The Marks & Spencer (LSE: MKS) share price is up 10% as I write, on 8 November.
It’s all about first-half results. But the shares have already doubled in the past 12 months.
How soon could M&S regain its losses of the past five years? Well, we’re only looking at a 16% deficit now.
High street improvement
I took notice when I saw the new premises my local M&S has moved into. Gone is the old Grace Brothers lookalike, and in its place a slick modern store on just two levels.
Oh, and it was busy. And I saw young people in there.
Marks & Spencer has always done fine with its food offerings. But it perpetually failed to get enough people to buy its clothes.
But it does look like that’s changing.
First half
Let’s get the tough bit out of the way. We saw a £23.4m loss from the joint venture with Ocado this time, compared to just £0.7m in the first half of 2022.
The update did point out that “Ocado Retail is in the early stages of restoring direction and profitability.“
The M&S board now reckons it could take at least three more years to turn it round. Hmm. Ever since its launch, the good days at Ocado have been… somewhere just over the horizon, there in the distance.
It sounds like there’s some way to go yet.
Positive news
Still, the rest of the H1 update looks good.
Pre-tax profit came in at £325.6m, way up on the £208.5m of a year ago.
We saw a big boost from a 14.7% rise in food sales. But the other side of the M&S coin, Clothing and Home, looks like it came up heads too. Sales rose 5.7%, with adjusted operating profit up 30%.
And in exciting news, M&S is to pay its first dividend since 2019. It’s only 1p per share for the half, but it looks like a sign of confidence.
Buy M&S shares?
The big question is, do I rate the stock a buy now? Well, I’m cautiously optimistic.
Despite the big gains in the Marks & Spencer share price of the past year, we still see forecast price-to-earnings (P/E) ratios of only around 10 or so in the next few years. It’s a bit early to judge the dividend yield yet.
I’ve learned one thing from the pandemic days. Investing in high-street retail is risky, and could face a lot of challenges.
That means I want a good safety margin built into share prices before I’d consider buying. With Marks, I think we might still have that.
The future
In focusing on its key product areas of food and clothing, I reckon the firm is possibly in two of the long-term safest bricks-and-mortar retail areas.
There’s been a backlash against the try-and-return approach of online fashion sellers of late. And when it come to food, particularly fresh food, there’ll surely always be a strong see-before-you-buy market.
I think the Marks & Spencer share price could climb further in the next few years.
