Marks & Spencer (LSE: MKS) is to cut 7,000 jobs over the next three months, in the latest twist to its Covid-19 fortunes. That news came Tuesday, as the high street chain revealed its latest trading update. The Marks & Spencer share price fell 5% in early trading, as the firm told us that clothing and home sales in its stores are “well below” 2019’s levels.
The M&S share price is now down 48% since the start of this year, compared to the 19% drop for the FTSE 100. But when we look back to the 77% slide over the past five years, the 2020 crash starts to look a bit like business as usual. I can’t help thinking the pandemic slump might really just be hastening the inevitable.
If you have your optimistic head on right now, you might see this as a good thing. It is, after all, painful to see a company’s attraction slowly but inexorably dwindling in its traditional markets. And accelerating the end of that misery might just be a good thing, helping to move M&S further towards its growing food business a bit more quickly.
It might be an obvious truism, but the Marks & Spencer share price is not going to turn bullish until it’s passed its bottom. And that’s where countless investors, for decades, have been too impatient and have come unstuck.
Turning to strength
On the food front, things appear to be going quite a bit better. M&S tells us that “food sales have built steadily from the shifts in demand and closure of travel locations at the outset of the crisis.” In 13 weeks, food sales have risen 2.5%.
The company’s move to taking over the Ocado supply agreement is also on track for September. The change will lead to “the launch of over 500 new products in M&S stores” from the resulting expanded online range. Online sales volumes are booming, but it’s hard to determine any long-term trends from lockdown trading figures.
What will M&S look like when it finally emerges into some form of new stability? And where will the M&S share price settle before we can look for future growth? Right now, we can only guess. Addressing the future streamlining of the business, the firm told us that “it is too early to predict with precision where a new post-Covid sales mix will settle.”
M&S share price future
That’s not surprising news, but I think it is key, both to the future of Marks & Spencer itself, and to the future of the retail trade in general. We are partway through a fundamental shift in the way we buy and sell stuff. And a lot of retailers have been struggling for years with the online shift.
The pandemic has surely just accelerated this change. Companies that sit tight and wait to see what happens could well end up being left behind. While those at the forefront of the new realignment should be the ones to prosper. I’m just not convinced I see M&S in that second group yet. I like the look of some retail stocks, even today. But the Marks & Spencer share price does not attract me.