M&S beats City forecast but what about M&S shares?

Marks and Spencer (M&S) sales fell by 4.2% in the 13 weeks to March 28, but this fall beat the City forecast.

Even though sales fell, M&S shares rose some 10% on opening today and at the time of writing were slightly higher still.

Sir Stuart Rose, M&S executive chairman, said ‘The actions we have taken internally are beginning to have an effect, but I wouldn’t say the market has improved.’

Like for like food sales were down 3.7%, an improvement from the previous quarter.

The ‘Dine in for £10′ offer and the ‘Wise Buys’ range have no doubt helped limit the fall in food sales.

General merchandise sales fell by 4.8%.

Despite the better than expected performance, Nick Raynor, investment adviser at retail stockbroker The Share Centre, suggests shareholders may do well to reconsider their position.

Raynor also indicates new investors should avoid the retail sector for the time being, a view also referenced recently when considering Next shares.

Reasons for this negative stance on M&S and the retail sector by the Share Centre include

• limited overall M&S group sales increase of 1.9%, despite cutting prices on both food and clothing
• weakness of sterling against the US Dollar and Euro which will challenge M&S and other retail buying teams
• concerns over the maintenance of the M&S dividend policy post March.

The potential is for investors to do better elsewhere if it’s income and growth that’s wanted.

The big question on the retail sector remains as to how well it can do through the recession as customers are generally forced to reduce spending.

Of course the value of investments and the associated income can go down as well as up.

Investors should make their own judgements on shares, if in doubt seek independent financial advice.