Market Report: Marks & Spencer - the one retailer still worth buying

Retailers have been unpopular with punters as the supermarkets struggle and Tesco tanks, while Next warns that the warm weather could hit sales. But the chaps at Morgan Stanley claim there is one retailer still worth buying: Marks & Spencer.

The bank reckons that M&S’s control of margins on clothes and homeware is better than the City expects and rates the stock a buy – overweight – with a 490p price target.

Analysts said: “Those focusing on weather, the online problems or market share data risk missing this story.”

Morgan Stanley has a different approach from its fellow M&S house broker. Earlier this month Citi cut its forecasts for general merchandise from a 1 per cent decline to a 4 per cent decline in the three months to the end of September. Investors were willing to go with Morgan Stanley’s view yesterday and the stock was one of the best performers, up 15.8p to 405.5p.

The market was still in the red after a huge tumble on Wednesday when the main market lost £45.9bn. Yesterday was no way near as bad but the FTSE 100 fell 15.73 points to 6,195.91.

Airlines were still in recovery mode after being hit earlier in the week by fears that the spread of ebola will reduce travelling. The sharp drop in crude oil prices has also meant the stocks are more attractive again as their costs will improve. British Airways owner IAG flew up 14.9p to 343p and easyJet lifted 51p to 1,403p.

On AIM, shares in the outsourcer Quindell rose 11.5p to 135.75p as a non-executive director, David Currie, spent just under £25,000 buying shares in the group. Earlier this week Quindell said it was on course to break the £1bn revenue barrier despite a terrible year in which its share price has tumbled by about 50 per cent after an encounter with the US short-seller Gotham City Research, which back in April claimed it was “built on quicksand”. Quindell, which strongly denied the claims, has since won a libel case in the High Court.

Karelian Diamond Resources sparkled 0.375p brighter to 1.425p after announcing the likelihood of a new source of kimberlite in the Kuhmo region of Finland.