Marks and Spencer Group (GB:MKS) shares fell more than 4% as of writing, even as the British retailer reported better-than-expected Christmas sales. Investors were disappointed as the company maintained its full-year guidance and did not raise it despite strong results in the Christmas season.
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Moreover, the retailer cautioned shareholders about an uncertain economic backdrop and additional costs due to higher wages and business rates-related inflation. Nonetheless, management is confident about delivering full-year results in line with market estimates, thanks to the company’s impressive performance in the crucial Christmas period.
Strong Trading Update
Marks and Spencer’s (M&S) sales in the UK grew 8.5% year-over-year to £3.57 billion in the 13 weeks ending December 30, 2023. The growth was 8.1% on a like-for-like basis. Meanwhile, the Group’s overall sales increased 7.2% to £3.86 billion.
In particular, the food and womenswear categories witnessed strong growth. Food sales grew 10.5% in the UK in the reporting period. Meanwhile, clothing and home sales increased 4.8% in the domestic market. In contrast to the UK market’s performance, the company’s international sales fell 6.4% due to the timing of franchise shipments in the Middle East and Asia and a tough macro backdrop in India.
Overall, sales growth of M&S in the Christmas period exceeded expectations and reflected the favorable impact of its growth initiatives, including supply chain improvements, enhanced merchandise offerings, and revamped stores.
What is the Price Target of Marks and Spencer Shares?
Following the trading update, Goldman Sachs analyst Richard Edwards said that he sees the scope for Fiscal 2024 consensus profit before tax estimate to remain unchanged at £667 million, which reflects year-over-year growth of 38%. The analyst reiterated a Buy rating on the stock with a price target of 330p.
With five Buys and three Holds, MKS stock earns a Moderate Buy consensus rating. The average Marks and Spencer share price target of 281.43p implies 6.2% upside. MKS shares have rallied 85% over the past year, driven by the company’s turnaround efforts.
