From its humble beginnings as a Leeds market stall Marks and Spencer plc. (M&S) is today a leading British multinational retailer headquartered in Westminster, London. It specializes in the sale of clothes, household items and luxury food products.”When Michael Marks and Tom Spencer joined forces to create M&S in 1894, noteven they could have foreseen the global success story that was to unfold.””M&S values the loyalty and confidence of their customers above all else.
The values of Inspiration, Innovation, Integrity, and In Touch underpin the customer promise of ‘Enhancing Lives, Everyday’.”The brand presented its latest slogan, ‘Spend It Well’, as it praises the loyalty of its customers in a “new and innovative way”.When one views the performance of the company over the past year, in comparison to companies in the same industry, one can take note that Marks and Spencer is overvalued based on earnings and poor value based on expected growth of its clothing and household products sales. On the other hand, its price-earnings ratio is that of 46.
08 when compared to the industrial average of 18.18. This shows that investors are more confident in the company and that they are expecting higher earnings growth in the future.The increase in net profit margin and return on capital employed shows that the company has managed to increase sales from last year but the company isn’t performing strongly since it has had a decrease in return on equity. This means that the company didn’t manage to use its equity efficiently and has resulted in a decrease in profits.
Although there was a decrease in the debt to equity ratio, the company still has a high gearing ratio (61.41%). This can be seen as optimistic as the company has managed to decrease its debt which could also be the result of the recent change in the company’s management.Marks and Spencer has an annual dividend yield of 5.93% which is above the average market top dividend payers of 3.
98% and is expected to increase next year. The dividend cover is that of 0.31% which is alarming as this shows that dividends aren’t well covered by net profit after interest and tax. The interest cover has increased substantially which is why shareholders can keep expecting the dividends per share to increase.
The dividend is what is attracting more investors to the company as its share price has been decreasing.The earnings per share ratio decreased significantly by £0.18 which shows that the company is in a weak financial position and isn’t a reliable company to invest money in.These results are discouraging but the company attracts potential investors due its high dividend yield. This means that the company’s shares are mainly being bought to earn a dividend. Marks and Spencer is moving in the right path, slowly but surely, but shareholders should hold off from buying any shares in this company if they are expecting the share price to jump upwards.