Charles Stanley downgrades M&S on share price strength

Charles Stanley downgraded Marks & Spencer to 'reduce' from 'hold' saying that investors may want to take advantage of recent price strength to reduce exposure.It pointed out that the stock is up around 50% since October 2014.Charles Stanley noted that the company's full-year results were solid, with the first increase in underlying pretax profit since 2010/11. It said the creditable performance in a tough operating environment was driven by the food business, but General Merchandise also made decent progress."Going forward, a significant opportunity exists to further expand gross margin in the General Merchandise business by sourcing more product directly from suppliers," rather than by third-party vendors, said Charles Stanley.In Food, the opportunity for further gross margin expansion is more limited, but the addition of new space in the Simply Food format should help to deliver reasonable sales growth.The announcement of a £150m share buyback programme for 2015/16 highlights improving free cash flow, it said, adding that it sees potential for further capital returns to shareholders in subsequent years.At 1500 BST, M&S shares were down 1.1% at 575.50p.