As Marks & Spencer opened the biggest store it has ever built this week, its shares were buoyed by speculation surrounding private equity interest in the retailer.
On Friday, M&S shares shot up 4% to 370.5p after it was reported that US private equity firm CVC Partners had considered a bid.
Its shares have already increased by more than 10% since the end of July amid suggestions that poor financial results could make the retailer ripe for a private equity takeover.
However, some analysts have poured scorn on the speculation, citing difficulties raising finance for such a deal in the current market. They have also predicted the current good run for the shares could soon come to an abrupt end.
“We view a successful bid as unlikely, and thus expect the big speculation bubble to burst,” said Bethany Hocking, analyst at Investec, which maintained its sell recommendation.
At the opening of the 151,000 sq ft Cheshire Oaks store near Chester this week, M&S gave a mixed assessment of current trading. Customer confidence was at its highest level for two years, it said. However, less reassuring for investors was the admission that one of the key reasons for consumers’ optimism was that they had spent little over the summer.
After Diageo posted a 6% increase in full-year sales to £10.8bn last week, it was the turn of French rival Pernod Ricard to report full-year results this week. The owner of Absolut and Jacob’s Creek delivered like-for-like sales growth of 7.6% - narrowly higher than analysts had predicted - but operating profit growth of 9.1% was short of expectations. Shares fell by 1.4% by lunchtime on Thursday to €86.50.
It was a disappointing week for fellow French giant L’Oréal. The cosmetics company reported an 11% increase in first-half operating profit, well off what had been forecast by analysts, causing shares to drop by 4% to €96.60 on Wednesday.
“We had expected good H1 results in terms of margins and earnings too. However, L’Oréal’s results came in below our expectations,” said Bernstein analyst Andrew Wood. “The disappointing H1 results especially on margins, with no change to generic full-year guidance should drive some stock weakness.”