Ian Forrest, investment research analyst at The Share Centre, said: “These results were certainly a mixed bag, as expected, but the departure of Bolland will provide an opportunity for a fresh approach and further change.
Bolland will be replaced by Steve Rowe in April. Rowe is currently head of general merchandise and has extensive experience across several areas of the business. According to a note by Investec, his appointment is likely to be well received. An M&S ‘lifer’, Investec said, he is known by the market. He has significant experience across the whole business having also run the food division and store operations historically.
James Illsley, fund manager at JP Morgan UK Core Equity Fund, agreed the CEO change has been a well-planned send over. Overall the fund manager remains positive and explains that with the improvements made to the operational side it’s an attractive stock that JP Morgan keeps a close eye on.
“Trading was weak given the very warm weather; consumers are not going to the high street and the clothing side were weaker in sales. Meanwhile, the food side is robust,” said Illsley. At the same time, says Illsey, there’s been a process of cutting costs which has offset the weakness as it has provided better sourcing. “So in terms of net there has been no movement,” he added.
Illsey points to how Marks & Spencer is a “self-help story”, as they have worked on improving operations and distribution at the right time of the year, as well as improved delivery. Hence the weak sales have been offset by cutting costs. “They’ve gotten their act together in a tougher trading environment,” he said.
Forrest also maintains recommendations for Marks and Spencer as a ‘buy’ due to the strength of the growing food business, the significant potential to increase profitability in general merchandise, rising disposable incomes and the healthy dividend. The lower oil price, along with a growing UK economy, should continue to be supportive of results ahead.”
And does Investec, which says the valuation does not reflect the firm’s strength of cash flow, capital return potential nor self-help potential. “M&S’ multi-year general merchandise gross margin improvement story should more than offset a subdued sales outlook, with potential for international profit recovery at some point.”
Marks & Spencer third quarter trading figures covering the period up to Boxing Day revealed general merchandise recorded a 5.8% drop due to unseasonal weather and stock availability. Like-for-like UK sales were down 2.5%, while online revenues rose 21%. Food picked up 0.4%.
