MKS Future Prospects

[PrefInvestor]

Hi All, Well I applaud MKS strategic move in acquiring the Ocado stake, which gives them a proven online capability that can deliver at scale. If they can keep the existing Ocado customer base, which must be in doubt given their affinity to Waitrose…..?

Building their successful Food offering clearly makes sense, but it has always been a niche offering rather than a serious competitor in the groceries market. There are a large number of strong players in that market including Tesco, Sainsbury’s, Asda and the discounters Aldi and Lidl. And Amazon’s Whole Food offering is coming…. MKS will have serious competition trying to grow their market share, especially when relatively few customers consider MKS as the supermarket of choice for their main shopping trip from what I have read.

On the clothing front they are dead in the water IMHO. Quality has gone to pot and my wife and her friends (their prime customer base I reckon) all report vocally that they can’t find anything they want to buy in their stores. Been like that for years now, how many things have they tried – but it’s just getting worse IMHO.

Just as well they going more online, every time I visit our high street I find that more shops have closed. Soon all be coffee shops and convenience stores I reckon.

Still a fairly good yield though for any HYPers out there I guess, but personally I’d be worried about a continuation in the fall of the share price.

I am not alone in having my doubts, see article below:-

https://www.proactiveinvestors.co.uk/co ... 20784.html

Personally not invested here (or in any retailers) and have no plans to change that.

Good luck to all holders, especially those taking up their rights.

ATB

Pref

Moderator Message:
Moved here from Investment Strategies. - Chris

[Alaric]

especially when relatively few customers consider MKS as the supermarket of choice for their main shopping trip from what I have read.

Asda, Tesco, Sainsbury's and Morrison's for a shop where you expect to find your complete shopping list in one store. Waitrose as well provided you have expensive rather than down-market tastes. Lidl, Aldi, M&S for a shop where you might expect to have to top up somewhere else. Lidl and Aldi will be quite a bit cheaper, even if you select their premium ranges, which can be lookalikes of M&S.

[dealtn]

Yet despite all the woes it continues to spit out approximately half a billion pounds a year of free cash flow, about the same as for the last 4 years. Not too shabby for a company whose equity is worth less than £4bn.

[PrefInvestor]

Yet despite all the woes it continues to spit out approximately half a billion pounds a year of free cash flow, about the same as for the last 4 years. Not too shabby for a company whose equity is worth less than £4bn.

Well if I were a holder the only thing I'd be spitting out would be the dummy given this share price performance
Down ~15% in 1 month
Down ~18% in 6 months
Down ~20% in 1 Year
Down ~50% in 5 Years

Dividend payments certainly no replacement for loss of capital over that time period. And a competitive and uncertain future IMV.

Good luck to all holders. I really hope the Ocado move makes a difference.

ATB

Pref

[Bouleversee]

Not having bought any clothes I couldn't pick up locally (which doesn't amount to much) for some years and feeling in need of a change, I thought I would have a look at the M&S website before visiting the nearest store which is some way distant. I'm glad, because I would have been wasting my time and petrol. There was absolutely nothing I would consider wearing and I really wonder what market they think they are catering for. My husband and I used to buy quite a lot of our clothes from M&S and I still have some very attractive items of excellent quality in my wardrobe. The style and quality today is just not comparable with earlier years and I have to say that if I had looked at that website before taking up my rights issue, I would not have done so.

I read that the person in charge of clothing and home had been shown the door and that Steve Rowe, CEO, "would be taking over the leadership of the business". This is what he said about the Man. Dir. who was leaving: "Jill was brought in to establish a strong platform for the transformation of the Clothing and Home business. She has achieved that; she leaves with my thanks and good wishes for the future. She has recruited a talented team, improved the quality and style of product and set a clear direction for the business to attract a younger family age customer. The business now needs to move on at pace to address long-standing issues in our Clothing and Home supply chain around availability and flow of product. Given the importance of this task to M&S I will be overseeing this programme directly."

It would seem he doesn't realise that by trying (and failing) to attract the youngsters who flock to Primark, he is losing his mature clientele who are the ones with the money and taste and are simply no longer provided for. I didn't manage to get to the AGM but would love to know whether Steve Rowe was a type to know what such people would be looking for, which isn't sweaters which pill before they are even washed and the boring, poor quality items shown on their website. If he doesn't or doesn't appoint someone who does, God help the shareholders.

