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Wednesday's agenda: M&S - low marks, few sparks

Last updated: 13:00 04 Nov 2014 EST, First published: 14:00 04 Nov 2014 EST

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Recent results from Next and SuperGroup do not bode well for Marks & Spencer, even if those from Primark-owner Associated British Foods do.

Marks & Spencer’s clothing division is likely to have been hit by the Indian Summer Britain is enjoying, which has subdued sales of the autumn and winter collections at Next and SuperGroup.

Marks & Spencer has the additional burden of an underperforming online business, as the company makes changes to its web platform.

Investec is forecasting a fiscal second quarter like-for-like (LFL) sales decline of 3.3% on the General Merchandise side, which would represent a deterioration from the preceding quarter’s 1.5% year-on-year decline.

Food sales growth, for so long the bright spot, is expected to turn negative – Investec forecasts a 0.1% decline – as the company struggles to achieve growth in a low-inflation environment.

The broker expects half-year profit before tax will be more or less flat compared to the same period of last year.

“The waiting game continues. We believe the recent sell-off in the shares reflects the market discounting likely disappointing H1 results. With LFL sales figures looking set to be negative in both business and no improvement in the M&S.com run-rate likely, we don’t expect much hard evidence to support a recovery thesis yet. However, news flow should improve in H2 and we see a return to cash generation as being largely overlooked by investors,” the broker said.

David Madden, a market analyst at spread betting firm IG Group, said shareholders should brace themselves for the fourth consecutive decline in first-half profits.

“M&S’s fashion sales will be of interest to traders in light of the announcement from its rival. Next blamed the unseasonably warm weather for poor sales of its winter line and M&S will possibly cite the same problem,” Madden says.

“Analysts are expecting six month sales and operating profits of £4.93 billion and £300 million respectively,” he added.

One company unlikely to be complaining about the unseasonably warm weather is pubs group JD Wetherspoon, but founder Tim Martin will undoubtedly find something to gripe about in the trading statement.

Will it be the government’s tax treatment of pubs in comparison with its tax treatment of supermarkets? Bookmakers are more likely to take bets on the religious beliefs of the Pope than they are on that one …

Significant announcements expected

Companies: Interims: Marks & Spencer Group (LON:MKS), Wincanton (LON:WIN), Lancashire Holdings (LON:LRE)
Finals: Applied Graphene Materials (LON:AGM)
Trading Statement: Wetherspoon (J D) PLC (LON: JDW), Aer Lingus Group PLC (LON:AERL), esure Group (LON:ESUR), Meggitt (LON:MGGT), Old Mutual (LON:OML), Schroders PLC (LON: SDR)

Economic: EU: French, Italian and Spanish services PMIs. US: crude oil inventories, Australia: unemployment data

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