Shares in famed British retailer Marks and Spencer Group (LSE: MKS) have soared since last October’s lows. On Tuesday morning, they hit a 52-week high. But after rising so far, so fast, am I too late to buy this popular stock?
M&S, a great British institution
Marks and Spencer — widely known as M&S or Marks — was founded in Leeds in 1884 by Michael Marks and Thomas Spencer. It grew rapidly over the next 142 years and in 1998, the food, clothing and interiors business became the first UK retailer to record a before-tax profit of over £1bn.
Regarded as the grocery chain for Britain’s middle classes, M&S recorded strong food and clothing sales for decades. But the group has struggled in recent years, with its shares taking a beating since mid-2015.
Share price slump
For decades, M&S was a member of the elite FTSE 100 index. But as its share price sank, it was relegated to the mid-cap FTSE 250 index in 2019, where it resides today.
After sustained price plunges, Marks and Spencer shares staged a big comeback in 2021-22. On 7 January 2022, they closed at 256.6p. But then they crashed once again.
On 13 October 2022, this stock hit a 52-week low of 91.56p. I’m absolutely kicking myself for not spotting the shares at this bargain-basement price last autumn.
Here’s how the M&S share price has skyrocketed in recent months, based on the current price of 169.7p:
| One day | +0.6% |
| Five days | +2.9% |
| One month | +17.8% |
| Year to date | +37.6% |
| Six months | +66.5% |
| One year | +14.8% |
| Five years | -36.8% |
Over six months, M&S shares have surged by around two-thirds. However, over the past decade, they’ve lost more than a third of their value.
On Tuesday afternoon, this stock hit a 52-week high of 170.2p. After this meteoric rise, M&S’s market value has shot up to £3.3bn. If it were to leap by another, say, 20%-25%, it might even return to the FTSE 100 after a four-year absence.
Would I buy M&S stock today?
To be blunt, I’ve never been a huge fan of retailers’ shares. History has taught me that chain retailers operate in a cut-throat industry, often with wafer-thin margins.
Also, the arrival of major German value chains Aldi and Lidl in the UK grocery market has led to repeated price wars. But to some degree, M&S (and also Waitrose) is partly insulated from this fierce grocery war for price-conscious customers.
My big question is would I buy Marks and Spencer shares today? At current levels, they trade on a price-to-earnings ratio of 11, for an earnings yield of 9.1%. That’s not overly expensive, but nor is it wildly cheap.
Also, M&S cancelled its dividend during the Covid-19 crisis. The last cash payout to shareholders was on 10 January 2020 — more than three years ago.
In summary, after their sustained surge since last October, M&S shares aren’t on my buy list today. Though I could see them continuing to rise further, they just aren’t cheap enough for me now. But how I wish I’d bought them six months ago. Like I said earlier, I’m kicking myself!
