A Fashion Tip For Investors: Consider Buying Marks and Spencer Group Plc

You don’t have to be a fashionista to have noticed the buzz around Marks and Spencer‘s (LSE: MKS) (NASDAQOTH: MAKSY.US) new Autumn womenswear collection. Early signs of its success haven’t yet been mirrored in M&S’s share price — but that could change.

The Autumn fashion collection could be make or break for CEO Marc Bolland. After two years of falling general merchandise sales, some large investors have hinted that if the decline isn’t arrested soon, Mr Bolland will be seeking alternative employment.

Hopes are that moving the successful head of its food division to run general merchandise, and recruitment of a new style director, will revive the all-important womenswear sales. Centralised distribution warehouses and better IT should deliver the right amount of stock to M&S’s 766 stores at the right time, increasing sales and reducing costs.

An ace up his sleeve

It’s looking good for Mr Bolland. The fashion press have applauded the new styles. A high-profile advertising campaign from Vogue and Vanity Fair photographer Annie Leibovitz featuring the great and the good of British women will accompany the full launch next month.

The secret ingredient, apparently, is sleeves. If you don’t understand why putting sleeves on dresses is a revolutionary concept then, like me, you don’t understand fashion — but you can still enjoy its effects.

More significantly in my analysis, practically all of my women friends have enthused about the range, even diarising to snap up items as and when they become available in the shops or online. That enthusiasm cuts across age ranges from 20s to 50s — important for M&S which, though most of its womenswear sales are to the 45+ age group, is a broad-range retailer.

Brokers’ caution

These promising signs haven’t yet registered in the financial community. Research for this article threw up just one Financial Times piece noting a modest uptick in M&S’s July sales. Brokers’ analysts are waiting for hard evidence before making a judgment. Besides, the City is still on summer holidays.

But if that judgement is ultimately positive, brokers will pencil in better earnings forecasts and fund managers will have more confidence in Mr Bolland’s turnaround strategy. Both aspects should be good for the share price.

On a prospective P/E of 13.6, M&S shares currently offer a decent 3.9% yield. With the prospect of positive momentum over the next few months, they could well be on my shopping list.

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> Tony does not own any shares mentioned in this article.