Broker snap: M&S full-year forecasts under pressure, says Credit Suisse

High Street department store Marks & Spencer (M&S) was trading in the red on Monday morning after Credit Suisse retained its 'underperform' rating, saying that full-year forecasts 'look demanding' after a weak first half. It said the stock is trading at a 20% premium to its long-term average and looks "overbought" after a 30% rise so far this year.The bank has cut its second-quarter like-for-like sales estimate from +0.5% to -1.5%, saying it reckons that the quarter has been slower than expected for M&S's UK General Merchandise (GM) division. Meanwhile, with higher mark-downs over the summer and an earlier mid-season sale it now forecasts a first-half gross-margin (GM) decline of 40 basis points (bp). This compares with the full-year guidance for 30-50bp growth.Ahead of the first-half report on November 5th, Credit Suisse expects a profit before tax (PBT) of £235m, down 20% year-on-year.The bank said: "Although we are not cutting full-year forecasts (clean PBT £668m +0.5% year-on-year), first-half PBT would represent 35% of our full-year PBT forecast which compares with an average of 46% over the past seven years, and second-half PBT will therefore have to increase by 18% year-on-year."This is just possible, if everything goes right in general merchandise (GM), Food and International. However after three years of steady downgrades, and a relatively wide consensus range, the top end of the range (over £700m PBT) looks set to fall even if management maintain guidance on costs and gross margins."The stock was down 2.73% at 480.5p in morning trading.BC