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Will full-year results give Marks & Spencer share price a leg up?

Marks & Spencer share price: shoppers walk past an M&S store

The Marks & Spencer [MKS] share price has been in decline now for six years, and led to the iconic retailer being relegated from the blue-chip FTSE 100 index in September 2019. After M&S revealed a first loss in its 94-year history in its six-month update last November, what will Wednesday’s full-year results reveal, and will the numbers help give the M&S share price a lift?

Marks & Spencer share price makes tentative recovery

Marks & Spencer’s share price remains a long way from the levels over 500p in 2015, with the shares sinking to a 52-week low of 86.44p on 30 October, as the impact of the coronavirus pandemic on the UK economy took full effect.

Since that nadir though, Marks & Spencer’s share price has made a steady recovery, closing last week at 152.75p, a climb of 77%.

M&S makes first-ever loss

Marks & Spencer’s first-half loss was caused by the spillover effects of the various government-enforced shutdowns to its retail operations, which hit trading, and where its general merchandising division bore the brunt.

A first-half loss after tax of £71.6m was notable for a 15.8% slide in sales to £4.1bn, although its food division came to the rescue in some respects, thanks largely to its recent deal with Ocado, as food sales rose 47.9%.

Online sales provide Q3 respite

In Q3, the picture wasn’t much better as far as general merchandising was concerned, with clothing and home sales down 24.1%, however this was still better than most estimates of a 30% decline. The outperformance here was down to a 47.5% increase in online sales, which helped boost sales while stores remained closed, while food sales rose 2.6%.

Q3 revenue came in at £2.77bn, with management saying that near-term trading was likely to remain challenging, given the likelihood of stores being closed for most of its fourth quarter of trading, while its Ireland and Czech Republic operations were likely to see costs increase as a result of potential tariffs.

M&S share price gets broker boost

Broker Berenberg Bank believe M&S management, led by CEO Steve Rowe, is showing solid progress in finally getting the group in shape for the modern retail environment: “we believe the results will highlight the progress M&S has made to address its weaknesses – and it should emerge from the pandemic a stronger business.” Its website has improved, and Rowe has introduced new brands to its fashion ranges. Berenberg says M&S’ stake in Ocado is worth 60p a share, and that this isn't reflected in the current M&S share price.

In terms of numbers, analysts are estimating a pre-tax profit of £43m, as one-time expenses related to Covid-19 safety measures and redundancy have an impact, along with the shutdowns. Notably, unlike some other “essential” retailers open during the pandemic, M&S has not returned its business rates relief to the UK government.

How will the Marks & Spencer share price react when the FTSE 250 constituent releases its annual results at 7am on Wednesday 26 May?


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