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10th Nov 2021. 11.13am

Regency View:

Marks and Spencer (MKS) Half-Year numbers in focus

M&S shares jump after upbeat profit forecast

It’s been a good week for UK retailers with M&S and Primark owner Associated British Foods (ABF) surging higher on strong trading updates…

M&S released their half-year numbers this morning – reporting pre-tax profits of £187m in the six months to October 2, up 18% from the same period a year ago.

The icon British brand said that full-year profits, before tax and adjusted items, would be in the “region of £500m” – ahead of expectations thanks to an improved performance from its food business.

Food sales during the half-year were 10% ahead of the equivalent pre-Covid period, generating £269m profit. While clothing and home sales were 1% lower, but profits almost doubled to £156m.

However, it wasn’t all good news with M&S warning of labour and product shortages as the economy starts to revive after the pandemic.

Commenting on the numbers, CEO Steve Rowe said:

“Given the history of M&S we’ve been clear that we won’t overclaim our progress”…

“But thanks to the hard work of our colleagues it is clear that underlying performance is improving . . . the hard yards of driving long-term change are beginning to be borne out in our performance.”

Technicals

The market has responded in bullish fashion to this morning’s numbers as the shares gapped higher – taking prices back within touching distance of thier pre-pandemic highs (see daily candle chart).

However, we are already seeing prices starting to retreat intra-day, and this signals today’s large gap may signal short-term buying exhaustion.

Hence we would favour being patient and waiting for prices to pullback and close the gap before considering M&S as a buy.

MKS Daily Candle Chart

MKS Daily Candle Chart

MKS Weekly Candle Chart

MKS Weekly Candle Chart

Disclaimer:

This research is prepared for general information only and should not be construed as any form of investment advice.