Shares rally on Morrisons takeover battle latest and M&S profits upgrade

·2-min read
M&S is led by Steve Rowe  (REUTERS)
M&S is led by Steve Rowe (REUTERS)

Investors put supermarket groups in the shopping basket on Friday, as a rare profit upgrade from Marks & Spencer and an intensifying takeover battle for Morrisons boosted shares across the sector.

The rally came as strong sales of food prompted M&S, led by Steve Rowe, to upgrade its profit forecast. The retailer said it was on track to record full year earnings of up to £350 million.

In an unexpected trading update, M&S said it had witnessed an “encouraging performance” since the start of the year, when tight restrictions linked to the pandemic triggered a collapse in sales.

M&S, whose shares rocketed 11% higher to 158.7p, said it was benefiting from “pent up consumer demand” and had enjoyed a particular boost from its food range, where sales jumped 10.8% in the 19 weeks to August 14 compared with last year. They were up 9.6% on 2019/20.

Sales from its clothing and home division during the period leaped 92.2% on last year.

Assuming no further Covid-related restrictions on trading, M&S said it expected adjusted profit before tax for the year to be “above the upper end of previous guidance of £300-350 million”.

Analysts at Shore Capital said it was the first unexpected profit upgrade from the group this century.

Shares in Morrisons, led by David Potts, also jumped over 4% as a £7 billion takeover battle for the grocer between two US private equity firms intensified.

The 11.8p rise to 291p came as US private equity bidder Clayton, Dubilier & Rice last night got support from Morrisons’ board for a 285p per offer.

That was ahead of a most recent 272p per share deal from a Fortress-led consortium. The suitor is “considering its options”.

Shares in other chains including Sainsbury and Tesco were also up.

New ONS data shows UK retail sales volumes dipped 2.5% in July compared with June, but were up 5.8% on February. The lower month-on-month figure was in part linked to a fading of the boost delivered by the Euro 2020 football tournament.

The good news from M&S was tempered by a cautious note on future trading: “There remains substantial uncertainty as to the continued strength of consumer demand, as well as disruption in both supply chains and consequent pressures on costs and margin.”

Read More

Not just any loss, an M&S £200m loss as sales plunge during pandemic

Marks & Spencer looks to redevelop one of its largest London stores, with new office space planned

FTSE 100 set to open higher, as investors watch Morrisons and retail sales

Euro 2020 helps lift UK retail sales, ONS data suggests

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting