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Credit Suisse upgrades M&S to 'neutral' after 10% YTD drop
(WebFG News) - With the shares down 10% year-to-date and limited downside to its unchanged price target of 285p, Credit Suisse upped its stance on retailer Marks & Spencer to 'neutral' from 'underperform' on Monday.
The bank trimmed its pre-tax profit estimate for 2017/18 by 3% ahead of M&S's preliminary results on 23 May, to reflect weak trading in the fourth quarter due to poor weather.
CS said it assumes pre-tax profit will drop a further 4.5% to £539m in 2018/19, driven by another year of weak like-for-like sales and assuming price investment continues in food, but with few FX pressures across the business.
Credit Suisse said structural issues remain but the velocity of change in the business has picked up.
"Most of the issues we highlighted in our January downgrade note such as competition, weak demand, poor footfall, core demographics, space, lagging online haven't gone away; however, the last three months have seen signs of UK consumer environment starting to turn with real-wages beginning to recover, inflation easing particularly in food, aided by pound strength which should all give some breathing room to the transformation programme."
The bank said that the flurry of announcements since January on management changes, store closures and logistics reflect the sense of urgency communicated by Archie Norman and Steve Rowe back in November.
"We believe execution still remains a risk given that leadership team apart from the CEO is mostly new," it added.
At 1120 BST, the shares were up 0.4% to 281.70p.
The bank trimmed its pre-tax profit estimate for 2017/18 by 3% ahead of M&S's preliminary results on 23 May, to reflect weak trading in the fourth quarter due to poor weather.
CS said it assumes pre-tax profit will drop a further 4.5% to £539m in 2018/19, driven by another year of weak like-for-like sales and assuming price investment continues in food, but with few FX pressures across the business.
Credit Suisse said structural issues remain but the velocity of change in the business has picked up.
"Most of the issues we highlighted in our January downgrade note such as competition, weak demand, poor footfall, core demographics, space, lagging online haven't gone away; however, the last three months have seen signs of UK consumer environment starting to turn with real-wages beginning to recover, inflation easing particularly in food, aided by pound strength which should all give some breathing room to the transformation programme."
The bank said that the flurry of announcements since January on management changes, store closures and logistics reflect the sense of urgency communicated by Archie Norman and Steve Rowe back in November.
"We believe execution still remains a risk given that leadership team apart from the CEO is mostly new," it added.
At 1120 BST, the shares were up 0.4% to 281.70p.
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