Marks & Spencer shares have been under pressure since its full year results in May, and a trading update alongside its annual meeting next week will be keenly watched by investors.
There have been concerns about its UK store performance, especially in the general merchandise business. But the retailer is up 9.4p at 450.7p at the moment, helped by a buy note from Panmure Gordon. Analyst Jean Roche said:
Profit taking has sent the shares down 7.5% since its preliminary results on 21 May. Other than disappointing late May/early June weather, leading to a more promotional than expected backdrop, the investment case has not changed. We continue to rate the shares buy as we highlight a 4.2% 2014 estimated dividend yield and the prospect of a new share buyback programme.
We are positive on Marks for four reasons: 1) strength in the food division; 2) potential for turnaround in the general merchandise division; 3) a growing, capital-light international business; and 4) a recent commitment to delivering improved returns to shareholders.
The next catalyst is the first quarter interim management statement on 9 July. Despite weak comps we are not advocating a positive surprise here: rather, we are reiterating our buy case, so that, should next Tuesday result in a buying opportunity, the buy case has been clearly articulated.
