More on Marks & Spencer
Marks & Spencer: 2005/6 results
Strong sales growth in the second half and margin improvement throughout the year meant that this was the year in which Marks & Spencer recovered. Despite the impressive second half performance most of the recovery is now behind us and profit growth is likely to be slower (but still strong) this year.
M & S’s buying strategy also seems to be working. Despite the price competitiveness of both its main businesses (clothing and food) gross margin improved to 42.8% from 39.2%.
As before food remains faster growing, with like-for-like sales growth of 4.5% and total (with expansion) growth of 8.2%. Food has outperformed clothing fairly consistently though Marks & Spencer’s troubles and it has more room for expansion.
At 549p Marks & Spencer is trading on a prospective PE of 15× with a 2.6% yield. This is reasonable against the sector for better than sector EPS growth, but given that growth is likely to drop to more normal levels after this year this we do not expect out-performance.
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