This year’s event in July may be a sombre affair, though. Attendees have often used past meetings as an opportunity to voice complaints as seemingly trivial as the cut of their underpants. But this year they may have something more substantial to grumble about: this week the company revealed that it would be accelerating its store closure programme and will disappear entirely from numerous UK high streets. M&S says its analysis has shown that those affected by closures will simply jump in their cars and head to another nearby store. But loyalty towards M&S is already being severely tested, as the company’s share price attests to. Many former investors appear to have given up altogether, with the shares falling from their peak of £7 in 2006 to just £3 today. Even the free sandwiches at the AGM may not be enough to tempt them back.
To be fair to M&S, it is not a great time to be a retailer, especially if you believe Mark Carney’s analysis this week that UK households are £900 a year worse off since the referendum. But comparing its share price with those of the broader retail benchmarks suggests much of the weakness is down to problems specific to M&S. In March 2013, we took an in-depth look at the company to ask whether scepticism towards the group was warranted ('M&S Untangled', IC, 28 March 2018). Since then its shares have underperformed the FTSE 350 general retail sector by a whopping 40 per cent, and rival Next by nearer 60 per cent. In the past two years, after a brief bout of investor optimism towards M&S’s shares, the rate of underperformance has widened.
M&S’s shares bounced on the news of the closures, with investors encouraged that the drastic action required to get the company in shape is happening, even if retrenchment could soon mean M&S losing its title as Britain’s biggest clothing retailer to ABF’s Primark. It’s new chairman, Archie Norman, certainly has a good track record of turning companies around, not least Asda, which he rescued from near-bankruptcy and sold to Walmart. And, as Harriet Russell discusses in her write-up of the company’s results on page 70, there’s still plenty of free cash flow to fund a fairly chunky dividend payment. But it is hard to look at that dividend as much more than the reward for enduring managed decline – in short, unless a buyer can be flushed out it could be all you’re getting.
