What To Expect: Marks & Spencer Full Year Results

Marks and Spencer full year results to provide food for thought?

Trader 1

When:

Wednesday 20th May

What to expect:

Marks and Spencer has been on a downward spiral for a while, even before the coronavirus outbreak.  

Since entering the FTSE 250, the stock has been heading southwards, a trend accelerated by coronavirus. The stock hit a record low of 74p mid-March. The rebound has been lacklustre, picking up just 14% to its current price of 85p, under performing the broader market.

The high street retailer has already announced that it would save £210 million, shoring up the balance sheet by withholding another year’s dividend. 
Marks and Spencer sits at a difficult place in the market between clothes retailer and food retailer. The food halls have remained open during the coronavirus shutdown, some compensation for the closed clothes stores. 

Food for thought
However, with a very limited online offering through Deliveroo, Marks and Spencer has most likely missed out on a significant portion of the rush to stockpile and soaring online demand. The tie up with Ocado is not due to begin until September. Investors will be hoping that his can be brought forward given the current climate. However, on a plus side the big shift to online food shopping will work in favour of M&S and its Ocado tie up going forwards. The food business is likely to take a hit from a reduction in travel and the closure of its 
café’s

Clothing
The clothes business has been struggling for years and covid-19 shut will mean trading has been severely constrained over the past 8 weeks. The cancellation of £100 million worth of Spring/Summer wear will almost certainly be appreciated preventing still higher levels of unsold stock. Even as store eventually reopen, social distancing measure will be a complication for the retail sector, limiting customers, not to mention the deep recession which could see spending on non-essential items tumble. With this in mind, the outlook is poor for the remainder of the year.

That said, thanks to the food department Marks and Spencer is better shielded from lockdown that clothes only retailers
Profits are expected to come in well below £420 million forecast just a few weeks ago.

Levels to watch:
M&S trades below its 50 & 20 sma on the 4 hour chart on a bearish chart. Immediate support can be seen at 85.4p, prior to 74p low struck in March. 
On the upside, resistance can be seen at 88p (20 sma) prior to 91p (50 sma) and 103p (high 12th May).

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