Is this the last great buying opportunity for Marks and Spencer Group plc?

Should you buy Marks and Spencer Group plc (LON: MKS) today?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in Marks and Spencer (LSE: MKS) plunged in early deals this morning but have since recovered after the company reported its full-year results for the year ending 1 April 2017.

On a headline basis, the company reported a sharp drop in profit thanks to increased restructuring costs. Pre-tax profit for the period collapsed to £176.4m from £488.8m in the year-ago period. However, revenue rose slightly from £10.56bn to £10.62bn off the back of growing food sales.

For the year the company reported food sales increased 4.2% overall, offsetting a 2.8% decline in clothing and home sales — an extension of the trend that has been blighting the company for many years. That being said, management noted today that while clothing and home sales declined by 2.8% for the period, the majority of this decline was a result of the decision to reduce the number of promotions and clearance sales in stores. Excluding this, full price clothing and home sales grew by 2.7%.

These figures hint at the fact that Marks & Spencer could be finally on the road to recovery although the group still seems to have a long road ahead of it. Even though revenue rose overall, it seems all of the growth was a result of new store openings. On a like-for-like basis, food sales slipped by 0.8%, and like-for-like clothing and home sales declined by 3.4%.

Time to buy?

Today’s figures from Marks & Spencer are a mixed bag. The company is making progress, but declining like-for-like sales figures are concerning.

It’s clear investors have lost patience with the company over the past two years. Even after rising by around 13% since the beginning of 2017, shares in the enterprise are still down by more than a third since the 2015 high of 600p.

A lack of progress is clearly to blame for this lacklustre performance. Today the company reported adjusted basic earnings per share for the 52 weeks ended 1 April 2017 of 30.4p, down 13.1% year-on-year and down 4.7% from fiscal 2012’s reported figure of 31.9p. City analysts are not expecting this trend to change anytime soon. Earnings per share are projected to slide to 29.2p for the fiscal year ending 31 March 2019. And based on City figures, shares in Marks & Spencer are currently trading at a forward P/E of 12.9, which doesn’t look particularly cheap for the struggling business.

The bottom line

So overall, even though the market seems to like the results out from it today, it doesn’t look to me as if the group is moving forward. If anything Marks & Spencer looks as if it is struggling to tread water.

For the past five years management has consistently told investors that the company is in the process of turning itself around, but so far no real turnaround has emerged. As online clothing retailers continue to grab market share from the group, and competition in the food sector only increases, management is only going to find it harder to get the business back on a stable footing.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »