James Moore: M&S blames the rain, and it really is a washout

Investment View: Having spent 10 minutes trying to find a checkout I waited an age in an unhappy queue

Marks & Spencer

Our view Sell

Price 312.2p (-6p)

M&S is looking about as cheerful as the British summer right now – and it was the rain that took the blame for yet another set of disappointing numbers earlier this week.

Well, the rain that is and Kate Bostock, who as the head of general merchandise – read clothing and including the key womenswear business – will be ensconced with her headhunter looking for new opportunities right now.

The weather might be the excuse du jour (and this is not the first time that one's been trotted out) but of wider concern is the fact that customers took one look at the summer range and went bleurrgh. Flappy-fronted cardigans, garish colours, Ms Bostock might have done well at Next and George Davies but it looks like she's got it horribly wrong with the designs this time.

But let's be honest here: it isn't only the fashions that are wrong. The shops (as chief executive Marc Bolland recognises but hasn't fixed yet) don't always provide the friendly, efficient, service for which M&S was once renowned. I visited one recently and, having spent a good 10 minutes trying to find a checkout so I could pay, then had to wait an age in a long and unhappy queue. That's not a pleasant experience when your legs don't work properly and you are reliant on crutches, believe me.

So a bad range, dowdy stores and less-than-efficient service. It's a terrible combination when the consumer is being squeezed.

No wonder the company reported a 6.8 per cent fall in general merchandise sales for the 13 weeks to the end of June at stores open at least a year in the UK.

The problem facing M&S is that it might not get better very quickly. If customers can't get what they want (and aren't served well) they'll be gone to rivals and might not return for a long time.

M&S seems to go in cycles, and right now it is firmly on the downward slope. So what's Mr Bolland's prescription for getting it moving in the right direction?

Well Ms Bostock has been replaced by, erm, a middle-aged man calledJohn Dixon. He used to be in charge of, erm, food. It's true that the food business has been a star. But the clothes, with a range that puts people off and a stodgy supply chain that doesn't allow M&S to react when the weatherman is uncooperative, is a different matter.

And one always has to wonder when businesses put blokes in charge of womenswear. Middle-aged businessmen who spend their lives in suits aren't always terribly good at it. And so enter Belinda Earl.

The former Debenhams chief executive had a great deal of success with Designers at Debenhams, persuading the likes of John Rocha and Jasper Conran to work with a shop that one wouldn't have expected them to be involved with in a month of Mondays.

Most recently with Jaeger, her hiring as style chief looks to be smart move. But she doesn't arrive until September and it will take some time for her influence to be felt, during which time M&S could lose even more customers.

Is it worth pointing out here that the man in charge of the whole shebang, Mr Bolland, was very good at food when he was at Morrison's?

Food's doing well at M&S but (so far) it doesn't look like he's done a sterling job with anything else and there won't be any Ms Bostock to jettison around next time if the numbers are still bad.

Shares in M&S have basically flatlined since this column last took an in-depth look at the end of January when they stood at 323p.

They trade on nearly 10 times forecast full-year's earnings for the year ending 31 March, while offering a prospective yield of 5.5 per cent. The yield is two times covered by earnings and it is basically the only reason to hold the stock.

Even if Ms Earl can work some magic on the ranges – and M&S's was trashed by The Daily Mail which given its readership spells trouble – there won't be any quick improvement. Analysts are cutting their forecasts with good reason.

I recommended that investors avoid the shares in January. That view hasn't changed.

Even with a nice yield, if you have these shares right now sell them.

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