James Gard: Welcome to Morningstar. Our latest stock of the week is Marks & Spencer. The retailer was back in profit to the year to the end of April after a loss of previous year after multiple lockdowns affected store sales.
In terms of highlights, food sales were up, cash flow was up, and debt was down. Like many other retailers, Marks & Spencer has put out an inflation warning. M&S says some of the increased costs will be passed on to customers and higher inflation also means shoppers are likely to rein in their spending this year, and that will affect profits in this financial year.
There are other big takeaways from the results too. M&S is shifting its focus away from the High Street and towards online sales and out of town locations, in line with changing consumer habits since the pandemic. To that end, it's closing 100 stores this year and increasing investment in its partnership with online grocer, Ocado. Investors have been hanging their hopes on the M&S turnaround story for many years now. Shares are up 200% since the pandemic lows, but they are off since the start of 2022. That leaves the shares undervalued according to Morningstar analyst, Ioannis Pontikis.
For Morningstar, I'm James Gard.