Marks & Spencer and Sainsbury share prices are rising: here’s why

Marks and Spencer (LON: MKS) and Sainsbury (LON: SBRY) share prices popped sharply on Wednesday. MKS jumped by 1.65% and moved to 260p while Sainsbury soared by 2% to 270p.

The main reason why the two companies jumped was because of the positive outlook of the UK retail sector. In a statement, Tesco, the biggest grocery chain in the country, said that its business was doing well and that inflation was easing.

Its pre-tax profit jumped to £2.3 billion in the last financial year, a big increase from the previous £882 million. This performance happened as the company’s annual revenue soared from £57.2 billion to £61.4 billion.

Therefore, Marks and Spencer and Sainsbury shares jumped because these results hinted that the retail sector was doing well even as the UK flirts with a recession. In most cases, stocks of companies in the same sector tend to do well when one of them publishes a strong report.

The next important catalyst for Sainsbury will be its financial results, which are scheduled for April 24th. The consensus is that its business did well in the last financial year as the profit before taxes is expected to come in at £703 million. 

Analysts expect that its annual PBT will continue growing in the coming years. For example, for the next financial year, the consensus is that the PBT will rise to £746 million followed by £789 million.

Marks and Spencer, on the other hand, will publish its preliminary results on May 2022. In its last half-year results, the company said that its profit before tax jumped to £360 million, up from £205 million. Its statutory profit before tax also jumped to £325 million.

British retailers were among the best performers in the FTSE 100 index in 2023, as I wrote here. Recently, however, most of them have retreated sharply from their highest points during the year as concerns about their momentum fade.

Sainsbury stock has retreated by over 12% from its highest level in January while Marks and Spencer is down by 13%. Before the strong earnings and dividend pledge, Tesco was down by over 10% from its peak.