Receiving the nod from the LSE on Wednesday morning, Marks and Spencer Group PLC (LSE:MKS) will once again be a FTSE 100 company, having spent four years relegated to the lower league FTSE 250.
Fashion retailers have been rocked in the past few months, most recently seen through the struggles at US company Dick’s Sporting Goods, which issued a profit warning after shoplifting and subdued sales ate away at margins.
Susannah Streeter at Hargreaves Lansdown said: “Marks and Spencer is in play for a promotion back to the big league, after scoring a succession of wins by upgrading its profit forecast and unveiling strong sales growth in the first 19 weeks of its financial year, with its turnaround strategy paying off.”
Shopping Success Source: Theindustry.fashion
Strong stock selection, a renewed focus on price as well as shrinking its estate have all proved vital in its fight for promotion back into the big league, Streeter claims.
“Promotion back into the topflight would be a coup for chief executive Steve Machin and co-CEO Katie Bickerstaff. But there are challenges ahead, with the longer-term outlook for retail hard to map,” she added.
Seamlessly transitioning to a more digital approach through the implementation of a click-and-collect scheme, bolstering its website and improving offerings on its app, the company has been able to close the online gap to e-commerce pioneers like Asos and Boohoo, although the group's technology boss stepping down may prove a slight headwind.
M&S’s promotion fight
Consumers' down-trading and Covid led to four years of yo-yo-ing profit growth at the retailer, with last year’s earnings still dropping despite it representing the first full year unaffected by pandemic regulation.
There were also problems that were largely or partially self-made.
“It’s difficult, M&S normally sell premium price products, its website wasn’t doing everything you’d like it to do and it didn’t really get its hand around the clothing business,” Russ Mould, investment director at AJ Bell, told Proactive.
One FTSE promotion later and the group’s share price is up more than 135% since its 2020 lows.
Mould believes some astute appointments to its home and clothing division, some of which were brought in from the collapsed Arcadia Group, have been a driving force in these changes.
“They've clearly been well trained with an awful lot of common sense and skill, which they're bringing to M&S, with enormous benefits to them,” Mould added.