Jumat, 08 Juni 2012

MARKET REPORT: M&S banking on high street war

MARKET REPORT: M&S banking on high street war

By Geoff Foster

PUBLISHED: 16:15 EST, 8 June 2012 | UPDATED: 16:15 EST, 8 June 2012

Marks Spencer might be one of Britain’s most trusted brands but its decision to compete head on with the high street banks could be a step too far.

Plans for 50 MS bank branches over the next two years offering current accounts and mortgages will certainly appeal to consumers disillusioned by the choice currently available. But whether it makes good commercial sense at a time when management need to focus on the core business remains to be seen.

Investors voted with their feet, sending the shares down 5.3p to 335.2p. When times are tough the judicious batten down the hatches and stick to what they do best and they grapple to get that right.

A step too far? MS decision to launch its own bank was not received well by investors, sending the shares down 5.3p to 335.2p

A step too far? MS decision to launch its own bank was not received well by investors, sending the shares down 5.3p to 335.2p

What seems to have also unnerved shareholders at the country’s biggest clothing retailer is a break-down of previously undisclosed market share data that was hidden away in its annual report.

While we knew that overall clothing share for the year had held flat at 11.7 per cent for the 52 weeks to April 15 we did not know its composition. In key womenswear Marks lost 50 percentage points of market share to 10.4 per cent but this was countered by a second year of good market share growth in menswear.

It saw an increase of 60 basis points to 12.1 per cent while both kidswear and pants and bras saw gains of 20 basis points to 6.8 per cent and 27.4 per cent respectively. The problem is the flat headline figure masks what could be a worrying underlying problem in womenswear.

Bethany Hocking, an analyst at broker Investec, said: ‘Although the share gain in menswear is a good development, the decline in womenswear is more significant in our view. Women are typically the main household shoppers and thus womenswear share movements can be leading indicators.’

What has caused most concern is the way the issue has been brushed over. ‘We would be less concerned if the recent preliminary results meeting had discussed womenswear and steps being taken to address the decline,’ said Hocking.

‘But it was barely mentioned. We continue to think that MS has a number of company-specific issues, including the womens’ offer.’

What is also worrying is recent unconfirmed trading figures for the first seven weeks of the first quarter showing underlying sales down 11 per cent in general merchandise with womenswear down 19 per cent.

While much of the fall can be chalked up to the April washout these figures are very weak. The retailer was not alone as investors took profits across the market.

The Footsie index of leading stocks reversed a two-day rebound to close down 20.32 points at 5427.47 as the true impact of Ben Bernanke’s testimony to Congress on Thursday sunk in.

Investors had hoped he might offer some further commitment to stimulus measures in the hope it would kick start growth in the world’s biggest economy. But this, and further gloom surrounding the state of Spain’s economy, knocked confidence.

Fitch cut the credit rating of the eurozone’s fourth biggest economy by three notches and estimated the cost of bailing out its banks is likely to be around £48.6billion. This hit the banks hard. Barclays led the way down 2.5p at 190.35p followed by Royal Bank of Scotland down 1.40p to 223p while HSBC was also down 3.6p to 531.4p.

The miners also reversed Thursday’s gains on concerns that a worsening global economy will lead to lower demand for metals. Many had risen some days before on hopes of new global monetary easing policies to combat the effects of the Spanish and Greek debt crises.

But it was a different story yesterday as shares in Rio Tinto fell 146p to 2869p along with BHP Billiton down 53p to 1767p. Xstrata was also hit falling 7.7p to 959.1p.

Elsewhere GlaxoSmithKline (up 14p to 1444p) extended its £1.6billion hostile offer to buy Human Genome Sciences until the end of June, giving Britain’s biggest drugs company more time to win over its long-term partner’s reluctant management.

The tender offer price of $13 has remained unchanged but GSK is thought to be preparing an attempt to replace the HGS board with its own nominees who would presumably look more favourably on the deal.

HGS says the bid undervalues the business, which has worked with GSK to develop Benlysta, a new treatment for autoimmune condition Lupus. Traffic warden gang master Capita was up 18p to 649.5p after winning a new contract worth £154million in terms of revenue.

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