Markets pick up, Marks & Spencer confident on turnaround and British Land scores an unwanted hat-trick

“Markets in Europe and Asia made small advances as investors took comfort from comments about key central banks maintaining the status quo on supportive monetary policy and stimulus measures,” says Russ Mould, Investment Director at AJ Bell.

“Federal Reserve Bank of Chicago President Charles Evans yesterday said he saw no reason for the US central bank to change its stance, and European Central Bank Executive Board member Fabio Panetta said there was no reason to reduce bond purchases.

“The FTSE 100 held firm at 7,036 with consumer goods and gambling stocks in demand. UK takeovers continue to gather pace, with Vectura and Spire Healthcare both receiving bids. This adds to a recent spate of deals, including offers for John Laing and UDG Healthcare.

“The UK stock market has started to regain favour with investors around the world after a long period in the doldrums and private equity is pouncing hard and deploying large cash resources by striking new deals. Trade buyers are also in the market, seeing opportunities to buy rivals and increase market share.”

Marks & Spencer

“Marks & Spencer’s full year results are easy to interpret. The retailer smashed it with food sales, but clothing was a flop as the working from home trend caused a slump in suit sales and the nation no doubt decided it didn’t need to buy any of its pastel-coloured jumpers.

“The company seems to be hoping that 2021 will be a turning point (just like each of the previous years and their turning points, given its eternal turnaround programme).

“The retailer is betting its fortunes on a permanent shift in the type of clothes people want. So smart suits and tailoring services are going to be downsized in favour of giving more floor space to athleisure items, children’s clothes and more smart casual items for those who do return to the office.

“Part of that shift will put it in more direct competition with Next, which itself has made the smart move of selling third party products on its website as well as its own goods, thereby giving customers broader choice. Marks & Spencer will therefore need to excel on its product choices if it is to gain market share.

“If this new push with clothes is unsuccessful, it will no doubt raise the question once again as to whether Marks & Spencer would be better off focusing purely on food. It wouldn’t be easy to sell the clothing and homewares arm because of the shared floor space with food in so many stores, plus there can’t be many businesses who would want to take on additional property. Therefore, it has to make the new clothing strategy work.”

British Land

“British Land scored the kind of hat-trick you’d never want to celebrate in chalking up a third consecutive annual loss.

“This demonstrates that although the value of its office and retail properties has been ravaged by the pandemic, the company’s problems did not start and end with Covid.

“Its retail assets have been at the mercy of the shift in shoppers spend from physical shops to the internet, an existing trend which has only been accelerated by the pandemic.

“This raises the question of whether the kind of traditional commercial property portfolio owned by British Land and consisting of shopping malls, retail parks and offices, with perhaps a few industrial and alternative assets, is still fit for purpose.

“The company has been selling assets to bolster its balance sheet and is reshaping its portfolio to bring it more up to date, managing to sell retail assets above their book value.

“It will need to do more of this as its new strategy under recently appointed CEO Simon Carter sees it focus attention on London offices, mixed-use sites and retail parks where it believes it can add value by repositioning them as logistics, residential and office space.

“It will take time to prove the merits of this strategy and it could be a bumpy ride for shareholders in the meantime.”

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