Marks & Spencer - never the same again? Chris Bailey reviews...

Tern – more disappearing auditor questions, and what of the new auditor? Is this a major Red Flag? Read from Nigel Somerville, the Deputy Sheriff of AIM, HERE

Confession time first. I do own some Marks & Spencer (MKS) shares…they are though right at the bottom of my SIPP and equate to approximately 0.2% of portfolio value. Clearly I should get rid or stick to my own rules of having no position smaller than 1% nor greater than 10% (hello Barrick Gold!). If truth be told, I have been considering whether I should quintuple (or more) my holding. Full year (to the end of March) results seem like a good chance to consider when I pull the trigger…to buy or sell...

Here’s a question for a dying industry – my own asks Tom Winnifrith HERE

I have been an M&S watcher for a while. All the turnaround hopes over the last decade or two kind of blur a bit into one and now an assertion that it is 'Securing the future...accelerating change' sounds like a combination of words it has said in slightly different ways a number of times before. I have also seen before the combination of metrics that include falling revenue, falling profit, lower free cash flow generation and a slashed dividend payment, as seen in this update. There are bits and bobs which are interesting to appraise but I kind of agree with the different emphasis of the company when it observes all this 'seems like ancient history as the trauma of the Covid crisis has galvanised our colleagues to secure the future of the business'. Simply put, the M&S investment case rests on whether the company survives in a material and cohesive way. So how is it looking for the 2020-21 period for M&S?

Motorpoint – “Operations Relaunch”… but already (more than?) priced-in? Reviewed HERE

Well its expectation for the four months to the end of July is for a 70% decline in its UK Clothing/Home revenues and a 20% decline at its UK Food business, after which an improvement, although very, very slowly in the former. You can see why it has got the cost cutting tools out, pushing capex:depreciation well below one, cancelling the final dividend and taking some impacts in terms of the cost of clothing cancellations/higher stocks. The company claims this will mean a 'limited' draw on its liquidity reserves and pacing through the numbers it is in no danger of keeling over shorter-term, even if the debt burden at the corporate level remains basically £4 billion (although over half of this is lease liabilities). The longer-term is a different story however. Everyone in retail has to acknowledge that we have seen five plus years of structural shifts towards e-commerce and related almost overnight and hence a focus on the value in freehold stores and legacy High Street locations plus a low commitment to selling through your website is a fast track to the ultimate corporate failure. At least the penny has finally dropped with the company's 'Never the Same Again' initiative. You do not need to be a McKinsey consultant to know that more flexible/smaller teams and a massive ramp-up in the use of technology is absolutely essential. By far the best thing the company has done in the last year is sign the Ocado JV for its food business. No surprise to see 'reported 9 weeks to 3 May was up 40.4%'. It is going to need so much more of this but it is a good start/statistic. M&S goes fully live later in the year, with 6,000 food retail products (more than what Waitrose had been offering) and up to 1,600 clothing/home options. It desperately needs this to work.

SIG offers longer term recovery potential if it can ride out the coming months considers Gary Newman HERE

So what price an EV of less than £6 billion (taking the most conservative view towards the debt line)? At £400 million odd profitability in the year to the end of March you can start to build a recovery case...but only in a naive extrapolated profit progress sort of way – it is not the reality. The profit split is already slightly in favour of the food business and this is massively going to continue. I am certain M&S would love to split its food business completely away from its Home/Clothing offerings and the Ocado deal and the convenience shops offer some growing differentiated scope…but it remains still an evolution and not a complete revolution due to the continuing importance of the legacy food sales in mixed retail stores offering. The 110 strong store closure programme continues apace naturally and M&S talks about 'negotiations with landlords on onerous leases' and 'accelerating proposals for development of large city centre stores on prime sites' as you would expect.

Feck Yu Group – unconvincing AGM piffle. Read more from the Deputy Sheriff of AIM, HERE

I have no idea where to pitch full year to March 2021 profitability. I can see a £200 million+ profitability food retail business but hand on heart I cannot see or say the same for the Home/Clothing division where the brand is tarnished to say the least, especially with younger demographics. So M&S remains - unsurprisingly - very messy. If it can cut the lease liabilities as well as drive the Ocado JV business there is a route out even from a share price that earlier this year hit a share price low as far as I can get my share charting provider to graph. Time to quintuple? Even though I do not think it is a complete write-off, not today, I would still consider names such as Next (NXT), Kingfisher (KGF) and Halfords (HFD) as more worthy of a retail punt if you want to have one. Maybe with more information, time and insights I might quintuple and this stops me from exiting stage left on my tiny position. It's never going to be the same again but the first step to recovery is to acknowledge the size of problem and at least M&S admits this now.

