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Brokers positive on Marks & Spencer's cost-cut move

Upgrading the stock to "overweight" from "neutral," J.P. Morgan Securities said the company's food business was expected to improve gradually versus the rest of the sector.
 
 
 
Upgrading the stock to "overweight" from "neutral," J.P. Morgan Securities said the company's food business was expected to improve gradually versus the rest of the sector.

The brokerage said it also expected the retailer's cashflow and net debt to remain stable owing to cost and interest charge reductions.

Further capacity reductions in the UK clothing sector should also help the company, it said.

Removing its "short-term sell" tag on the stock, UBS said the company's savings would come from store closures, especially in food, and cost cuts at head office, marketing, distribution and pension scheme changes.

The brokerage rates the stock at "neutral."

The 15 percent job cuts planned by the UK's biggest clothing retailer will not hurt the business significantly, but they will do nothing to get the sales trends back on track, Deutsche Bank said in a note to clients.

It raised M&S price target but kept a "hold" rating.

Numis Securities downgraded the stock to "sell" from "reduce" citing structural weaknesses in both food and general merchandise, expected risk and 3 billion pounds of debt.

M&S, which serves more than 21 million people a week from over 600 stores, on Wednesday reported its worst quarterly sales in a decade, hit by tough economic conditions and said it would cut 1,230 jobs to save cash.

Shares of the company were down 2 percent at 239 pence at 11:49 a.m. British time.

(Reporting by Balachander Surianarayanan in Bangalore; Editing by Gopakumar Warrier)

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