Will M&S Shoppers Suffer Buyer's Remorse?

The Week: Morningstar columnist Rodney Hobson questions the wisdom of Marks & Spencer encouraging shoppers to buy now, pay later

Rodney Hobson 1 November, 2019 | 9:56AM
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Good for Sofas, Bad for Suits?

Is it a lifeline or is it a noose that Marks & Spencer (MKS) is dangling? The retailer thinks it has had a brainwave with its “buy now, pay later” initiative but investors may feel it smacks of desperation, putting the middle class retailer on a level with DFS (DFS), furniture seller to the financially strapped.

Firstly, it is a somewhat limited offer, restricted to online purchases of clothing and homeware. Secondly, you can already postpone paying for goods by buying them on a credit card. Reducing the interest charge on the M&S Mastercard might create more goodwill.

Encouraging more people to run up debt is questionable in these days of heightened concerns over unethical commercial practices but that is, in this case, not a big issue for investors. Of greater concern is any adverse publicity arising when people inadvertently miss one-of-three instalments and incur penalty charges.

The real issue, though, is that no gimmick (or initiative if you prefer) will stem the flow of lost sales at any retailer unless the products are right. There is no sign of that happening at M&S yet. The shares were just short of 600p less than five years ago; they now trade at less than 200p. The slide looks set to continue.

Housebuilder May Go for the Kitchen Sink

Politicians hoping to back their horses everywhich way would do well to study the third quarter manifesto from the new management team at housebuilder Crest Nicholson.

Peter Truscott, chief executive for less than two months, reckons Crest Nicholson (CRST) is a great business building high quality homes. On the other hand, it apparently isn’t making the most of its high quality land portfolio in the south east and decisive action is needed to move the business “further and faster”.

Prospects are highly attractive, except for the fact that “current market conditions remain uncertain”. Land sales remain an important part of the strategy, except the new team is cutting back on them so they will make a smaller contribution to profits next year.

Still, Truscott is a fast worker, as he has already identified significant opportunities to become more efficient and eliminate waste. And there is no time to lose in reducing overheads and sales-related costs. One hopes the sales staff are raring to go, since the number of sales outlets is being increased.

More details will accompany full year results in January. I suspect there will be a kitchen sink job, with the new team throwing in every nasty that can be blamed tactfully on the departed management before (one hopes) a dramatic upturn that Truscott can take credit for.

The shares dropped 5% on the update. This could be a bumpy ride until Truscott proves he can deliver.

Do What Works For You

I have been challenged on Twitter about my stock market pronouncements so let me set out my stall. I am paid for this column and for any other website columns and magazine articles I may write. I also receive royalties from sales of the investment books that I have written. I always declare any holdings I may have in companies I cover but I never seek, or would accept, payment from any companies I write about. I do not pay “influencers”, nor do I canvass favourable reviews for anything I write. Opinions expressed are my personal independent thoughts.

I encourage ordinary investors to buy listed shares freely traded on reputable stock exchanges. I believe that even unsophisticated investors can enhance their wealth through informed decision making. It should be fun, educational and character-building. However, I would not encourage anyone to invest if they lie awake at night worrying over their shareholdings; nor should they become obsessed with their investments.

While I encourage individuals to take responsibility for their own decisions, I see nothing inherently wrong with investing through funds, where you get a spread of investments immediately. The choice is up to each investor personally. The key mantra is this: if it works for you, go for it.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.