Categories: Economy

Remarkable value? Could be. Or it could be another false dawn at M&S

Remarkable value? Could be. Or it could be another false dawn at M&S ​​- loyal investors hope trust will be rewarded

Finally I’m ready to commit. I have been an avid customer of Marks & Spencer for a long time and have often thought about becoming an investor too. now this week’s results have encouraged me to put aside the concerns that held me back.

One is the frequent skeptical response to my wardrobe from those who should also be fans of autographs and other M&S brands, including Jaeger, the iconic name M&S acquired last year.

They claim not to believe a smart item comes from M&S and refuse to familiarize themselves with the stores or app, convinced that the 138-year-old tough guy is irreparably sloppy.

M&S often seemed determined to confirm this bias with less than adept merchandising. A turnaround process that includes a real estate reorganization could finally change these perceptions.

Shares, while nearly 70 percent below their levels a decade ago, are up 33 percent in the past month. Could this be because some consider them to be, as the current tagline says, ‘remarkable worth’?

Could it be that much of the bad news is priced in and better news is coming?

Perhaps this seems too optimistic. There has been many false dawns at M&S, and in announcing the results, chief executive Stuart Machin warned of a ‘rising storm’ fueled by inflation. But I’m still going to spend some money on the business, as Machin emphasizes that M&S ​​is targeting a more “privileged demographic” that is older and less affected by higher mortgage rates. He also thinks skyrocketing costs could lead to attrition among the competition.

Ian Black is manager of the Temple Bar Investment Trust and co-manager of the Redwheel UK Value & Income funds, both of which own M&S. His confidence is based on the strong balance sheet and investment in the ‘omnichannel’ (store and online) offering.

He says: ‘The food business has always been a force, but it has improved enormously in recent years. M&S food continues to gain market share together with Aldi and Lidl.

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“About 40 percent of Marks’ clothing is sold online – and the retailer still has a large share of the most important parts of the clothing market.”

M&S, for example, sells 35.6 percent of bras – model Rosie Huntington-Whiteley has been the face of the retailer’s lingerie collection for more than a decade – and 21 percent of men’s nightwear.

Even those more optimistic about the retailer’s ability to reinvent itself should be aware of the challenges.

If Machin and the other managers meet their targets, there will be fewer, but better stores.

Jonathan De Mello of retail consultancy JDM says this restructuring is the way to go, but points to difficulties arising from local objections to store closures, which are seen as damaging to house prices.

This week, M&S defended its controversial plans to redevelop the Marble Arch store on London’s Oxford Street, saying it was championing the UK’s most famous High Street.

It’s a justified claim, but could infuriate those losing their town’s shop even more.

Machin spoke of his particular determination to maximize the potential of the loss-making joint venture with Ocado.

Another ambition is to entice shoppers who love M&S treats like Percy Pig confectionery and the rotisserie lunches served in the in-store cafes to weekly ‘big basket’ shoppers who also pick up things for their kids .

This seems a reasonable ambition. But De Mello points to the gap between the Gastropub range and other M&S food specialties and clothing. He says, ‘How do they win the fans of the food over the clothes? Maybe more collaborations with designers like those at H&M.’

I await these kinds of innovations in my new role as customer and committed shareholder. Setbacks are inevitable. But I hope my faith will be rewarded.


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