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Analyst response: M&S Q3

Analysts have reacted with disappointment rather than surprise at Marks & Spencer’s third quarter results.

The high street giant reported a like-for-like drop in general merchandise of 3.8%, with group sales edging up 0.6%.

Panmure Gordon said the results were “not surprising given more full-price sales and a weak collection”. International and multichannel – which Marc Bolland had highlighted as pleasing – were considered less positive, with the former described as “disappointing but not catastrophic”.

“We argue that once there is better womenswear product, the sales – multichannel or otherwise – will come”, adding that the spring 13 collection “already looked a lot stronger than we have seen in the past few seasons”.

However Panmure’s analyst gave some praise for protecting gross margins, as did independent analyst Nick Bubb, who noted “’M&S avoids a profit warning’ might be the right headline”.

At Espirito Santo, Caroline Gulliver downgraded her recommendation from neutral to sell, noting that despite these cost controls, wider economic factors will continue to make M&S struggle.

“M&S has disappointed investors many times and though the reasons have varied the conclusion seems increasingly clear that customers are just not happy with M&S’ product and value,” said Gulliver. “Consequently the pressure is building on John Dixon, Belinda Earl and Laura Wade-Gery to turn the business around.”

Manchester Business School’s retail analyst Tarlok Teji noted that the early leak of the results – which led to M&S having to publish 12 hours ahead of schedule – “shows that the management is frustrated with the leadership and suggests Mr Bolland’s sell by date is fast approaching”.

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