Marks & Spencer's share price has soared 8.3 per cent this morning, suggesting that investors were pleasantly surprised by its better-than-expected results.
Although it marked its 13th quarter of declines, the 3.4 per cent drop in clothing was lower than consensus. Analysts this morning are suggesting this could be, if not the beginning of the end, perhaps at least the end of the beginning.
Mike van Dulken, head of research at Accendo Markets, noted the “still ugly” falls in sales, but highlights the improved margins and “token increase in interim dividend” as positive signs, asking whether it could be “a turning point for M&S shares”.
Louise Cooper CFA is rather more bullish, saying she felt “slightly vindicated” by her previously positive take on the future of the retailer.
“The dividend increase may only a modest rise of 0.2p to 6.4p but the direction of travel is highly significant,” she said. “Boards hate cutting dividends with a passion. Therefore the senior executive team must feel very confident that the recovery at Marks is on track. This is a sign of confidence in future trading.”
Turning around a giant behemoth like Marks was never going to happen overnight. Chief executive Bolland is teased for how overuse of "step by step", but he is right. This is a long process reversing decades of complacency and poor management. But now Marks has lost its top slot to Next, the cultural shift to catch up has begun.
Meanwhile, Investec has maintained its buy recommendation, saying it expects better news in the second half. “The unseasonal warm weather, which has impacted the whole sector, has overshadowed some progress from improved ranges, better markdown and sourcing and improved cash generation,” said analyst Kate Calvert.
However Warren Ruhomon at Finspreads said M&S' argument that the warm weather has deterred customers will be “seen by the market as increasingly unsatisfactory, especially for an 130-year old retailer like Marks, with some of the most sophisticated space and inventory management systems in the world”.
Cantor Fitzgerald is also unsure, with analyst Freddie George saying: “We continue to believe it will take a number of seasons before the existing team is able to manifest a marked improvement in performance in womenswear.”
He added: “Results will have been broadly flat over the last seven years ranging consistently between £600m and £700m and are likely to remain in this range over the medium term while debt levels remain over £2bn restricting the potential for an accelerated dividend payout.”