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Marks & Spencer Group PLC MKS

Morningstar Rating
GBX 260.20 +3.20 (1.25%)
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Company Report

Marks & Spencer Earnings: Solid Top and Bottom-Line Momentum Continues With Food Leading the Way

Marks & Spencer reported another robust set of results in its fiscal 2024 half-year. Group sales were up 10.8% driven once again by food sales, which were up 14.7% (like-for-like sales up 11.7%), driving volume and market share gains against mainline grocers. The clothing and home division grew by 5.7% (like-for-like sales up 5.5%) with resilient full-price sales and the click-and-collect channel (reduced fulfillment costs) contributing to improved profitability. International and Ocado Retail sales were up 3.9% and 6.9%, respectively. On profitability, the adjusted operating margin recovered to 4.3% from 2.2% last year in food, driven by volume growth and manufacturing efficiencies. Margins in clothing and home also recovered to 12.1% from 9.8% last year, supported by a higher proportion of full-price sales (82%), cost-savings in the logistics network, and lower freight rates than anticipated. Management remains cautious about its outlook and said it expects profit before tax and adjusting items to be weighted toward the first half. Profit-before-tax and adjusting items were ahead at GBP 360.2 million versus GBP 205.5 million last year. Marks & Spencer's share of Ocado Retail's net income-to-group results was negative GBP 23.4 million due to the continued effect of costs related to new and excess capacity. Given the widespread improvement in operating performance across the business and a stronger balance sheet, and as previously announced, the firm is restoring a modest annual dividend to shareholders (GBX 1 per share). We don't expect to change our GBX 185 fair value estimate for Marks & Spencer after accounting for these results. Given the strong beat in top-line growth and profits, shares were up as high as 9% intraday, pushing the stock further into 2-star territory.

Price vs Fair Value

MKS is trading at a 41% premium.
Price
GBX 260.20
Fair Value
GBX 513.00
Uncertainty
High
1-Star Price
GBX 233.93
5-Star Price
GBX 995.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Its joint venture with Ocado presents an opportunity for M&S to expand efficiently in one of the fastest growing channels in the U.K. grocery market and extend its product range beyond fresh and prepared meals.

Bears

M&S in in need of a radical and urgent business model reset, which will take time to complete.

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News

Trading Information

Previous Close Price
GBX 257.00
Day Range
GBX 255.40263.40
52-Week Range
GBX 116.80263.40
Bid/Ask
GBX 215.00 / GBX 263.00
Market Cap
GBX 513.33 Bil
Volume/Avg
6.7 Mil / 10.6 Mil

Key Statistics

Price/Earnings (Normalized)
13.68
Price/Sales
0.44
Dividend Yield
0.38%
Dividend Yield (Forward)
0.38%
Total Yield
0.39%

Company Profile

M&S is a British multichannel retailer with stores across Europe, Asia, and the Middle East. The company sells into more than 60 countries from thousands of stores and several websites around the world and offers predominantly own-brand luxury food, clothing, and home products with the majority of sales coming from its U.K. operations. Marks & Spencer operates three business models—owned, franchise, and joint venture—in the U.K. and internationally. The online business globally is delivered through localized owned and franchised websites and partnerships. The food segment includes value products, convenient ready-made meals, and healthy items. The clothing and home division sells own-brand and high-quality womenswear, lingerie, menswear, kidswear, beauty, and home products.
Sector
Consumer Cyclical
Industry
Department Stores
Stock Style Box
Mid Core
Total Number of Employees
66,371

Competitors

Valuation

Metric
MKS
ABF
TSCO
Price/Earnings (Normalized)
13.6820.1311.69
Price/Book Value
1.801.681.70
Price/Sales
0.440.950.31
Price/Cash Flow
10.545.85
Price/Earnings
MKS
ABF
TSCO

Financial Strength

Metric
MKS
ABF
TSCO
Quick Ratio
0.430.850.57
Current Ratio
0.801.830.74
Interest Coverage
5.433.16
Quick Ratio
MKS
ABF
TSCO

Profitability

Metric
MKS
ABF
TSCO
Return on Assets (Normalized)
5.71%3.67%
Return on Equity (Normalized)
9.79%13.64%
Return on Invested Capital (Normalized)
7.36%7.70%
Return on Assets
MKS
ABF
TSCO

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