ii view: M&S stays on the retail road to recovery

Shares for this FTSE 250 retailer have almost halved year-to-date. We assess prospects

First-half results to 1 October

• Revenue up 8.5% to £5.54 billion
• Pre-tax profit up 11% £209 million
• Net debt down 7% to £2.9 billion 
• No dividend payment

Chief executive Stuart Machin said:

"Trading in the first half has been robust with both businesses growing ahead of the market, reflecting the beginnings of a reshaped M&S. The programme to renew and rotate our store estate is driving sales and quick paybacks, while the M&S App now accounts for over a third of online Clothing & Home sales. 

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“This progress means we face into the current market headwinds with an increased resilience and level of confidence. Looking beyond the current stormy weather, much is in our control and our mandate is clear - to step up the pace, accelerate change, drive a simpler, leaner business and invest in growth opportunities to build a reshaped M&S."

ii round-up:

Marks & Spencer Group (LSE:MKS) is a retailer of Clothing and Homewares (CH), and Food, both in store and online. 

Its food business now includes a 50% joint venture with delivery company Ocado Group (LSE:OCDO). 

It also operates both M&S Bank and M&S Energy.

For a round-up of these latest results announced back on the 9 November, please click here.

ii view:

Founded in 1884, M&S is today a constituent of the FTSE 250, operating several hundred UK general and food related outlets. It also has more than 400 stores overseas spread across 100 global markets. An ongoing transformation programme is focused on store renewal and restructuring initiatives, investments in technology, growing its online food proposition in partnership with Ocado and focusing down on costs. 

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For investors, a highly uncertain economic outlook, including rising interest rates and a cost-of-living crisis now offers a challenging backdrop. Rising costs at its food business have hurt, required investment costs across the business continue, while the dividend remains suspended. 

On the upside, both sales and profit for its previously underperforming CH business are showing promise. Its transformation programme is also progressing, with just over 200 stores either closed or due to be closed, net debt has fallen helped by the lack of a dividend, while a price-to-net asset value of under one compared to over five times at fellow retailer rivals such as B&M European Value Retail SA (LSE:BME) and Next (LSE:NXT) also suggests the shares are not obviously expensive. 

For now, and weighing outlook uncertainty against continued group change, long-term fans of the company are likely to stay patient.  

Positives: 

• Reducing High Street stores and growing online
• Ocado Joint Venture gives it a scalable presence in online grocery

Negatives:

• Competition not standing still
• No dividend payment

The average rating of stock market analysts:

Hold