[PrefInvestor]

Couldnt help but notice in passing today whilst scanning the FTSE that the MKS closing price on Friday (9/8) was 187.x pretty much the rights issue price which at the time it was announced on 22/5 was at a 30% discount to the share price. Cant say that I am terribly surprised personally and I doubt that many who took up their rights will be feeling happy about it either.

Pref

PS We bought some fruit there the other day, but clothes - no.

[Bouleversee]

IIRC their own broker was saying a week or so ago that they didn't think the tie-up with Ocado was a good idea, which is rather depressing.

[PinkDalek]

It was a good idea, years ago!

[UncleEbenezer]

Since noone else admits to it, let me put my hand up. I'm an M&S clothes customer.

In fact I'm sure I've bought more there than anywhere else in the last couple of years. Not that my usual annual spend on clothes would hit the £100 milestone, excluding what I'd buy (some years) in an 'outdoor' shop instead.

Why? Well, for a start I avoid any of those retailers that assault your ears with a gross insult to music. Or the likes of Debenhams where you run the gauntlet of a stinks (and warpaint) department on entry and exit. Mostly I go to M&S when I give up on finding anything comfortable at Primark - the other big chain that isn't too unpleasant an ordeal since the much-lamented C&A departed our high streets. But also when I needed a formal black shirt last year, M&S seemed the obvious place.

[PrefInvestor]

Since noone else admits to it, let me put my hand up. I'm an M&S clothes customer.

Hi UncleEbenezer, Well I can also.own up to buying the odd pair of socks and underpants in the last year, though only when they were offering 20% off with my wife’s Sparks card, probably more like £50 worth over the year. Can’t see how that’s going to sustain the clothing side of the business!. My wife would happily spend more, we go into the store quite regularly, she looks at their stuff and comes away with nothing - just frustrated. They just dont seem to have the right styles or sizes, it’s been like that a long time now.

The recent department store innovation of distributing the same items all around the shop (so that you have to go round and look at everything) doesn’t help either. When she goes into the shop she knows she is looking for a dress, trousers or a skirt etc. and time was all of those items were put together so that you could easily see everything that was available. Now you have to traipse around every part of the shop where there are women’s clothes, making things far more difficult and time consuming !. But MKS are not alone in this practice which is sadly now prevalent. Is it any wonder that people just shop online now where they can see everything easily and order the right size (rather than find that the store doesn’t have it).

Clothing retail is generally in a bad way IMHO.

ATB

Pref

[Bouleversee]

Now below the rights price but admittedly pretty well everything is down at the moment.

[scrumpyjack]

We haven't shopped there in decades. the quality of the clothes is abysmal. In my youth it was all decent cotton, but then they moved to all the clothes being plastic (polyester, nylon etc) which I wouldn't touch with a bargepole. It's crazy as the gross margin on clothing is huge so you might as well sell clothes made of high quality materials is you are selling from a prime High St location. They haven't and they've lost their business. Does not surprise me one bit.

I have never owned the shares.

[vrdiver]

I will admit we do pop in occasionally, but nothing happens to frighten the wallet moths as (usually) there is nothing of particular interest available that I want or that Mrs VRD would wear.

I did buy some MKS shares back in 2009 (Oct) at £3.62 (costs included) but gave up on them in March 2018, selling at £2.86. Including dividends, that gave me an annual return of 2.7%, which didn't look like it was going to improve any time soon, both because of the M&S approach and my views on the health of the High Street in general.

I normally don't sell my (HYP) shares, preferring to let time heal any problems, but this one just didn't look good, and that's from somebody who held Carillion to the bitter end!

VRD

[PrefInvestor]

I normally don't sell my (HYP) shares, preferring to let time heal any problems, but this one just didn't look good, and that's from somebody who held Carillion to the bitter end!

Hi VRD, Not a flattering comparison that one I must say. Anyway glad to hear that you managed to edit MKS with a plus score, I suspect that there will be many other holders out there who are significantly underwater now and wish that they had exited earlier. Not that capital losses are supposed to concern a HYPer as long as the dividends keep coming !.

Personally I think that while time does heal problems in some companies in others it just compounds the problem. Take Centrica for example, 400p in 2013 and gone pretty well straight downhill to be 65p today, no amount of dividends can compensate for that IMV. And that’s not an isolated case is it, consider VOD, RMG and BT all in a bad way.

I freely admit that I am no HYPer, any investment of mine that gets over 10% down in total return terms and I’m out (well unless the whole market has fallen that is...) I think it’s the only way to avoid such disasters, mind you I mainly invest in only investment trusts and ETFS these days to avoid single stock vulnerabilities.

ATB

Pref