-tax profit — a third consecutive fall after a three-year investment plan failed to revive the group’s underperforming non-food business. The market consensus is for M&S to post full-year pre-tax profit of £615 million, compared to underlying pre-tax profit of £665.2 million last year, which at the time was the lowest level since 2009. This compares to the £700 million expected by analysts at the start of the 2013-14 financial year, as well as the £695 million profit made by rival Next (LON:NXT) (Next share price rises as annual earnings meet top end of guidance).

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As well as announcing a fall in pre-tax profit, M&S is also expected to confirm that it will fall short of the sales targets it revised down only two years ago. When CEO Marc Bolland launched M&S’s three-year strategic plan in November 2010 he planned to raise annual sales from £9.7 billion in the year to March 2011 to between £11.5 billion and £12.5 billion by March 2014. Two years ago, this was scaled back to a target of between £10.8 billion and £11.5 billion, with the reduction blamed on the weakness of the UK economy. For the latest financial year, analysts expect sales of £10.3 billion.

In a trading update in April, M&S reported its best clothing sales for three years (Marks and Spencer share price rises on Q4 trading update). This prompted Bolland to insist M&S’s strategy was “bang on”, despite margins falling. However, the underwhelming performance in the last year will put pressure on the CEO. He can be awarded an annual bonus of up to £2 million, but 60 percent of the bonus is based on profit targets.

The annual results tomorrow will represent the end of Bolland’s three-year plan to turn M&S into an international multi-channel retailer. This has involved opening stores in Paris, a £150 million revamp of the company’s website, and the construction of a new distribution centre in the Midlands. These measures have cost roughly £2.3 billion with no improvement so far in profits.

With this plan now at an end, annual spending is expected to fall from £775 million last year to £550 million, improving the company’s free cash flow. It could also signal the return of more cash to shareholders, analysts have noted.
**Shares edge higher ahead of results**
Marks and Spencer’s share price has advanced ahead of tomorrow’s release. As of 08:35 BST, the stock was trading 0.57 percent higher at 458.10p.
Of the 25 analysts projecting 12 month price targets for Marks and Spencer for The Financial Times, the median target is 490.00p, with a high estimate of 609.00p and a low estimate of 340.00p.
**As of 08:27 BST, buy Marks and Spencer shares at 459.40p.**
**As of 08:27 BST, sell Marks and Spencer shares at 459.00p.**

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