Marks & Spencer still searching for a new look
A REPORT from accountancy firm PwC has found around 14 high street shops are closing every day across the UK. There are 29 Marks & Spencer stores in those numbers, and the group is looking to close more than 100 in time.
That pretty much sums things up on the high street at the moment.
Increasing online competition, and the high cost of maintaining a high street presence are hitting less profitable stores. As more close, that’s reducing footfall, making matters worse and forcing retailers to roll back into fewer, more profitable locations.
M&S is no exception. It’s even feeling the pinch in M&S Food, previously a shining light, as input costs rise and online retailing penetrates the supermarket sector.
It doesn’t help that the economic climate is tough. M&S is hardly alone facing that headwind, but the fact other high street giants are struggling too isn’t much consolation for investors.
Unfortunately, many of the current difficulties aren’t new. Clothing & Home like-for-like sales have been going backwards for years, as the division struggles to convert the young professionals that pop in to grab lunch.
CEO Steve Rowe is the man with the plan – he’s closing stores, reducing spending and increasing digital capacity.
Cost savings boosted profits at the half year, but the problem is M&S is a bit of a giant, and not a particularly agile one.
Restructuring costs aren’t small, and M&S’s average store lease has around 20 years to run. With more tough decisions on the horizon, profits are due to stay broadly flat for now.
We’re not saying it’s all bad. M&S has taken its head out of the sand and is working on all the right things, it’s just rowing against the tide right now, which probably explains why the company is trading below its historic price to earnings (P/E) ratio.
With the focus firmly on turning round performance, returns to shareholders are likely to come second to reinvestment in the next few years. Still, with analysts forecasting a yield of 6 per cent, the dividend is pretty generous as it is.