Are Marks and Spencer Shares A Buy?

Published: 10 January 2012 By Julian Stone Leave a Comment

Marks and Spencer UK sales over the Christmas period were helped by strong food sales and despite weaker margins expects full year profit forecasts to remain unchanged. Should investors ‘buy’ Marks and Spencer shares?

Marks and Spencer share priceThe Marks and Spencer home division saw a slump in  sales of 13.3%, put down to no longer selling technology products.

Clothing performed well, up 1.1%, and as Marc Bolland, chief executive said: “In clothing our focus was of offering our customers real value at a time when they’re managing their budgets carefully. Our trading strategy worked well, delivering a record performance in many categories including menswear and sleepwear.”

International sales rose by 8.1% and online shopping sales were up 22.4%, heavily supported by the introduction of the online Food to Order service.

Sheridan Admans, investment research manager at The Share Centre, explains what this M&S trading statement means for investors: ”

“Concerns over disposable income expenditure remain and consumers are seeking discounts. This has had a negative impact on profits and resulted in the retailer expecting weaker margins for the full year. Despite this, full year profit forecasts remain unchanged as Marks and Spencer believe the effect of discounts on profits will be offset by cost savings elsewhere.

“We continue to recommend investors that are comfortable taking a contrarian view on this cyclical stock to ‘buy’ Marks and Spencer. The retailer continues to look at ways to reduce costs, whilst remaining competitive in these challenging economic conditions.

It also aims to expand its overseas operations, so over time it can diversify its reliance on the UK consumer. In addition Marks and Spencer has a strong reputation in the UK for high quality produce at good value.

This reputation should pay dividends in a time of austerity, when people will be more conscious of their discretionary spending.”

M&S shares have risen since the trading statement was released and at the time of writing the M&S share price was 318.00p, up just over 3%.

Investors should of course make their own judgements on buying or selling shares and if in doubt seek independent financial advice.

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