Up 20% in a month, should investors consider buying Marks & Spencer shares?

Marks and Spencer (LSE: MKS) shares have risen by round 20% during the last month, making the agency one of many high performers in the FTSE 100 over this era.

The retailer’s shares have climbed by practically 60% during the last 12 months. On a five-year view, the M&S share value has risen by a powerful 350%.

On this piece I’m asking whether or not investors should nonetheless consider buying M&S shares. Is there nonetheless extra to come back from this spectacular turnaround?

Robust momentum

A couple of years in the past, Marks and Spencer appeared an unlikely selection for an funding success story. Falling gross sales, dated inventory, and unprofitable shops had been holding again income.

Since CEO Stuart Machin took cost in Could 2022, a lot of this has modified. Annual gross sales have risen by 23% to £13.4bn, whereas working revenue is up by virtually 50% to £864m.

Machin has lower debt, closed unprofitable shops, and led a revamp of the core Clothes, Dwelling & Magnificence enterprise. On the similar time, M&S Meals has continued to carve out a area of interest as a fashionable selection for consumers in search of an inexpensive improve from the large supermarkets.

The corporate’s most up-to-date buying and selling replace lined the final 13 weeks of 2024 – together with the all-important Christmas interval. Whole group gross sales rose by 5.6% to £4.1bn.

Meals gross sales had been up by 8.7%, together with the “greatest day” ever.

In the meantime, the group’s Clothes, Dwelling & Magnificence division achieved its greatest ever week of on-line gross sales.

Is a slowdown doubtless?

I believe there are some good causes to take a extra cautious view on M&S shares. To start with, this enterprise just isn’t as low cost because it was.

As I write, the shares are buying and selling on round 13 occasions 2025/26 forecast earnings. A 12 months in the past, Marks and Spencer’s forecast price-to-earnings ratio (P/E) was solely 10.

A P/E of 13 isn’t costly for all sorts of enterprise. However M&S is a giant, mature retailer working in a sluggish UK financial system. Revenue margins are comparatively low.

Development during the last couple of years has been boosted by operational enhancements. With many of those modifications now full, I’m not positive if latest progress charges will probably be sustainable. Slowing progress may put stress on the inventory’s valuation.

There’s additionally the danger that new issues may hit the enterprise. On 22 April, M&S revealed that its retailer operations had been hit by a latest cyberattack. Based on some press studies, click on and gather companies had been disrupted.

The corporate hasn’t revealed any particulars in regards to the assault. However occasions resembling this may be expensive and take time to resolve.

M&S shares: purchase or keep away from?

All investments carry some danger. However I believe there are some good causes to stay constructive about Marks & Spencer. This enterprise has a big footprint in UK retail and is working rather more competitively than it was a few years in the past.

On-line progress can be a constructive. Many patrons anticipate a seamless mix of in-store and on-line retail, and M&S is effectively positioned to offer this.

In the meantime, the M&S Meals enterprise may do effectively, even in a recession, as consumers purchase treats to eat at dwelling as a substitute of eating out.

General, I believe M&S continues to be value contemplating as a doable funding.