Week Ahead

M&S wears it well | inflation to fall close to 2% target

Actress and model Sara Sampaio features in the latest M&S advertising

An easing of pressure on household budgets and a long-awaited turnaround in its clothing range have helped put Marks & Spencer back into investors’ good books.

Shares in the retailer are trading very close to five-year highs, and they rank as the second-best performers in the FTSE 100 over the past 12 months, say AJ Bell analysts.

While the share price has flattened this year, M&S delivered an underlying first-half pre-tax profit of £360 million, easily beating the £206m earned in the same six-month period in 2022.

It is benefiting from having a demographic suited to the times, with wage growth among middle earners holding up, its reputation for quality food appealing to those who may swap a night out for a night in, and the clothing and home business looking to be on a roll after years in the doldrums.

AJ Bell notes that the arrival of key, former TopShop executives (who were there when it was in its pomp before Sir Philip Green ran it into the ground), is leading to better ranges, faster stock turn, less discounting and better margins for the clothing range, which is regaining its standing with stylish shoppers.

“M&S always used to be good for at least one key, must-have piece a season and it looks to be on its way back to recapturing that form,” says the investment platform.

“One indicator of management’s degree of confidence in the outlook could be the dividend. M&S returned to the dividend list after a four-year absence, with a first-half payment of 1p a share, and analysts have pencilled in a final payment of 2p a share to take the total to 3p.

Economic news this week will be headed by the latest inflation figures and by the energy regulator Ofgem which is expected to announce a 7% cut in the price cap.

In the year to March, annual inflation stood at 3.2%. The figure for April is expected to be lower and might even fall as low as the Bank of England’s 2% target.

The sharp decline is mainly due to movements in electricity and gas prices. Domestic energy bills rose in April 2023 but have fallen by 12% this year for most households.

Economists expect overall inflation to remain at about 2% in the third quarter and rise to 2.3% in the final three months of the year.

DIARY

Monday 20 May

  • Full-year results from Big Yellow and Kainos
  • Rightmove UK house price index

Tuesday 21 May

  • Full-year results from Calnex Solutions, Cranswick, Pennon and Assura
  • First-half results from SSP and Greencore
  • Trading statements from Smiths Group, Kingfisher and Dowlais

Wednesday 22 May

  • Full-year results from M&S, SSE, RS Group, British Land and C&C
  • First-half results from Integrafin
  • Trading updates and quarterly results from Coats
  • UK inflation figures
  • UK government borrowing

Thursday 23 May

  • Full-year results from National Grid, Johnson Matthey, International Distributions Services, Tate & Lyle, Wizz Air, QinetiQ, Bloomsbury Publishing and Great Portland Estates
  • Trading updates and quarterly results from Aviva, Petershill Partners, Hill & Smith and Essentra

Friday 24 May

  • Trading updates and quarterly results from Intertek
  • Ofgem announces energy price cap
  • GfK UK consumer confidence
  • UK retail sales
  • US durable goods orders


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