Marks & Spencer's (MAKSY) latest restructuring plan -- which will see it move away from its traditional clothing sales to focus on food -- has raised investor concern that the British retailing icon is headed in the wrong direction.
M&S, as it is known in the U.K., unveiled a five-year, £350 million overhaul that will see the closure of 60 clothing and home stores, the retailer announced in its first-half results released Monday. It will also "reposition" around 25% of its clothing and home space stores and increase the number of its 'Simply Food' branded stores.
The strategy overshadowed a decent, if not spectacularly, third quarter release that had M&S beating street estimates for net profit despite flat revenue growth. Shares in group fell as much as 1.9% to 342.6 pence each in London trading and were the second-biggest decliner on the benchmark FTSE 100.
Year-to-date, M&S stock has lost nearly 25% of its value, but appears to have stabilized somewhat over the past three months, falling only 1.2% against a 4.4% decline for the FTSE 350 General Retailers Index.
"Given our bearish view on U.K. consumer confidence and future clothing spend we hope that M&S' five -year recovery strategy will be a case of 'two steps forward, one step back' but fear it may be 'one step forward, two steps back'," analysts from Jefferies said in a client note.
That said, the logic behind the shift in focus is easy to understand: same-store sales for food in the first half of the year fell 0.9% compared to a 5.9% plunge in clothing and home.