Harvey Jones sizes up Marks & Spencer (LSE: MKS).
It's time to go shopping for shares again, but where to start? Motor insurance warship Admiral Group (LSE: ADM)? Pipeline prince National Grid (LSE: NG)? Or major oil major Royal Dutch Shell (LSE: RDSB)?
There are loads of great stocks to choose from, and I've got my wallet out. So here's the question I'm asking right now. Should I buy Marks & Spencer (LSE: MKS)?
Far from saintly Michael
Personally, I've never really bought into Marks & Spencer clothing. When I was young, I considered its clothes drab and uncool. Now I'm in my mid-forties, I still feel the same way, and I find its stores drab and uncool as well. I don't even buy cheap socks there any more. M&S food halls are a different matter. I must have eaten thousands of M&S sandwiches in my time, and there's room for more. But should I tuck into its shares?
Don't bank on this
Marks & Spencer is a little like that other long-standing UK institution, the BBC. They're both a bit auntie-ish, and although we wouldn't want to lose them, we like grumbling about them. Marks & Spencer has drawn flak for its recent "real women" advertising campaign, which was supposed to show normal women sporting its underwear, but in time-honoured fashion industry style, accidentally substituted them with skinny supermodels. I'm equally unconvinced by its new Premium Current Account, which carries a hefty fee of £20 a month. M&S claims benefits such as worldwide travel insurance, M&S shopping vouchers, loyalty points and a 6% savings account are worth more than £500 a year, but that's only if you use them all. Packaged bank accounts are all news anyway. Like other recent entrants, such as Metro and Virgin, I don't see M&S breaking the banking mould, especially when you discover that M&S Bank is a wholly owned subsidiary of HSBC (LSE: HSBA).
Mark my words
Food aside, my worry about Marks & Spencer is this: what's the point of it? If you want cheap, cool fashion, Primark does it better. Even people in their 30s and 40s dress like teens these days, which again, rules out M&S. That leaves a relatively older demographic, who tend not to spend as much. And why would they, in such a dreary environment? Last time I blundered into M&S clothing, I had to check it wasn't a charity shop. Recent bleak sales updates suggest I'm not the only one who feels this way.
A sandwich short of a buy
Marks & Spencer has spent years trying to pull off one of the hardest tricks of all -- buffing up its image to attract new customers, while clinging onto the old ones. It has subjected itself to fashion makeover after makeover, but still hasn't succeeded. At £3.94, its share price remains 50% lower than before the financial crisis, although it did rebound in recent months, on talk of a private equity-backed takeover. I've absolutely no idea whether there will be a bid, but I would ask this question: if you had £6 billion, would you spend it in Marks? Trading on a 4.3% yield, covered 2.1 times, the stock may still tempt income seekers. You can buy it on a modest forecast price-to-earnings ratio of 10.9 times earnings, but personally, I won't. I'll stick to the sandwiches.
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> Harvey owns shares in Royal Dutch Shell. He doesn't own any other shares mentioned in this article.