How M&S shares could be worth 30% more

Out-of-favour Marks & Spencer Group (LSE:MKS) shares have been given City as well as retail investor support after a leading bank said the retailer's valuation deserved to be a third higher.

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Alongside its price target of 480p, Berenberg said M&S's stronger free cash flow meant it saw scope for the company to reinstate the dividend more fully in the current financial year.

The backing follows a tough run for the shares, which today topped the FTSE 100 index fallers board for a second successive session with a decline of 5.6p to 365.5p.

They were as high as 410p in early August, having rallied by a third since their mid-May low point for the year.

Plenty of interactive investor customers appear to believe the recent sell-off is an opportunity after M&S ranked as Tuesday's most-traded stock on our platform.

The shares compare with 170p in October 2022 and 233p after the cyber attack in April 2025. The incident meant adjusted profits fell 23.8% to £671.4 million in 2025/26, although M&S told shareholders it ended the period in a strong position and back on track.

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Berenberg expects half-year results on 4 November will show profits of £394 million, which it said would represent a robust recovery against the cyber attack position of a year ago.

However, it would still be 3% below the level reported two years ago as a strong performance in Food - up 21% versus 2024/25 - is offset by a 26% decrease in Fashion, Home and Beauty.

The bank believes that the main shortfall is in womenswear due to execution reasons that can be traced back to the cyber attack.

While market data points to M&S gaining share in clothing on a two-year view, Berenberg said there were some availability issues in best-selling lines and smaller sizes due to spring and summer ranges having been ordered manually.

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Deutsche Bank added recently: “The market share data over summer suggests M&S has missed some opportunities in womenswear (especially amongst older consumers), availability in smaller sizes and kidswear ranging which is disappointing.

“It feels like the hangover from the cyber incident in May 2025 is still having a (limited) impact on the clothing business.”

The bank recently came away from a breakfast meeting with chief executive Stuart Machin reassured over the longer-term direction of the company, including actions being undertaken for sustainable sales and earnings growth.

It added: “Importantly in our view, the culture at M&S has evolved, with mistakes admitted and educated risks being taken.” Deutsche Bank has a price target of 435p.

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In the Food division, Berenberg said it had been a superb summer for M&S after consumer survey data from Worldpanel and NIQ pointed to a strong first half of the year as hot weather is likely to have favoured convenience food locations.

It added: “M&S’s growth strategy, based on offering improved quality and innovation with some relative price investment and modernised marketing using social channels, appears to be driving momentum in Food.”

Berenberg said market data sources suggest the Ocado Retail joint venture, in which Ocado sells M&S-branded food, was also performing exceptionally well.

When M&S updated investors at May's annual results, Machin said retailers faced a triple whammy of headwinds through increased taxation, a greater regulatory burden and ongoing global conflict.

A conservative approach to distributions during M&S's current investment phase meant the company's 105,000 shareholders were awarded a final dividend of 3p a share, lifting the total for the year by 16.7% to 4.2p a share.

Directors were asked at July's AGM when the dividend would get back to pre-Covid levels, which included a final dividend of 11.9p in July 2018. The shares currently trade with a dividend yield of 1.1%.

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Another shareholder said: “Why are you investing so much back into the business instead of prioritising shareholder returns including the dividend?”

In response, M&S said: “As a growth business we are prioritising investment which we are confident will deliver returns.

“This year’s dividend reflects the next phase of reinvestment for growth with a meaningful 17% increase in the dividend this year and it is our intention that we continue to invest in the business and increase returns to shareholders.”

Based on Berenberg's forecasts, the bank sees the total dividend growing to 12p a share in the current financial year and 13.9p in 2027/28. “Free cash flow is strong and we see scope to reinstate the dividend more fully from 2027.”