I was surprised to read recently that the ‘Portas Pilot’ high-street makeover does not seem to have worked.
For Fools who are not familiar with what the ‘Portas Pilot’ is, it’s essentially a scheme headed by British ‘retail guru’ Mary Portas, whereby 12 towns across Britain were given a slice of a £1.2m pot called the High Street Innovation Fund.
The aim was to increase the number of shops, customers and generally improve the prospects of high streets where out-of-town shopping outlets had eaten away at their customer base.
Unfortunately, 10 of the 12 pilot towns reported that more shops had closed than had opened during the first year, according to the Local Data Company. Overall, around 700 shops had closed and 600 had opened.
So, it seems as though even greater funding and expert help cannot significantly improve prospects for many high streets across Britain.
However, I think that the results (thus far) actually create an opportunity for private investors like me. That opportunity, I believe, comes in the form of M&S (LSE: MKS) (NASDAQOTH: MAKSY.US).
It may sound rather counterintuitive to be bullish about a UK retailer that has a lot of shops on the UK high street when the ‘Portas review’ has indicated that prospects still look bleak.
However, M&S is focusing on two areas in the coming years that I think can add real value for shareholders.
The first is online. M&S continues to use a website that is behind the curve: the likes of ASOS and Next are streets ahead of M&S, with ASOS in particular offering useful tools that M&S simply does not, such as the ‘get the look’ button where shoppers can buy an outfit rather than just an item of clothing.
Therefore, I believe that M&S has the opportunity to substantially increase online sales simply by catching up with competitors, which it is set to do in the next couple of years.
Secondly, M&S is set to expand abroad in the medium to long term. In doing so, it should be able to tap into faster-growing markets and reduce the company’s reliance on the UK high street for its sales. Furthermore, a business model that demands relatively little capital expenditure means that M&S can expand further, faster.
In addition to all of this, M&S trades on a price-to-earnings (P/E) ratio of 15.6. This compares favourably to the general retail sector, which has a P/E of 18.4.
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> Peter owns shares in M&S.
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