Marks & Spencer Earnings: Will the Retailer Top Expectations?

Marks & Spencer (LON: MKS) is set to announce its preliminary results on Wednesday, May 22, and with its turnaround gaining attention amongst consumers, analysts and investors are somewhat optimistic ahead of the release. 

Back in its November half-year update, the company said its “reshaping M&S” strategy was delivering strong results, with food driving volume and share reflecting M&S's value investment, product innovation and quality upgrades.

Looking ahead, M&S CEO Stuart Machin said that customers had responded positively to the Christmas ranges at the time. While acknowledging the potential challenges and headwinds in the year ahead, Machin stated: “We are ambitious for future growth and are driving what is in our control.”

In that same November update, M&S said that against more challenging comparatives, it expected profit before tax and adjusting items to be weighted towards the first half.

Meanwhile, in its Christmas trading update, M&S was also cautious, noting that as it enters FY25, expectations for economic growth remain uncertain, with consumer and geopolitical risks. 

The company also highlighted additional cost increases from higher than anticipated wage and business rates related cost inflation. 

“Nevertheless, the strong Christmas trading performance provides confidence that the results for the year will be consistent with market expectations,” said the company.

So far this year, the M&S share price has struggled, dipping in January and February before climbing to where it is now up just 0.2% for the year-to-date. 

Even so, analysts remain mostly bullish on the stock. Data compiled by TradingView shows 13 out of 16 analysts have a Buy rating on the stock, with three assigning MKS shares a Hold rating. The average price target is 313.2p, suggesting a potential 13.2% upside from current levels. 

Last week, analysts at Barclays raised the price target on Marks & Spencer to 315p from 300p, keeping an Overweight rating on the shares.

In late April, Jefferies upgraded shares of Marks & Spencer to Buy from Hold, keeping a price target of 310p on the stock. 

Jefferies said its UK consumer cash flow model shows a consumer with “substantial disposable income recovery” over the next year. They also noted that with fiscal 2024 and 2025 growth of 7%, increasing wages and falling energy costs offset incremental pressures from housing. Jefferies analysts see a positive consumer environment fully translating into a supportive clothing retail market, helping to boost Marks & Spencer.

JPMorgan is another firm that upgraded shares of M&S last month. They upgraded Marks & Spencer to Overweight from Neutral, raising the price target to 330p from 260p. The bank stated that Marks & Spencer “has demonstrated the biggest positive inflection in market share coming out of the pandemic (improvement in trend of +230bps).”

JPMorgan added: “Combined with more to go for in mens and kidswear, along with compelling sales uplifts from store renewals, we see recent gains as sustainable.”

The current Marks & Spencer market cap is £5.66 billion. The P/E ratio (TTM) is 14.21.