All told, it’s been an interesting, surprising year for Marks & Spencer shares.
Opening at £2.45 in 2019, they got off to a fantastic start, rocketing above £3 for the first time in 3-months at the end of February, as speculation mounted that it was in discussions with Ocado over a potential joint venture.
Yet when investors got wind of the full details of that deal, they were less happy, the stock dropping nearly 13% on February 27th as the cost of the tie-up was revealed. The retail institution is investing a not insignificant £750 million in the Ocado.com joint venture – one that sees M&S replace Waitrose as Ocado’s main supplier – funded by a £600 million rights issue that’ll result in a 40% cut to the firm’s dividend.
Since that decline that stock hasn’t been able to get back to £3, at best striking £2.90 at the very start of May. Marks & Spencer shares now sit at a current trading price of £2.74.
Before all this, Marks & Spencer posted its third quarter update in January, a set of results that displayed the need for a substantial shake-up. For the 13 weeks to 29th December total UK sales were down 2.7%, with like-for-likes slipping 2.2%. This as comparable sales in the Clothing & Home division fell 2.4%, closely followed by a 2.2% decline in Food – especially disappointing given the reporting period covered the Christmas season.
As for Wednesday’s annual results, analysts are expecting pre-tax profit to tumble 10.7% to £519 million, against the £580.9 million managed the year previous. Of course, any comment on Ocado will be heavily scrutinised.
Marks & Spencer shares have a consensus rating of ‘Hold’ alongside an average target price of £2.75.
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