M&S hit over fears of delay to turnaround
HIGH Street favourite
Marks & Spencer is no longer flavour of the month with City analysts.
In a tough trading environment for retailers, the company has seen food and clothing sales stall.
However, analysts at Royal Bank of Canada were still keen on the shares, at least until now.
In a note to clients yesterday, RBC’s Richard Chamberlain said he believed it would take longer than expected for M&S to turn around its key food business.
Chamberlain said: ‘M&S has completed around a third of its range reviews.
‘However the rest won’t be finished until April and it will take time for customers to notice its new lower prices.’
Food sales probably won’t regain momentum until ‘well into next year,’ he added, since the retailer is seeing its prices decrease in a sector where they are generally rising and is choosing to promote less at a time when promotions are popular.
On the clothing side, M&S should perform broadly in line with the sector on a like-for-like basis, Chamberlain said.
He added that its website still needs work, in terms of improving the search feature, making payment easier and speeding it up.
After M&S’s relatively strong run in recent months, it now trades slightly higher, compared to its earnings, than Next – even though Next has ‘more favourable’ online growth prospects, Chamberlain said.
RBC now sees more potential in Primark’s owner Associated British Foods, Next and Zara’s Spanish parent Inditex. M&S slipped 0.9pc, or 2.7p, to 306.9p.
Easyjet also fell foul of the brokers, as Kepler Cheuvreux dropped its recommendation for investors in the budget airline from ‘buy’ to ‘hold’.
Berenberg, which has a ‘sell’ recommendation, lowered its expectations this week, saying fuel price pressures were squeezing the business. Shares slid 4.9pc, or 59.5p, to 1159.5p.
The budget airline was the biggest faller on the FTSE 100, which dipped 0.2pc, or 12.33 points, to 7004.52 points.
Housebuilders weighed on the index, as wariness of a housing market slump knocked their popularity. Persimmon fell 4.7pc, or 99p, to 2014p, Taylor Wimpey dipped 4.2pc, or 6.2p, to 141.4p,
Barratt Developments slid 2.8pc, or 14p, to 481p, and Berkeley
Group shed 2.8pc, or 96p, to end at 3369p.
It was a mixed day for oil and gas companies trading on London’s junior market, AIM.
Cluff Natural Resources, which holds assets on the Southern North Sea gas basin, jumped as it signed an exclusivity agreement with an unnamed major oil and gas company.
It hopes the mystery company will eventually help Cluff drill two of the sites and get the oil flowing. Shares jumped by 12.4pc, or 0.28p, to 2.5p. Argentina-focused President
Energy, meanwhile, climbed by 7.5pc or 0.7p to 10.05p, after announcing that it had bought new assets and that production would begin next month.
But shares in Europa Oil & Gas, Union Jack Oil and Egdon Resources all crashed as they announced planning permission for their shared Wressle oil development in north Lincolnshire had been refused.
Egdon’s managing director Mark Abbott said his firm would appeal against the decision.
But its shares slumped 22.8pc, or 1.85p, to 6.25p.
Union Jack’s were down by 15.6pc, or 0.02p, to 0.1p and Europa’s by 7pc, or 0.2p, to 2.65p.