I’ve got a screener so I can easily see when a FTSE stock of a specific size hits a 52-week low. After crashing over 20% last week, Marshalls (LSE:MSLH) easily triggered this alert. Clearly, something fundamental’s gone wrong for the business. But on closer inspection, I’m not sure the size of the move was justified.
The surprise news
On Friday (25 July), the company released a trading update. The main takeaway was that it issued a profit warning, stating that market activity in its core landscaping business weakened sharply from late May and that it sees no meaningful recovery through the rest of 2025.
The firm now expects adjusted profit before tax for 2025 to be in the range of £42m–£46m, down from earlier (and higher) guidance levels. In terms of the key drivers for this, the update spoke about “structural overcapacity in the UK supply chain continuing to exert downward pressure on prices”. Moreover, “cumulative inflation in building materials” has shifted client demand away from higher-margin offerings from Marshalls.
It wasn’t all bad news, with divisions such as Building Products and Roofing Products experiencing revenue growth. Yet in terms of an initial market reaction, the share price fell sharply. The loss from last week means over the past year the stock’s down 37%.
Why I’m not too concerned
Although the news may have come as a shock to some investors, I was encouraged by the end of the report. The management team said: “We have taken action to reduce costs and optimise our national manufacturing network”. So the implementation of change has already begun. Even better, the actions being taken are expected to boost the landscaping division’s profits materially next year.
What we have here is a situation where there are short-term headwinds for the rest of this year for Marshalls. But when we look to 2026 and beyond, the management team believes it’s taking enough action to have things back on track by then. As a result, I think the share price move was a bit of an overreaction.
It’s true that this is my subjective viewpoint. The main risk I see is if trading conditions worsen from here, triggering another update where the company has to further walk back investor expectations.
Let’s also not forget that despite the hit to profits, Marshalls is still expecting to generate a profit before tax in the tens of millions of pounds. If it were loss-making or predicted to flip to a loss, I’d be more concerned. However, any company that makes a profit during a tough period highlights the strength of its business model.
I think an investor could consider adding the stock to their portfolio as a value pick for a recovery over the coming year.
