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3 Great Reasons Why Marks And Spencer Group plc Is Set To Take Off

Today I am looking at why I believe Marks & Spencer (LSE: MKS) (NASDAQOTH: MAKSY.US) is an excellent stock selection for savvy investors.

Signs of turnaround at home

Although Marks & Spencer continues to suffer from weak turnover at its core markets at home — UK operations still account for around 90% of group revenues — recent sales performance has shown definitive signs of a pick-up, which City brokers expect to underpin a belated turnaround in earnings growth.

July’s interims revealed that total domestic sales rose 2.7% in April-June, up from 2.6% in the previous quarter and 0.3% in the three months prior to that. And on a like-for-like basis, revenues grew 0.3% in the last quarter and 0.6% in January-March, a massive difference when tallied up against the massive 1.8% decline punched in the previous three-month period.

Although the firm’s General Merchandise arm continues to struggle — like-for-like sales dropped 1.6% in April-June — this is better than the 2.2% drop reported in each of the previous two quarters.

And the company has brought in a new clothing team to arrest weakness in this key division, including the appointment of former Jaeger designer Belinda Earl as style director, to improve the quality and design of its womanswear collection. Coupled with the heavily-promoted autumn catalogue, the retailer is certainly pulling out all the stops to revive its fortunes here.

Online business setting blistering pace

Marks & Spencer is investing heavily in the red-hot online sales sphere in a bid to latch onto the stunning sales potential here, while also shaking off its more traditional — or some would say dated — image.

The company saw internet sales surge 29.9% in April-June, helped by schemes such as free next-day delivery for store collection. The launch of its new online platform at the start of 2014 should help to drive volumes at M&S.com, while the opening of its new Castle Donington distribution centre should ensure smooth stock management and meet online customers’ expectations in an increasingly competitive space.

International revenues keep on rolling

The British retailer has been relentless in driving into new international territories through new store openings, franchise creation and improvements to its online services. This has seen sales gallop higher recently, rising 8.7% in April-June against 4.5% in the whole of 2012.

In particular, Marks & Spencer is concentrating on achieving growth through exposure to emerging markets — particularly those in Asia — and is on track to achieve a raft of new store unveilings in China and India, among other destinations, over the next 12-24 months.

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> Royston does not own shares in Marks & Spencer.