Marks & Spencer Share News (MKS)

LONDON (Alliance News) - Shares in Marks & Spencer Group fell by 6.7% on Wednesday amid an otherwise rising market, after the retailer warned its profit will take a short-term hit from new Chief Executive Steve Rowe's plan to revive its Clothing & Home division.

M&S shares closed at 415.02 pence, having fallen to as low as 398.60p earlier in the day. The stock is down 12% so far in 2016.

Other constituents of the FTSE 100 index fared better. The blue-chip index closed up 0.7%, or 43.59 points, at 6,262.85. Meanwhile, the mid-cap FTSE 250 rose 0.6%, or 96.97 points, to 17,232.64. The AIM All-Share ended about flat, up 0.23 point, to end at 733.50.

Stocks in mainland Europe also made gains, with markets pleased that eurozone finance ministers struck a deal early Wednesday for Greece to access a fresh round of bailout funds, while also laying out debt relief measures aimed at securing the involvement of the International Monetary Fund.

The agreement, reached after 11 hours of talks in Brussels, should allow Greece to receive an overall EUR10.3 billion in the coming months, needed to prevent the cash-strapped nation from returning to the brink of bankruptcy.

In Paris, the CAC 40 closed up 1.1% and the DAX in Frankfurt rose 1.5%.

In the US, the Dow Jones Industrial Average was up 0.9%, the S&P 500 up 0.7%, and the Nasdaq Composite up 0.5% at the London equities close.

"Stock markets have built on yesterday's gains, turning Tuesday's spike into something more concrete and indicating that investors appear to be growing more comfortable with the idea of an interest rate hike in the US," said Chris Beauchamp, senior market analyst at IG.

Department store chain M&S said its pretax profit fell to GBP488.8 million in the year ended April 2, from GBP600.0 million a year earlier, as revenue rose slightly to GBP10.56 billion from GBP10.31 billion. Earnings were hit by GBP200 million in non-underlying costs largely relating to impairments in the group's international business as well as payment protection insurance mis-selling costs at M&S Bank.

Food sales grew 3.6%, or 0.2% on a like-for-like basis, while Clothing & Home sales fell by 2.2%, or 2.9% on a like-for-like basis. M&S.com achieved sales growth of 23%.

New CEO Rowe, who took the helm from long-serving ex-boss Marc Bolland in early April, said his priority is to bring the Clothing & Home division, formerly called General Merchandise, back to profitability.

Clothing & Home has been suffering for more than a decade, even as Food sales have gone from strength to strength. M&S struggles to attract a wide enough customer base for its clothing ranges, in particular failing to coax in younger shoppers.

To attempt to turn the business around, M&S said on Wednesday it will invest to re-establish its price position by sharpening prices, enhance service by putting more employees into its stores and improve the style of its products.

"These actions, combined with the difficult trading conditions, will have an adverse effect on profit in the short term. We are, however, confident that our commitment to delivering the right product, price and service will help return Clothing & Home sales to growth. This, together with continued momentum in Food, will provide us with a solid base from which to build a long-term sustainable business," Rowe said in the company's statement Wednesday.

Also in the FTSE 100, Royal Bank of Scotland Group rose 4.6%, Standard Chartered 3.5%, HSBC Holdings 3.0%, Barclays 2.5%, and Lloyds Banking 1.2%. Banks were in demand as markets priced in the "earnings benefit" of a possible move by the Federal Reserve to increase US interest rates in the summer, according to Jasper Lawler, market analyst at CMC Markets, rather than closer to the US presidential election in November.

IG's Beauchamp said the banking sector put in a good performance, with investors "evidently still mustard keen" to buy shares in the likes of Lloyds and RBS.

"The shock of recent full-year earnings has worn off, and these leveraged bets on the UK economy and housing market look a lot more attractive now that Brexit polls are almost universally giving the Remain camp a solid lead," Beauchamp said.

