Marks and Spencer’s stagnant performance and its £600m store refurbishment programme are causing concern amongst its investors. Fraser Ramzan, analyst at Nomura, cut his forecast of pre-tax profit in the year
to March 2012, from £724.5m ($1.2bn) to £692.2m, lower than those of analysts at Citigroup – broker to M&S – and UBS.
In a note, he raised questions about whether chief executive Marc Bolland’s store overhaul plan could be maintained amid a fresh decline in consumer confidence.
“With first-half profits expected to be down 13 per cent, and recovery of last year’s poor weather related trading/markdown in the second half still required for M&S to deliver our newly reduced estimates, we think the market is likely to focus on management flexibility with respect to the timing, operating costs and capital costs and hurdle rates of its plans,” he said.
“While the plan was conceived anticipating stable economic conditions, the macro and consumer environment has since deteriorated. Shareholders might therefore ask if this can be ‘done for less’,” he added.
“I don’t think he needs to throw out the baby with the bathwater. But, in this kind of environment, you need to put an extra magnifying glass over everything you do,” he said.
“We are supportive of the plan, but the macro environment is worse than expected, and that lowers the chances of delivering all of it,” he added. M&S did not comment.
Mr Ramzan said he expected the benefits from the store refits and refreshed advertising to have been offset by “extremely weak trading as a result of unseasonable weather at the end of September”.
He forecasts a 2.4 per cent decline in sales of general merchandise, including clothing and housewares, from UK stores
open at least a year, in M&S’s second quarter to October 1.
Nomura forecasts M&S’s first-half pre-tax profit will decline from £349m to £307.2m.
Concerns have risen about the outlook for M&S after the unusually warm weather at the end of September – key trading weeks for the group. Evidence from rival retailers has suggested that consumer confidence has taken another tumble over the past three months.
The FT revealed this month that M&S had asked its suppliers for a one-off contribution worth millions of pounds. People familiar with the situation have suggested that M&S is finding life tough in women’s wear and housewares.
Marks and Spencer’s stagnant performance and its £600m store refurbishment programme are causing concern amongst its investors. Fraser Ramzan, analyst at Nomura, cut his forecast of pre-tax profit in the year
to March 2012, from £724.5m ($1.2bn) to £692.2m, lower than those of analysts at Citigroup – broker to M&S – and UBS.
a note, he raised questions about whether chief executive Marc Bolland’s store overhaul plan could be maintained amid a fresh decline in consumer confidence.