Marks and Spencer Group PLC (LSE:MKS) could see its share price double over the medium to longer term as years of sustained investment begin to deliver returns, according to Shore Capital.
Shore Cap, which acts as the retailer’s house broker, made the bullish assessment following a meeting with M&S chairman Archie Norman, whose influence on the business has been significant since joining in 2017.
Analyst Clive Black said the FTSE 100 group is “focusing upon growth over capital distribution”, with continued spending directed at stores, logistics and technology infrastructure across the business.
Black acknowledged that “much has been achieved” since Norman’s arrival, but noted the retailer still had “much to do” as it works through a substantial transformation agenda.
That agenda includes completing the reset of its full-line store estate, building “fit for purpose” systems, and improving the performance of its online clothing operation.
M&S is targeting food sales of more than £10 billion in the 2027 financial year, a significant step up from £6.8 billion recorded in 2022, alongside a separate ambition to double online apparel sales from their 2022 base.
Shore Capital argued the investment programme should underpin sequential earnings per share growth and provide “a strengthening basis for rating expansion” as the spending cycle matures.
Black said the “medium-to-longer term journey could see a doubling of the group’s share price”, supported by what he described as a “virtuous evolution of the balance sheet”.
Sustained earnings growth, a strengthened balance sheet, and eventually higher shareholder distributions are seen as the key pillars justifying a valuation of approximately 15 times earnings.
The analyst indicated that if earnings reached around 50p a share, that multiple would imply the potential for the share price to double over the medium to longer term.
Shore Cap’s view is that M&S should continue prioritising growth and infrastructure investment rather than returning excess cash to shareholders at this stage of its development.
Major capital projects including a new distribution centre at Daventry and automation facilities at Avonmouth are expected to support future earnings growth, though they are likely to delay any significant increase in capital returns to investors in the near term.