View from City Road: Onset of the yuletide jitters

CHRISTMAS is coming, the geese are getting fat, and stores shareholders are - as usual - getting nervous. Marks & Spencer got the treatment yesterday, its shares marked down by 15 1/2 p to 327 1/2 p. Many analysts cut their full-year profits forecasts after a set of interims that posed as many questions as they answered.

Sales were pedestrian, falling by about 2 per cent in like-for-like volume terms. Stores in the UK are starting to cannibalise each other. The dividend increase could have been more generous, some investors felt. Continental expansion may prove tougher than expected, despite the love of the St Michael formula in France and Spain. And costs, which M&S has controlled superbly in the past two years, are starting to creep up.

Above all, the strategic switch to more emphasis on sales at the expense of margins has got some investors rattled. With so much dependent on Christmas takings, investors in M&S and other stores groups are bound to be jittery. When Storehouse- owned BhS is managing real sales increases of more than 10 per cent, M&S starts to look a little dull.

After yesterday's share fall, M&S is on a multiple of 18 1/2 times prospective earnings of 17.8p, assuming full-year profits of pounds 735m. M&S has enormous strengths and deserves its hefty premium rating, but the shares may well dip further.

Stand by for bearish raids on M&S and other retailers from now till mid-December as investors panic that stores will be left with unsold stock. Then be alert for a late surge as seasonal shoppers dust the cobwebs from their purses in Christmas week - as they almost certainly will.