Can Marks & Spencer catch the retail reopening tailwind?


Next PLC‘s upbeat trading statement caught the market on the hop and not be just because it came out two weeks earlier than expected.

The numbers were way ahead of even the most bullish forecast, possibly because in all of the noise surrounding Covid-19 investors have not been paying enough attention to what has been happening on the high street, both on and offline.

Next put the bumper numbers down to a combination of pent-up demand, warm weather from May onwards, fewer holidays and people just having more money after being locked down for so long, but other forces may be at work.

Rivals have been falling like ninepins during the pandemic. Debenhams and Arcadia have collapsed while Gap is closing all of its UK outlets and H&M is retrenching across the globe.

But it’s not just Next seeing the benefit of reduced competition, recently Primark UK reported “very strong increases” in like-for-like sales in the period to June over a two-year comparison while ASOS UK reported growth of 58%.

Marks & Spencer plan is credible and coherent, City broker says

Broker Berenberg said it would expect both to outperform Next’s respective store and online businesses, but such performance is indicative of the buoyant trading conditions currently and, if anything, City folk are still underestimating the strength of the current trends.

So who might be the next to catch this tailwind and could it possibly be venerable underperformer Marks & Spencer PLC (LON:MKS).

Chief executive Steve Rowe has already earned plaudits for a new online-focused strategy to revive its clothing and home business that was revealed in May.

M&S is targeting 40% of C&H revenue to be from e-commerce in three years, with Rowe telling reporters it could even reach 50%.

He added the company is being prudent in reviewing the store estate and plans to have 180 full-line stores, down from 254 at the end of February.

Of these, 100 will be flagships, while 80 stores will be called ‘core’, adding 15 on the present 65 outlets, while around 110 sites will see a ‘rotation’.

What would do these plans no harm at all would be a bit of breathing space and better than expected numbers from a mini-reopening shopping boom.

Marks’ share price jumped 4.5% today to 137.4p seemingly on the back of the Next figures, so it seems others might also be thinking that this current retail tide will lift all boats including M&S.


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