Steve Rowe, the head of Marks & Spencer, has tried to reassure investors that the retailer “has a clear line of sight on the road to making M&S special again”.
The group’s shareholders have been in a tumultuous time over the past few years and the FTSE 250-listed company’s share price remains around 36 percent lower than two years ago.
After keeping Marks & Spencer open in some form throughout the pandemic, the share price rose 65 percent last year, while the broader FTSE 250 index rose 33 percent.
Despite posting an annual loss of £ 200 million today, shares are up 7.3 percent.
Roller coaster ride: M&S shareholders have had a turbulent time in recent years
Fluctuations: A chart from UBS shows the share price and price shifts for M&S.
Changes: A table from UBS showing the share price and target price for M&S over a set period of time
“The recent price rally has led investors to conclude that stocks are now up to date with events and that market consensus, albeit strong, persists,” said Richard Hunter, director of markets at Interactive Investor.
The group, which posted a loss of £ 201 million last year and will close 30 more stores, saw its share price surge today.
M&S shares are currently up 7.28 percent, or 11.35 pence, to 167.3 pence, compared to a year ago the share price was 100.30 pence.
To put things into context, five years ago M & S’s share price was 369.75 pence and in April 2007 it was 704 pence.
M&S pushed the share price higher today, saying it is making progress on its turnaround plan, which traded heavily in the first few weeks of fiscal 2021/22. His food arm did well during the pandemic, and his recent collaboration with Ocado has proven to be a hit with shoppers.
The company still has some major hurdles to overcome, however, and the roller coaster ride for its shareholders is far from over.
The situation is a long way from 1998, when M&S became the first UK retailer to achieve an annual pre-tax profit of more than £ 1 billion.
Last year, the retailer’s retail apparel and housewares sales declined 31.5 percent last year, due to the “heavy impact” of lockdowns on stores. The apparel and household businesses recorded an operating loss of £ 129.4 million. However, M&S said performance improved in the second half of the year.
In all clothing lines, M&S has increased the number of brands it offers. At the beginning of this year, for example, M&S took over the fashion brand Jaeger from the administrators in order to exclude the 63 independent stores of the retailer concerned.
M&S now also sells a number of well-known brands on its website, including Hobbs, Joules and White Stuff.
As part of its turnaround plans, the retailer has already closed or relocated 59 stores and cut 7,000 jobs in its store and management teams.
The 30 planned closings announced today will be part of a restructuring of around 110 stores, with most of those locations slated for relocation. Some will show up in former Debenhams stores.
M&S stocks have bounced back from their lows but remain well below their previous levels
Stronger: M&S Food Arm performed well in the past year, as new results show
The group currently has 254 full-range retailers selling food and clothing. However, there are plans to reduce these to around 180 over the next decade, with some of them being replaced with clean food or clean clothes and home locations.
How do M&S shares score?
Stock analysis website Stockopedia gives M&S a StockRank of 81 out of 100, with the metric with the highest score within that total being 89 out of 100 for value.
M&S has a rolling 12 month price / quality ratio of 12.9 and a price to book ratio of 1.13, both of which are cheap compared to the broader sector.
However, the loss of M&S affected a number of stock quality metrics.
> Stockopedia stock analysis: free trial and TiM discount
The extent of M & S’s financial troubles was exposed in November when it posted a loss for the first time in its 94 years as a public company.
The high street giant fell to a pre-tax loss of £ 87.6 million in the 26 weeks to September 26, compared to a profit of £ 158.8 million for the same period last year.
Sales for the half-year in question fell 15.8 percent to £ 4.09 billion after suffering from lower clothing and home sales.
The gloomy half-year update came as M&S continued its “Never The Same Again” transformation program.
The program would enable the company to emerge from the crisis in a “stronger, leaner and more focused position”.
Unlike some retailers, M&S also chose to maintain the multi-million pound relief from the worst pandemic on business rates, IG analysts noted.
Brands: M&S now sells clothing ranges from retailers such as Jaeger on its website
Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said: “To say that all challenges are over would be a gross misrepresentation. The picture for Clothing & Home remains very tricky.
“The work being done to streamline business and get more business online needs to be welcomed, but it’s too early to call when this gigantic effort is simply too late.
“Such an intense restructuring involves enormous risk and the possibility exists that the associated profit and cash outflows will extend further into the future than M&S plans.”
Meanwhile, Adam Vettese, an analyst at eToro said, “Marks & Spencer has seen many false dawns over the years. So you can forgive shareholders for rolling their eyes when the board of directors used language like, ‘Forging a Remodeled M & S “used.”
Looking ahead, M&S expects a profit of between £ 300 million and £ 350 million for the next year.
UBS analysts said: ‘In the middle of £ 325m, the outlook is 9 percent above consensus. MKS announced that it will attempt to look into reintroducing a dividend but is unlikely to do so this year as profitability restores and balance sheet metrics improve to investment grade. ‘
They added: ‘Assessment: We rate FMD as neutral; We anticipate that with some upgrades the stocks will keep the earnings outlook positive. ‘
Jefferies analysts said, ‘We are upgrading PT to 200p at 10.6% FCY by 2023 as we expect investors to see the foot and mouth earnings base moving towards a more sustainable model with increased food relevance and a better adapted C + H offer shifts to the 21st century. ‘
Boss’ view: “The transformation has moved to the next level.”
Responsible: M&S boss Steve Rowe
Steve Rowe, CEO of M&S, said today, ‘In a year like no other, we have had robust trading performance, thanks in no small part to the extraordinary efforts of our colleagues.
‘By moving our transformation further and faster through the Never The Same Again program, we have gone beyond laying the foundations to forge a remodeled M&S.
‘With the right team to accelerate change in the trading business and find a path for future growth, we now have a clear line of sight on the path to making M&S special again.
“The transformation has moved on to the next phase.”
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