M&S is a ‘buy’ after general merchandise shake-up

Otmane El Rhazi from Mindful Money » Shares.

High-street retail stalwart Marks & Spencer may benefit from the departure of head of general merchandise, making it a ‘buy’ for investors.

 

Marks & Spencer head of general merchandise John Dixon is to be replaced by Steve Row following repeated failures to improve sales, particularly in the womenswear section. Although the company saw small improvements in general merchandise over the last year, the most recent trading update show like-for-like sales fell 0.4%.

 

The Share Centre investment research analyst Helal Miah said hopes were now pinned on Rowe.

 

‘If his successor, Steve Rowe, can finally reach the potential of increased profitability in general merchandise, this could be positive news for investors,’ he said.

 

‘He has been with M&S for over 26 years and therefore brings significant internal knowledge to the role. We continue to recommend M&S as a ‘buy’ due to the strength of the growing food business, rising disposable incomes and healthy dividend.’

 

He added that lower oil prices and rising disposable incomes, alongside a growing UK economy, should all help.

 

‘The 2016 price/earnings ratio of 15.7x is slightly lower than the group’s peers, and the dividend is forecast to return to steady growth after remaining static for a number of years,’ said Miah.

 

‘The prospective dividend yield of 3.3% is better than average for the market, the dividend is well covered and forecast to grow above inflation over the next few years.’