The Marks and Spencer Group (LSE: MKS) share price is down 6.5% in 2024 as I write. That’s a stark contrast to its performance in recent times.
In the last year, its share price has kept pushing higher. Across that time, the stock has gone up 55.7%. During the same period, the FTSE 100 is up just 2.5%.
I’m wondering if this dip is a chance for me to get in and snap up some shares. Let’s explore.
Road to recovery
With its impressive rise, that means its share price is sitting at 257.8p. As a result, the British icon recently regained promotion back to the Footsie.
It’s been a long journey for the company. M&S has struggled for years as it looked like it had been left in the dust by its competition. The retail giant made its name for providing the highest of quality. However, much of its operation seemed to be outdated and out of fashion.
But now things seem to be on the up. And in the last few years, the business has put into place a turnaround strategy that has helped it reverse its fortunes.
CEO Stuart Machin has been key to bringing the business back to the 21st century. He’s put in place measures such as closing flagging high street stores and emphasised boosting its online channels. Safe to say, it’s working.
Impressive turnaround
For the 26 weeks ended 30 September 2023, profit before tax rose 56.2% year on year to £325.6m. Food sales also jumped a solid 14.7%.
Its January update on Christmas trading also showed group sales rose 7.2% versus the year prior. All of this is even more impressive when considering we’ve been in a cost-of-living crisis.
But even after its rise, I still think there’s value left in the stock. Today, its shares trade on a price-to-earnings (P/E) ratio of around 13. That’s below the long-term Footsie average of between 14 to 15.
Looking ahead, it has predicted its P/E ratio could fall to below 10 by 2025. I sense value.
Still not in the clear
That’s all positive news. However, there are a few threats that I must consider. While it seems we’re over the worst of racing inflation and interest rate hikes, we’re not out of the woods yet. Higher rates squeeze consumers’ pockets. This always has the potential to harm the firm’s sales.
Higher inflation also threatens rising wages and higher costs. The business recently announced it will fork out £89m as it rewards 40,000 staff with a raise.
The time to buy?
Even with that in mind, I still like where M&S is heading. The business has made a strong recovery. And with retail sales figures for January and February coming in hotter than expected, I’m confident better times are ahead for retailers.
Interest rates falling will also provide the business with an uplift. This should lead to a pick up in spending.
I’m not expecting the stock to replicate its performance over the last 12 months, but I do believe that it has more to give. If I had the cash, I’d open a position. I think investors should consider the shares too.
