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MARKET COMMENT
By
Carburton Street, London -- After the well-documented dreary trading performances and the disappearance of potential bidders, Marks & Spencer (LSE: MKS) has lost 35% of its value this year. But will the country's Christmas shoppers bring joy to the group's long-suffering shareholders? It's very unlikely. Just as Luc Vandevelde, the M&S Chairman, asked investors to accept the reality of the company's full-year financial performance, so those same investors must accept the reality of M&S' current valuation. Even after this year's sharp drop, M&S shares still aren't ripe for any recovery. At 187p per share, M&S stand on a forward price to earnings ratio (P/E) of 16.0 and offer a prospective dividend yield of 4.8%. However, even though M&S has historically traded at a P/E of around 20 and currently present a reasonable yield, don't be fooled by the apparent discount now being offered by the stock market. The company's interim results described how like-for-like sales growth had declined by 8% during early November, while recent industry rumours have suggested that trading in the run-up to Christmas had deteriorated even further. So, it's not too surprising to find that most brokers are forecasting profits at M&S to fall in the current financial year. The consensus is that earnings per share (EPS) will slip from 13.2p to 11.7p. There could also be further woe on the dividend front, with several analysts pencilling in a full-year payout of slightly below last year's 9p per share payment. In terms of the year after, brokers are expecting a profit improvement from M&S, but only to match 13.2 EPS level seen last year. As Vandevelde remarked at the interim results "there are no quick fixes". Overall, it could be worthwhile M&S shareholders revisiting the Foolish comments reviewing the company's full-year results. Back then, at 244p, there was deemed to be "a lot of optimism in M&S shares". And even with the subsequent 23% decline to 187p, there's still a lot of investor expectation in the M&S share price, bearing in mind the ongoing fall in profits. All in all, it's still worth repeating the Foolish M&S summary given seven months ago. That is, those remaining with M&S should expect a long, and at times, painful, road to recovery. And for those looking in the retail sector for High Street revival stories, there are plenty of other, smaller, and more nimble, operators that offer greater immediate value than M&S at present. Where Next? Visit the Marks and Spencer discussion board -- keep in touch with the latest M&S share price and news
