The decline of the high street has been the major trend in the retail sector for the last decade and the industry was dealt another blow this week as the British Retail Consortium warned of more job losses and store closures.
The BRC said sales had contracted 2.7% in May as a result of ongoing political uncertainty, with chief executive Helen Dickinson warning that retail conditions were the toughest they had been in a decade.
In that light, is there anything to be said for investing in troubled high street retailer Marks and Spencer (LSE:MKS) shares right now?
Short sellers
Marks and Spencer has frequently appeared amongst the most shorted stocks in the UK in recent times, and has narrowly avoided the ignominy of being demoted from the UK’s primary stock index, the FTSE 100.
Having been a constituent of the index since 1984, M&S is now scrambling to save its status, helped by its call for an extra £601m in capital from shareholders as part of a joint venture with tech specialist/online retailer Ocado.
Full-year results released by M&S at the end of May did not make for good reading. Multiple store closures led to sales falling by 3% with underlying pre-tax profit declining 9.9% to £523.2m, hardly an encouraging sign to those looking out for hints that growth is around the corner. It also announced a further 20 store closures alongside the results.
It is no surprise that the M&S share price has fallen 16.5% in the last 12 months as investors flock to dump the stock.
So is there anything to suggest that M&S might actually represent a bit of value now with its share price plummeting?
Value buy?
CEO Steve Rowe has acknowledged the difficulties faced by the company since he took over in 2016, and has been keen to address the core issues it faces.
Performance in its clothing division has shown signs of life, albeit limited in comparison to its underperformance over an even lengthier period.
As has been referenced by Kevin Godbold recently however, its food division is swiftly shedding its reputation as a premium consumer option as other stores catch up in terms of quality.
Shareholders will be given the right to purchase shares at a discounted rate in order to fund the investment in Ocado, which some may see as representing further value on the current share price.
However, it is my belief that this deal and subsequent rights issue has a distinct whiff of desperation about it from a traditional retailer scurrying to latch on to new ideas from a more innovative company.
Previously I’ve written about how Ocado could be a bargain despite trading at all-time highs, and its sound strategy of embracing high-street retailers with its technology means that the venture could be more beneficial for it than for M&S.
I don’t see enough to suggest that the M&S share price has the ability to recover from recent woes, so I would avoid the stock as an investment for the foreseeable future.
