Could the Marks and Spencer price ever go up to 700p?

Could the Marks and Spencer price ever go up to 700p?

<p class = "canvas-atom canvas-text Mb (1.0) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The relatively new management team at Marks and Spencer (LSE: MKS) has issued quarterly results, inviting investors to focus on long-term development. This is admirable and agrees with the world's best known investor Warren Buffett. The problem is that at M & S in the long run – at least in the rearview mirror – a thoroughly dark picture emerges. "Data-reactid =" 22 "> The relatively new management team at Marks and Spencer (LSE: MKS) has issued quarterly results, inviting investors to focus on long-term development. This is admirable and agrees with the world's best known investor Warren Buffett. The problem is that at M & S, the long-term view – at least in the rear-view mirror – gives a very bleak picture.

<p class = "Canvas Atom Canvas Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The FTSE 100 The shares of the company are currently at just over 300 pence, a level that was reached in 1992. Certainly there were dividends (and cuts), but a quarter of a century of inflation was taken into account, and I calculate the actual rate of return over the period as being somewhere around zero. "data-reactid =" 23 "> The FTSE 100 The shares of the company are currently at just over 300 pence, a level that was reached in 1992. Certainly there were dividends (and cuts), but a quarter of a century of inflation was taken into account, and I calculate the actual yield over the period as somewhere around zero.

There were proverbs when it looked as if M & S's business would flourish again and the shares rose accordingly (at a peak of over 700p in 2007), but fell back as the rebound broke out. The big question today – certainly for long-term investors – is: Can the company's most recent management team achieve sustainable growth for the company and shareholder returns? Or is M & S simply too structurally challenged?

Rebuild foundations

The veteran of the company, Steve Rowe, took over the position of Chief Executive in April 2016. He has new perspectives through the appointment from outside in the form of Chairman Archie Norman (since September 2017) and Finance Director Humphrey Singer (since July 2018).

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "M & S half-year results have only been used this week Emphasize The scope of the upcoming transformation task "Rebuild the foundations of future M & S" it was already reorganized "In the biggest change of our structure for decades" and the "eOur offer, our trade, our supply chain and our marketing are scrutinized and changed. ""data-reactid =" 27 "> M & S's half-year results this week have just highlighted the scope of the upcoming transformation task, which the company said in "Rebuild the foundations of future M & S" it was already reorganized "In the biggest change of our structure for decades" and the "eOur offer, our trade, our supply chain and our marketing are scrutinized and changed. "

Smarter than its predecessors?

In an attempt to put M & S on a path to sustainable growth, former CEO Marc Bolland has invested nearly £ 3.8 billion in investments over three years, averaging £ 626 million per annum. In the first two and a half years of Steve Rowe, the average annual spend was only £ 296 million. Given that current management has implicitly accused the management of underinvestment in a number of areas, it probably believes it can invest much less but is much more intelligent than its predecessors. This is one of many things that I think are too optimistic.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Another risk I see is that M & S & # 39; s Store Is The closure program could be more extensive (and more expensive) than currently planned: As the aging customer base blasts into the Great Clothing Emporium and Food Hall every year, the company needs to push younger generations into its businesses On the second page, clothing and online online sales are in the 6% region compared to online apparel and retail apparel growth Next (17%) and even the disaster Debenhams (16%). "Data-reactid =" 30 "> Another risk I see is that M & S's closure program may need to be larger (and more expensive) than currently thought, with the aging customer base passing for the Great Clothing Emporium and the food hall in the air has to bring the company's younger generations into its stores every year and click on its website, with the sale of apparel and online online sales in the 6% region detrimental to online apparel growth. and retail stores Next (17%) and even the disaster Debenhams (16%).

Unconvinced

It is possible that M & S shares could rise from their current levels on the back of signs of progress in the turnaround. After past disappointments, however, I do not believe that we will see 700p again soon. I am not convinced that M & S can achieve long-term sustainable growth. And since I also see a significant downside risk due to the factors discussed, it is a stock I avoid.

<p class = "canvas-atom canvas-text Mb (1.0) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Read more"data-reactid =" 33 ">Read more

<p class = "canvas-atom canvas-text Mb (1.0) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "G A Chester has no position in any of these shares. Motley Fool UK has no positions in any of these stocks. The companies mentioned in this article are based on the author's views and may therefore differ from the official recommendations we make in our subscription services such as Stock Advisers, Hidden Winners and Pro. We at The Motley Fool believe that taking into account different insights makes us better investors."data -reaidid =" 41 ">G A Chester has no position in any of these shares. Motley Fool UK has no positions in any of these stocks. The companies mentioned in this article are based on the author's views and may therefore differ from the official recommendations we make in our subscription services such as Stock Advisers, Hidden Winners and Pro. We at The Motley Fool believe that taking into account different insights makes us better investors.

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