Marks & Spencer: What the analysts say

“The trading update for the quarter ending 29 December was, worse than expected and we are downgrading our ‘low end of the range’ full-year 2013 pre-tax profit by 3%. The company blames the poor performance on an increase in discount activity. We are concerned that the stores during the critical and important two weeks before Christmas would have had the footfall but did not get the spend.” – Freddie George, Seymour Pierce

“M&S is becoming structurally less profitable. Food is growing whilst general merchandise is seeing significant sales declines. M&S must continue to grow general merchandise online if it is to stem ongoing market share losses - but this is also a less profitable channel.” – Bethany Hocking, Investec

“On the multichannel front, while M&S has made some very positive strides with its offering – and deserves credit for doing so – it is still playing catch up. Offering next-day pick up in store when ordering by 7pm may be a giant leap for M&S, but unfortunately it is a tiny step for retail-kind when Next offer next day delivery to home when ordering by 9pm and John Lewis the same when ordering by 7pm. Moreover, away from home delivery there is a sense that M&S could have used its Simply Food outlets more effectively to drive click and collect sales.

“If there was one area that offered some comfort it was food. Although like-for-likes were rather anaemic this does need to be stacked against the fact the market has been negative in volume territory and against the knowledge that M&S has faced more competition from Waitrose and, indeed, from the big four who have all upped their game on premium over the festive season. As such, we see food performance as credible, although not stunning. That said, there is no doubt that the competitive environment in food will only become tougher in 2013; as such, M&S needs to keep innovating and wowing the consumer if it is to grow its share. We are confident that the food team will deliver this performance.” – Neil Saunders, Conlumino

“M&S released the third quarter figures last night instead of this morning following a press leak, which has fuelled speculation that there may be some disarray internally, i.e. a desire to destabilise current management. The cherry on top is a one off £75m finance charge.” – Jean Roche, Panmure Gordon

“The management of M&S clothing has undergone considerable change over the last year, which creates a period of handover and arguably inertia and uncertainty. That said it is clear that pressure is rising on the new management with respect to the nature and performance of forthcoming spring and summer clothing ranges at M&S in the UK and an improvement in relative and absolute terms is necessary for shareholders confidence to be bolstered.” – Clive Black, Shore Capital

“Well, the impact of the disappointing M&S clothing sales at Christmas will be largely offset by the surprisingly robust gross margin outcome and the extra cost savings, so full-year profit forecasts are unlikely to drift very far beyond the bottom end of the current market range. Nomura cut to £666m full-year pre-tax profit last week and an outcome of say £650m-660m would be ‘broadly’ in line with that, so ‘M&S avoid a profit warning’ may be the right headline. It is worth noting, however, the £75m interest rate write-off on the 2007 Bond which will be a big exceptional charge (this dates back to the days when Ian Dyson was finance director, by the way).” – Nick Bubb, independent retail analyst

“M&S has had a dreadful Christmas with general merchandise third quarter like-for-like sales down 3.8% versus our estimate of down 1% and consensus average estimates of -1.5%.

“The hope for M&S is that John Dixon can bring some of the discipline he has shown in M&S’s food business to the clothing, home and beauty offers and that his new team will be able to realign M&S’s product range with what customers want from M&S. The other hope is that M&S’ new, experienced, multichannel team will be able to engineer a profitable shift in the business to match consumer shopping trends. However neither strategy is proven and multi-channel sales growth actually slowed from 21.6% to 10.8%, which was surprising, even allowing for the tougher comp.” – Caroline Gulliver, Espirito Santo