The Surprising Buy Case For Marks and Spencer Plc

Royston Wild looks at a little-known share price catalyst for Marks and Spencer plc (LON: MKS).

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.

Today I am looking at an eye-opening reason why shares in Marks and Spencer (LSE: MKS) (NASDAQOTH: MAKSY.US) fail to fully account for the sterling work made by the retailer in juicy growth regions.

An intelligent approach to overseas growth

For many, Marks and Spencer represents a lingering tale of ongoing woe on the UK High Street. Like-for-like sales advanced just 0.6% in April-June, with a 1.8% growth in food sales again rescuing poor performance in its general merchandise division, where like-for-like sales dropped 1.6% .

Although Marks and Spencer still generates more than nine-tenths of total revenues at home, the company is making massive strides into overseas expansion, a strategy which saw total international sales rise 8.7% last quarter versus 2.7% in the UK. Still, I believe that the amazing progress which the firm has made into foreign climes is yet to be fully prices into its current stock valuation.

The British shopping institution entered eight lucrative new territories last year, and the company now operates across 51 regions spanning the entire globe. And 31 new store openings in the last year took its total overseas shops to 418.

In particular, Marks and Spencer is concentrating on expansion in India, China and the Middle East — including Turkey and Russia — which is delivering spectacular returns. Indeed, the company opened 19 new shops in the Middle East and North Africa and a further 22 in Asia.

Marks and Spencer is placing particular focus on developing its international presence through the franchise model, a sensible route which allows Marks and Spencer to reduce capital outlay and risk whilst also benefiting from the local knowledge of its regional partners. In total, the firm has 17 foreign franchise associates which deliver more than 35% of international sales.

As well, the firm’s multi-channel approach to sales growth also encompasses the particularly-lucrative growth potential of online markets. Since last November has rolled out localised websites in the rapidly-growing internet marketplaces of Germany, Austria, Belgium, Spain, Luxembourg and The Netherlands. The business has also introduced built a localised website in China to supplement its accelerating revenues there.

Although performance at home remains relatively subdued and could be in line for further shocks, I believe that Marks and Spencer’s galloping and multi-layered strategy in foreign markets leaves it in prime position to realise solid earnings growth well into the long term.

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.

> Royston does not own shares in Marks and Spencer.

More on Investing Articles

Investing Articles

Down 23%! Should I buy more CrowdStrike shares for my Stocks and Shares ISA?

Sometimes bad news can be good news for long-term investors. But is that the case for CrowdStrike in relation to…

Read more »

Investing Articles

2 UK shares near 52-week lows I’m considering snapping up

These UK shares are loitering near, or at, 52-week lows. Are these prime opportunities for our writer to boost her…

Read more »

Investing Articles

Unilever: a passive income stock with potential for decades of dividend growth

Stephen Wright thinks Unilever can keep reducing its share count for years to come. And this should help make it…

Read more »

Middle-aged black male working at home desk
Investing Articles

Worried about retirement? I’d buy high-yield dividend shares to build wealth

The number of pensioners enduring poverty in the UK looks set to rise. Investing in dividend shares could help Britons…

Read more »

Investing For Beginners

2 boring but beautiful FTSE 100 stocks to add to my ISA

Jon Smith runs over a couple of FTSE 100 stocks that he really likes the look of, even though they…

Read more »

Investing Articles

Here’s how I could supercharge my wealth by snapping up the best dividend stocks!

This Fool explains how dividend stocks play a crucial part of her aspirations to build wealth, and details one pick…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Revenue up 10% and accelerated growth potential for this overlooked FTSE 250 company

Today's first-quarter update from this good-value FTSE 250 company keeps me keen on the stock as recovery and growth continues.

Read more »

Investing Articles

Here’s why I’m so bullish about the BT share price now

The BT share price shot up after FY results, and a couple of months on it's still up there. Might…

Read more »