Do I pony up for more Whitbread stock? Read more from Chris Bailey HERE

Filed under: Marks & Spencer, Tern, Motorpoint, SIG, Yu Group, Whitbread, Chris Bailey

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09/25/2020

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09/24/2020

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09/23/2020

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09/22/2020

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09/21/2020

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09/17/2020

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09/02/2020

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09/01/2020

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08/28/2020

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08/27/2020

Golden Prospect Precious Metals - a buy?...

08/26/2020

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08/25/2020

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08/24/2020

Red Rock Resources - update potentially very significant says HotStockRockets...

08/21/2020

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08/20/2020

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08/19/2020

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08/18/2020

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08/17/2020

Pensana Rare Earths - emphasises woke nonsense but still further upside says HotStockRockets

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07/31/2020

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Novacyt - the desperate share-ramping continues says Tom Winnifrith

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07/24/2020

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ECR Minerals - a speculative buy? A review by HotStockRockets

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Burberry & ASOS - fashionista trading update face-off

07/16/2020

Fevertree - a Trading Statement lacking financial specifics… & a recovered £2.7 billion valuation

07/15/2020

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Red Rock Resources - spin-off potential, and more than one...

07/13/2020

KEFI Minerals - about to rip? The HotStockRockets team writes...

07/10/2020

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07/09/2020

Whitbread - why you should not worry about a -80% Q1 revenue move writes Chris Bailey...

07/08/2020

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07/07/2020

Highland Gold Mining - update on COVID-19 response, continuing as planned...

07/06/2020

DS Smith - respectfully Mr Market you are wrong says Chris Bailey...

07/03/2020

Pity us poor British taxpayers bailing out Versarien plc says Tom Winnifrith...

07/02/2020

Petra Diamonds - heading for a wipeout for equity holders? Gary Newman writes...

07/01/2020

easyJet - data breach is not in my top three worries and I own the shares says Chris Bailey...

06/30/2020

San Leon Energy - 2019 results & now about to capitalise on a strong position?

06/29/2020

KEFI Minerals - reduced Tulu Kapi project funding requirement, buy says HotStockRockets

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Cranswick - future FTSE-100 constituent? Chris Bailey reviews...

06/24/2020

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06/23/2020

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06/22/2020

Novacyt - corona update, this is all about executive greed and share ramping now says Tom Winnifrith

06/19/2020

Kingfisher sings a song of recovery... but can do so much more says Chris Bailey

06/18/2020

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06/17/2020

Metro Bank - potential acquisition two drunks propping each other up?...

06/16/2020

Cora Gold - a buy suggests HotStockRockets

06/15/2020

Hummingbird Resources - a diversified gold production buy?...

06/12/2020

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Avacta - its covid game soon to be up says Tom Winnifrith...

06/10/2020

Columbus Energy - another potential share price catalyst...

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Biffa - still brass in muck says Chris Bailey...

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Union Jack Oil - for a hat-trick of wins?...

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06/04/2020

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Big themes still at Playtech says Chris Bailey...

06/02/2020

Centamin, Ariana Resouces & Gold - was that the correction, in double-quick time?

06/01/2020

Asiamet - negotiations for deal on KSK helps shares, target increased...

05/29/2020

Bluebird Merchant Ventures - further project funding progress, increased price target...

05/28/2020

Burberry shares remain fashionable to me says Chris Bailey

05/27/2020

Imperial Brands - still an Income buy?

05/26/2020

Columbus Energy - project & funding update suggest still a buy?

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Marks & Spencer - never the same again? Chris Bailey reviews...

05/21/2020

OptiBiotix - sales trajectory sparks shares, but still an even stronger buy?...

05/20/2020

A whole sector that is a short?...

05/19/2020

Tri-Star Resources - sale of first Antimony BUT...

05/18/2020

KEFI Minerals - still significant upside offered by its asset base...

05/15/2020

OptiBiotix - now Taiwan agreement adds to confidence...

05/14/2020

Some gold and gold stock takeaways from Nigel Somerville...

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Another reality pill - this time for BT Group

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Hummingbird Resources - a buy says HotStockRockets...

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Goldplat - quarterly update, production getting back on track...

05/05/2020

The markets & sell NASDAQ-listed Credit Acceptance Corporation. From Lucian Miers...

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