The price of Marks and Spencer shares could ever return to 700p?

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The relatively new management team at Marks and Spencer & nbsp; (LSE: MKS) has abandoned the quarterly results, asking investors to focus instead on the long run. This is admirable and something with which Warren Buffett, the most famous investor in the world, is in agreement. The problem is that, in the case of M & amp; S, looking long-term – at least in the rear-view mirror – you get a really sad picture. "Data-reactid =" 22 "> The relatively new management team of Marks and Spencer (LSE: MKS) has abandoned the quarterly results, asking investors to focus instead on the long term. This is admirable and something with which Warren Buffett, the most famous investor in the world, is in agreement. The trouble is that, in the case of M & S, looking long-term – at least in the rearview mirror – creates a really gloomy picture.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " FTSE 100 & nbsp;The shares of the company are currently trading at just over 300 percentage points, a level reached for the first time in 1992. Of course, there have been dividends along the way (and cuts) but a quarter-century factor of inflation and calculate the real yield in the period as somewhere around zero. "data-reactid =" 23 "> The FTSE 100 The shares of the company are currently trading at just over 300 percentage points, a level reached for the first time in 1992. Of course, there have been dividends along the way (and cuts) but a quarter-century factor of inflation and calculate the real yield in the period as somewhere around zero.

There were spells when it seemed that M & S's business could thrive again and the odds rose accordingly (comfortably above 700p at a peak in 2007), and then back when the recovery faded. The big question today, certainly for investors who have a long-term vision, is the following: can the ultimate management team of the company guarantee sustainable growth in the business and a return of shareholders? Or is M & S simply too structurally challenged?

Reconstruction of foundations

The veteran of the company Steve Rowe assumed the role of chief executive in April 2016. He has the advantage of new perspectives from external appointments in the form of the president Archie Norman (joined in September 2017) and of the financial director Humphrey Singer (entered in July 2018).

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "M & amp; S & # 39; s half-year results this week has only served to underline the scope of the task of transformation that awaits us. The company said that in "Reconstructing the foundations of the future M & amp; S" & nbsp;it had already been reorganized "In the biggest change in our structure for decades" & nbsp;and that "ismuch of our ranges, the way we trade, our supply chain and marketing are under control and change. ""data-reactid =" 27 "> The half-year results of M & S this week have only served to underline the scope of the transformation task that awaits us. "Reconstructing the foundations of the future M & S" it had already been reorganized "In the biggest change in our structure for decades" and that "ismuch of our ranges, the way we trade, our supply chain and marketing are under control and change. "

Smarter than the predecessors?

In trying to get M & S on a path to sustainable growth, former managing director Marc Bolland has accumulated around £ 3.8 billion of investment over six years, an average of £ 626 million a year. In the first two and a half years of Steve Rowe, the average annual expenditure was only £ 296 million. Given that current management has implicitly accused past management of insufficient investments in a number of sectors, presumably it believes it can invest much less but much smarter than its predecessors. This is one of the many things that I think can turn out to be overly optimistic.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Another of the risks I see is that M & amp; The closure program of the S store may require to be more extensive (and expensive) than it is currently expected with an aging customer base leaving each year for the large clothing emporium and food canteen in heaven, the company badly needs to have younger generations in its stores and clicking on its website. On the second front, online sales of clothing and home in the region of 6% compare unfavorably with growth online clothing and home Next & nbsp;(17%) and even the disaster that is Debenhams (16%). "Data-reactid =" 30 "> Another of the risks I see is that the closing program of M & S stores could be more extensive (and expensive) than it is currently expected, every year for Great Clothing Emporio and The Food Hall in the sky, the company badly needs to entice younger generations into its stores and clicking on its website. On the second front, online sales of clothing and home in the region of 6% are unfavorably compared with online growth at apparel and home retailer The next (17%) and also the disaster that is Debenhams (16%).

Not convinced

It is possible that M & S shares can rise from their current level on any signs of progress in the business turnaround. However, after the past disappointments, I do not think we will see 700p again quickly. In fact, I am not convinced that M & S can ever offer sustainable long-term growth. And as I also see a significant downside risk, because of the factors I've discussed, it's a title I'm avoiding.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "More reading"data-reactid =" 33 ">More reading

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "G A Chester has no position in any of the actions mentioned. Motley Fool UK has no position in any of the actions mentioned. The opinions expressed on the companies mentioned in this article are those of the writer and may therefore differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that taking into consideration a wide range of insights we better investors."data-reactid =" 41 ">G A Chester has no position in any of the actions mentioned. Motley Fool UK has no position in any of the actions mentioned. The opinions expressed on the companies mentioned in this article are those of the writer and may therefore differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that taking into consideration a diverse range of insights make us better investors.

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