Marks and Spencer shares, sell-off on Wall Street drag FTSE 100 lower in Thursday trading 

In Thursday's trading session, the primary UK stock indices closed lower, hurt by Wall Street losses following a higher-than-anticipated consumer price inflation (CPI) reading in the U.S., while shares of major retailer Marks & Spencer (M&S) fell by over 5% despite stronger-than-expected holiday season sales. 

The FTSE 100, the UK’s benchmark blue-chip index, saw a 1% decline on the day, having initially risen by 0.6%, driven by gains in the mining sector. U.S. and European investor sentiment soured as December's U.S. CPI exceeded expectations, suggesting the Federal Reserve might delay interest rate cuts. 

Major UK banks, including HSBC, Lloyds Banking Group, and Barclays, contributed to the FTSE 100's downturn, falling between 3.1% and 4.6%. HSBC shares closed down 3.06% at 611.40p, while the Lloyds share price tumbled to 45.24p (-3.73%). The Barclays share price saw the sharpest fall of the three, closing at 145.58p (-4.63%). 

In a comment cited by Reuters, Unicredit analysts noted: 

"The US CPI report for December suggests that the last mile in the disinflationary process towards the Fed's 2% inflation target will be bumpy. Overall, the December CPI report is consistent with our view that the Fed will not cut interest rates until June”. 

Marks & Spencer, a standout performer in 2023, sustained its positive sales momentum during the Christmas period, with total sales up 7.2%, reaching £3.86 billion, and UK like-for-like sales up 8.1% in the 13 weeks to December 30. However, the lack of an explicit earnings upgrade and a cautious outlook statement tempered the market's response to the news. 

The Tesco share price dipped 1.4%, despite upgrading its profit outlook for the second time in four months. WPP faced a 4.0% decline after UBS downgraded the advertising group's stock to "sell" from "buy," citing subdued cash flow levels. 

The FTSE 250 index, representing UK midcap firms, slid by 0.9%. Cybersecurity company Darktrace saw a 9% climb as it raised its annual revenue and core profit margin forecasts, anticipating strong demand for its AI-powered products. 

Marks and Spencer share price: Outlook uncertainty weights on M&S 

Despite the rise in sales, the High Street giant said its economic outlook for 2024 was uncertain: 

“As we enter the new year and full year 2025, expectations for economic growth remain uncertain, with consumer and geopolitical risks. We also face additional cost increases from higher than anticipated wage and business rates-related cost inflation. Nevertheless, the strong Christmas trading performance provides confidence that the results for the year will be consistent with market expectations”. 

Chief executive Stuart Machin said: “We enter 2024 with a spring in our step, but clear eyed on the near-term challenges”.  

Machin also said that M&S plans to “up the pace” of its overhaul, focusing on increasing the speed of store changes and revamps, “doubling down” on measures to enhance its supply chain, ensure better product availability, and reduce costs. The goal is to achieve a 1% increase in market share across both business segments. 

M&S rejoined the FTSE 100 index last August after a four-year hiatus thanks to big share gains. 

Marks & Spencer's robust festive performance encouraged house broker Shore Capital to increase pre-tax profit forecasts for March 2024 and 2025 by £20 million each, reaching £665 million and £695 million, respectively. 

Marks and Spencer shares: Experts weigh in 

Shore Capital commented: 

“After a quite remarkable calendar year 2023 with two especially material upgrades to earnings announced we sense M&S is arriving at a point where more normalised expansion and sequential earnings and dividend growth can be expected, which should more sedately be followed by capital appreciation of the group’s equity. That said, if Mr Machin can expedite his plans for modernisation at pace there should still be plenty of upside in the journey of M&S equity”. 

Russ Mould, investment director at AJ Bell, said:  

“Chief executive Stuart Machin has echoed previous statements that more work is needed to transform the business. The latest update would suggest the company’s turnaround programme remains on track but it is understandable that the boss wants to manage expectations and not let anyone assume it’s going to be an easy ride from now on”. 

As of market close on January 11, the Marks and Spencer share price stood at 263.30p (-5.19% on the day). M&S shares were one of the UK’s top performers last year — they remain 83.61% up year-on-year even despite the recent slide. The FTSE 100 index was down close to 1%. 

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