Broker stays positive on M&S as Christmas test looms

Shore Capital remains positive on Marks & Spencer ahead of the critical Christmas trading period, leaving forecasts unchanged at £655m for the current year and £960m for 2027 and noting management will alert the market if guidance needs revising ahead of the 8 January trading update; management is focused on Christmas execution despite soft UK clothing demand (weaker coats/boots after a mild autumn) and dampened shopper sentiment following the late-November Budget. The broker highlights M&S’s defensive actions—careful markdowns, targeted Sparks loyalty use—and expects a larger-than-usual New Year sale to clear first-half stock, while food is a standout with NIQ showing 9.2% sales growth over 12 weeks to 29 November and share at 3.9%, plus early encouraging signs in Australia. Valuation underpins the bullish stance: on FY27 forecasts M&S trades below 10x P/E with low revenue and EBITDA multiples, a gap versus peers such as Next and Tesco that could support a material rerating if FY27 profit targets are achieved.

Analysis

Shore Capital retained a constructive view on Marks & Spencer, leaving forecasts at £655m for the current year and £960m for FY27 after a management update and ahead of the crucial Christmas trading period; the broker emphasises management will notify the market if guidance needs changing and expects little movement to consensus before the 8 January trading statement. The note states management is "firmly focusing" on Christmas execution despite soft UK clothing demand—milder autumn weather dented coats and boots—and weaker shopper sentiment following the late‑November Budget. Shore Capital expects a larger‑than‑usual New Year sale to clear a first‑half stock overhang.

Operationally, food is the standout: NIQ data to 29 November shows 9.2% sales growth over 12 weeks and a market share of 3.9%, with Ocado (about one‑third of whose sales are M&S products) the fastest‑growing grocer; broker store visits suggest the Christmas food offer is "well set," and early Australian signs (Coles and David Jones) are encouraging. Valuation underpins the bullish case—on FY27 forecasts M&S trades below 10x P/E with low revenue and EBITDA multiples—leading Shore to view the shares as "detached" from peers such as Next and Tesco and to see scope for a material rerating if FY27 profit targets are met. Key risks are continued weak clothing demand, the size of markdowns/New Year sale, and any negative guidance revision at the 8 January update.

Key Decisions for Investors

• Consider maintaining or modestly increasing exposure to M&S given sub‑10x FY27 P/E and strong food momentum, provided the 8 January trading update confirms Christmas execution
• Treat the 8 January trading statement as the next material catalyst and be prepared to trim positions if management revises guidance or signals deeper markdowns than currently expected
• Monitor UK clothing demand indicators and the scale of the expected New Year sale as proximate signals of inventory pressure and margin risk
• If risk management is required, use position sizing or hedges to protect against downside from weaker consumer sentiment following the Budget and any larger‑than‑anticipated markdown cycle