Marks & Spencer (MKS.L): Worldpanel data shows strength in Food offset by weakness in FH&B, lowering 1H27/FY27E earnings; TP to 470p, Buy

Post the release of the summer trading data from Worldpanel, we have updated our 1H27 earnings forecast assumptions, raising Food division EBIT (1H27E £261mn, from £232mn) to reflect strong ongoing Worldpanel sales growth data with M&S' last 12 weeks +14.8%, but reducing FH&B division EBIT (1H27E £170mn, from £226mn) given the adverse impact of the shift to M&S' lower margin online channel and profit deleverage of lower store-based sales (on a 2-yr stack). Taken with the recently strong Ocado results, this drives £390mn of 1H27E PBT (from £410mn), and with a largely unchanged 2H27E, FY27E PBT of £925mn (from £942mn). TP to 470p, Buy rated. M&S clothing sales slowed in recent weeks with negative 2-yr growth in Worldpanel data (12-weeks to 16th August -1% vs market -1.3%). M&S' online traffic trends remain strong, but app user growth is slowing and discounting is higher yoy as the market has slowed (BRC non-food LFL negative in July and August). While the revenue line has benefited from