With the UK set to vote on whether to remain a member of the EU or leave in a referendum scheduled for June 23, a Survation poll in association with IG showed that the Remain camp still has a steady lead.

Survation interviewed 1,013 voters by telephone on Tuesday, with 44% in favour of staying in the EU, 38% wanting to leave, and 18% undecided. IG, an online trading company, said its own clients believe there is an 81% chance that the UK will vote to remain.

Sterling was quoted at USD1,4711 at the London equities close, up from USD1,4615 at the same time on Tuesday. Meanwhile, the pound was at EUR1.3178, compared to EUR1.3108 on Tuesday.

Oil companies also were among London's winners on Wednesday. BP shares rose 2.1%, while Royal Dutch Shell 'A' and 'B' shares increased by 1.2% and 1.1%, respectively.

Brent crude moved tantalizingly close to the USD50 a barrel mark and close to its 2016 high of USD49.81.

Brent oil was quoted at USD49.17 a barrel at the London equities close, up from USD48.75 a barrel Tuesday. The Energy Information Administration said crude stockpiles in the US fell in the week ended May 20. The EIA report showed that US crude oil inventories dropped by 4.2 million barrels last week. Economists had expected a decrease of 2.5 million barrels.

Lower gold prices hit producers of the precious metal. Randgold, down 1.3%, and Fresnillo, down 1.4%, were among the fallers in the FTSE 100. Centamin, down 4.5%, was one of the heaviest fallers in the FTSE 250, along with Acacia Mining, down 2.3%.

Gold was quoted at USD1,222.95 an ounce at the London equities close, down from USD1,230.78 the same stage on Tuesday.

Also in the FTSE 250, outsourcer Serco rose by 12% after guiding that profit in 2016 will be ahead of its previous expectations, boosted by one-off benefits accrued thus far in the first half.

The stronger-than-anticipated financial performance in the first four months of 2016 was due to favourable outcomes on a number of commercial negotiations, Serco said.

Those talks will sharply increase first-half profit, Serco said, although there won't be a repeat in future. Serco said the increase to its guidance for 2016 does not change its view on the probable outcome for 2017.

Serco now expects underlying trading profit for 2016 of no less than GBP65.0 million, compared to the GBP50.0 million previously guided. Revenue will also be higher than expected, at GBP2.9 billion against the GBP2.8 billion previously anticipated.

"It is encouraging that we are able to announce an upgrade to our guidance for the year, albeit that much of this improvement comes from items that will not recur," said Chief Executive Rupert Soames.

Zoopla, the online property portal, added 7.5%, after reporting a pretax profit of GBP28.1 million in the six months ended March 31, up from GBP18.4 million the corresponding period a year earlier.

Chief Executive Alex Chesterman doesn't expect to see any impact from the Brexit vote next month. "We don't expect any impact really on our business over the next few weeks, and we expect the market to return to pretty normal levels following the referendum, so I think we are just in an unusual period for three or four weeks of uncertainty in the housing market, but we're not seeing a slowdown in traffic as a result," Chesterman said.

"What you are seeing both in the housing market and in other markets, from people I talk to, is a reluctance of people to pull the trigger. It doesn't stop people carrying on life as normal, but in terms of big decisions, given the choice somebody would make a decision in four weeks with a bit more certainty," the Zoopla chief executive added.

In the UK corporate calendar Thursday, expected are full-year results from United Utilities Group, Pets at Home Group, Sophos Group, Tate & Lyle, Vectura Group, QinetiQ Group, Henry Boot, Inchcape, and Urban&Civic. First-half results are due from SVG Capital.

Trading statements are expected from Paypoint, Daily Mail & General Trust, and Lombard Risk Management.

In the economic calendar, UK BBA mortgage approvals, gross domestic product and business investment are due at 0930 BST Thursday, followed by US jobless claims at 1330 BST. Also in the US, the Markit PMI composite reading is at 1445 BST, followed by EIA natural gas storage data at 1530 BST.

By Samuel Agini; samagini@alliancenews.com; @samuelagini

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