Mindful Money’s weekly shares watch: Marks & Spencer, Morrison & National Grid

3rd November 2014

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High Street giant Marks & Spencer has endured something of tumultuous period over the past 12 months, with its shares down by 19% over the period.

Wednesday sees the group publish is half year results and second quarter like-for-like General Merchandise sales are again predicted to have eased, chiefly on the back of the unseasonally warm September weather, while consumers’ desire for treats is again likely to drive growth in same store food sales.

Keith Bowman equity analyst at Hargreaves Lansdown says: “Pre-tax profit is forecast to fall by around 7% to £244m. Nonetheless, with previously outlined website difficulties potentially largely behind it and supply chain efficiencies implemented, management outlook comments should prove supportive. The company’s push to open stores overseas may also again feature.”

Sheridan Admans, investment research manager at The Share Centre expects that investors will be keen to see an improvement in clothing sales, especially in womenswear, although recent trading updates from other clothing retailers have not been encouraging. He says: “The strength of online sales and international sales will also be of interest to investors as the company has made those a priority in recent years.”

With the current chief executive and former head of Morrison’s still being given the benefit of the doubt in moulding an eventual recovery, Bowman highlights that ahead of its update, analyst opinion currently points towards a ‘strong hold’.

The UK’s troubled supermarket sector will be back in the spotlight on Thursday when Morrison, down 45% over the past year, reports its third quarter trading update. Prior to the news, and with no turnaround in profits on the horizon, analyst consensus opinion continues to denote a ‘sell’.

Bowman anticipates that the launch of its new “Match & More” customer loyalty card may feature high on management’s agenda, sharpening its price matching, including with discounters Aldi and Lidl, and generating customer spending data going forward.

He says: “Its cost savings programme and investment in product price reductions could also be underlined. Recent data from market researcher Kantar Worldpanel would suggest that same store sales have continued to retreat. Any update with regards to full-year profit expectations for underlying profit before tax to be in the range of £325m to £375m will be closely watched for.”

Friday sees National Grid unveil its second quarter numbers. The firm which runs the electricity wires across Britain and Northern Ireland has enjoyed an 18% share price hike over the past year and given the typical predictability of utility groups, investors will be expecting the usual trading in line with expectations.

While the stock by market consensus is currently in ‘neutral’ territory, Admans is calling it a ‘buy’. He says: “The group has been able to maintain confidence regarding its operational and financial performance and its ability to support the dividend growth policy. Perhaps of more interest, as we enter the winter months, will be any comment on future concerns over power supply in the UK.”

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