The Marks & Spencer share price is down 12% in the last month. Would I buy?

The stats prove that retailer Marks & Spencer (LSE: MKS) was one of the worst performing shares of 2019. The shares fell by 20% last year, when the FTSE 250 of which it’s now a part moved strongly in the opposite direction. This shows that investors have serious concerns about the group, and understandably so.

Poor sales continue

It’s unlikely the share price will revive any time soon. Sales over Christmas were hampered by poor stock management, with Marks & Spencer stocking skinny jeans and the wrong sizes. It’s far from the first time M&S has had these types of issues. It didn’t have enough stock to meet demand for a range promoted by Holly Willoughby, leading to CEO Steve Rowe describing the stock levels as the worst “I have ever seen in my life”.

During the recent third quarter, the troubled clothing & home division suffered a 3.7% drop in total revenue, while the unit’s like-for-like revenue slumped 1.7%.

This gloomy picture follows full-year results to March 30 that showed M&S’s overall profit before tax declined for the third straight year, dropping 9.9% year-on-year to £523.2m. Group revenues also dropped 3% to £10.37bn. This included a 1.8% decline in UK sales, with clothing & home like-for-like sales down by 1.6%.

Clearly M&S is struggling to grow as it battles unsuccessfully to attract and retain new loyal shoppers and react to the decline of the high street. It’s a long time since investors have had any hope of seeing annual growth at the retailer. Although there is one part of the business that is doing better. 

Food is the lifesaver 

While clothing is letting the side down, food is doing better. Like-for-like revenue growth in the third quarter was 1.4% in the division, which led to a 0.2% increase overall in group UK like-for-like revenue.

Although profitability was hit by higher wastage and  profit margins will be at the bottom end of analysts’ expectations, some are reasonably upbeat.

“In a tough market, these figures signal a much-improved performance from the retailer and could signal the green shoots of recovery in the ongoing transformation of the business,” said Retail Economics chief executive Richard Lim.

Yet while food may be a silver lining, this is just a single quarter of sales and isn’t on its own necessarily a sign of better things to come. I think even with a P/E under eight, the shares are still too risky to buy. M&S has been chucked out of the elite FTSE 100, slashed its dividend, had to launch a rights issue (sell more shares) just to get to just this point. And there’s plenty more potential for bad news. 

M&S is trying to revive its fortunes via an expensive tie-up with Ocado, focusing its marketing on pricing, stocking vegan products and trying to get shoppers to do a larger weekly shop there. All good ideas, but I’m not convinced it’ll be enough.

While M&S might provides undeniably appealing food to Britain’s consumers, the share price is distinctly less tasty and I for one will be going nowhere near it.