JP Morgan lifts M&S target on online margin opportunity

JP Morgan has raised its price target on Marks and Spencer Group PLC (LSE:MKS) to 450p from 440p, arguing the retailer has a clear opportunity to close much of the margin gap on its online fashion, home and beauty business. The bank reiterated its 'overweight' rating, with the new target implying roughly 19% upside. At the heart of the note is what JP Morgan describes as a quantifiable chance to add around 400 basis points to online margins in fashion, home and beauty as the new Lichfield distribution centre ramps up. The site is due to open in calendar 2027. JP Morgan identifies three tangible building blocks behind that improvement, which it says gives it enough confidence to bank the upside in its forecasts. The bank has lifted its group pre-tax profit forecast for the 2029 financial year by 6% as a result. That leaves JP Morgan a low single-digit percentage ahead of Bloomberg consensus on group pre-tax profit, and 6% and 5% higher on fashion, home and beauty and food operating profit respectively. The bank stressed it does not regard this as the ceiling for margin gains, nor the only opportunity across the business. A more bullish scenario, factoring in better order economics and sourcing benefits, would add a further 7% to its profit forecast and leave it a double-digit percentage ahead of consensus. JP Morgan argues the valuation remains undemanding. The shares trade on 10.7 times forecast 2027 earnings, around 7% below their five-year pre-pandemic average, despite what the bank sees as materially better visibility on the turnaround. The revised target applies a multiple of about 13 times, a 10% premium to that pre-pandemic average, reflecting JP Morgan's view.