When Marks & Spencer (LSE: MKS) shares fell from the FTSE 100 in September 2019, it felt like the end of an era. At that time, I stopped writing about stocks. I loved its food halls like everyone else. But, I lost patience with the arm of clothes that could not restore the lost splendor. Unfortunately, that meant missing out on one of the most surprising acquisitions in the UK market.
In five years, Marks & Spencer’s share price has risen 182%, putting it back on the FTSE 100. Much of that turnaround is under chief executive Stuart Machin. He took office in 2022 after a previous diet. On his watch, M&S sharpened its focus, improved its product range, tightened costs, and restored credibility to investors.
Its revamped food business continues to gain traction in the market, while its clothing and home operations have also seen significant improvements. The group cut costs and closed underperforming sites. It also invested heavily in data and internet capabilities, and moved forward with logistics automation.
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This top FTSE stock is back
Last year’s cyber attacks are expected to hit £300m or more of operating profit by 2025/26. However, shares are still up 13% over the year. This is because of the big explosion last month. They rose by 9.8% in February, which would have changed £10k to £10,980. Not bad for a few weeks work.
Food vendors generally had a good month. Tesco shares jumped 16% as well Places to stay in Sainsbury up 8%, helped by lower grocery prices. This gives buyers more breathing room and supported margins as well.
This followed a strong Christmas, with like-for-like food sales up 5.6% in the 13 weeks to 27 December, hitting £2.72bn. Its a 50:50 joint venture with Ocado Sales are flying. Sales increased by 13.7% during that period, and sales of the M&S label on the platform are rising at the fastest pace.
Low yield, good balance
The board is investing heavily in its future, modernizing its catering network, continuing its store refurbishment programme, and planning hundreds of new or refurbished food outlets under the Simply Food banner. Valuations don’t look stretched, with a price-to-earnings ratio of 12.5.
However, consumers are still struggling. And higher employers’ national insurance contributions and two cuts to inflation-busting wage increases have pushed up costs, pressuring rates. Total debt has fallen in recent months, although it remains modest when lease debt is excluded.
So where do stocks go next? Analyst forecasts yield a one-year price target of 430p. If correct, this is up just 9% from today, and a potential yield of 1.1%. That suggests a potential total return of more than 10%, which is pretty good fare. Of course, predictions can’t be relied upon, and many of these will be ahead of February stock prices.
IM&S has had a good run and others may be tempted. But I think I can find some exciting growth news in the FTSE 100 today, and a very nice yield.
