Consumer product

Marks & Spencer’s Half-year Profits Expected to Drop

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Marks & Spencer will release figures on Wednesday, while a consensus of City analysts predict that underlying pre-tax profit for the year’s first half will decline 13% to around $260 million.

Steve Rowe, M&S’s chief executive, signaled an overhaul of the group’s strategy at the company’s half year results in 2016. The strategy involves shutting down under-performing stores and cutting back on clothing while driving up its food branch.

In July, Rowe stated that sales at its clothing arm were progressing in the “right direction” following a disconcerting final quarter last year when sales dipped 5.9%.

An equity analyst noted that in the previous year, the group unveiled a new strategy where the key themes were a rationalization of sales space and the continued showcase of the foods business. The analyst also pointed out that investors will be anticipating seeing the progress over last 12 months.

A senior member of its clothing division departed, namely Jo Jenkins, weeks after she started a new role which had Rowe swayed in the recent weeks.

To add to the trouble, retailers across the board have been affected by the Brexit fuelled inflation hitting the sector, the impact caused falling consumer confidence and rising costs.

The latest trading update will be reported ahead of the critical Christmas trading period where M&S has already warned of obstacles on the high street.

 Short-seller’s Gain

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Bets have been waged by city hedge funds worth more than £1bn against three of Britain’s street chain giants as traditional retailers continue to struggle.

Short-selling had been involved in the process where shares are borrowed in the retailers, then selling them on with the possibility of buying them back at a later date for a price that is lower.

During the last few months, investors have increased their short positions in Marks & Spencer, Next, and Debenhams, to levels not shown since the financial crisis on Sunday.

M&S’s stock is currently shorted, worth around £643m, around 12pc. This figure was less than 5pc a year ago.

Meanwhile, around 5pc of Next shares are in the control of short sellers, worth around £329m. Shares in the company declined as much as 8pc last week after the retailer warned of “volatile” trading and missed sales expectations.

With Debenhams, short sellers own 9pc, having bought just 2pc a year ago. The shorted shares are worth around £46m.

Rowe is likely to come through with a more ruthless plan to turnaround the suffering retailer as the City expects another decline in clothing and home sales.

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