Shareprice Report

Done by:
Adam Marsden 32846436
Badreya Mahmood 32971885
Christian McKinlay 32851855
Demetris Messios
Shivani Modasia

Content: | Page | Executive Summary | 3 | Introduction | 4 | Company Analysis | 5-7 | Event Analysis | 8-10 | Competitors Analysis | 11-13 | Conclusion | 14 | References | 15 | | |

Executive Summary:

Marks and Spencer has been described in the "FTSE UK Series, which measure the performance of the 100 largest companies traded on the London Stock Exchange that pass screening for size and liquidity, as a nationally recognized, well-established and financially secure company" (FTSE.com). Although Marks and Spencer has a good financial position and reputation in the market, there are times where the price of its shares fluctuate as on the 27th February UBS – a financial services company - included Marks and Spencer to its “buy” list, as a result the share price of Marks and Spencer raised from 353.4 to 360.1 (Financial Times (a)) and there was a fall in the share price in the beginning of October, mid November and at the launch of March caused by the fall in the market value. The increase in Marks and Spencer share price on the 27th February and the UBS decision to put M&S on its buying list could be linked to announcement of the Interim Management Statement on the 10th of January which indicated the glowing performance that M&S done in the 3rd quarter of its financial year.
Marks and Spencer have many competitors, Sainsbury’s as they offer same standard of Marks and Spencer food and NEXT for the same quality of clothing. Sainsbury’s share price tend to have almost the same rises and falls of Marks and Spenser share price, whereas Next have considerably low share price compared to Sainsbury’s and Marks and Spencer.

Introduction

Marks and Spencer was established by Michael Marks in the 1800s (Marksandspencer.com). since then, Marks and Spencer has developed a lot to be one of the successful stores not only in the UK but, has grown to become an international store which has many branches around the world. Marks and Spencer is known for its quality clothing and luxury food. There are other stores which compete with Marks and Spencer in both clothing and food industries. This report means to analyze the market share of Marks and Spencer; its competitors NEXT (clothing) and Sainsbury (Food) and event analyses, linking its competitors react to the movements of the price and events.

27th Feb
27th Feb
COMPANY ANALYSIS

Above is a graph which illustrates Marks and Spencer’s share price from 30th September 2011 to 23rd March 2012 (Yahoo Finance), it shows that over the period the share price has a steady increase. I have conducted research on the company and I will explain in some situations why the share price has changed. On the 27th February UBS – a financial services company - added Marks and Spencer to its “buy” list, this boosted the share price from 353.4 to 360.1 (Financial Times (a)).

12th March → 16th March
12th March → 16th March
Without comparisons it is hard to assess the performance of the company, for this reason I have re-based the model and compared it with the FTSE 100. “The FTSE 100 is a market-capitalisation weighted index of UK-listed blue chip companies - A nationally recognized, well-established and financially secure company. The index is part of the FTSE UK Series and is designed to measure the performance of the 100 largest companies traded on the London Stock Exchange that pass screening for size and liquidity. FTSE 100 constituents are all traded on the London Stock Exchange’s SETS trading system.” (FTSE.com).

Now it is possible to gain prospective, the graph would indicate that drops in the share price early October, mid November and early March would be due to a drop in the market value. Numerous reports show that retailer had to discount heavily in order to compete with rivals over the Christmas period, this left doubt in investors’ minds that they would gain for investing, and this would explain the low figures throughout December and the beginning of January (Financial Times (b)).

A report published online shows that UBS increased its forecast for the UK economic growth ahead of the forecasts, this lead to an increase in share prices across the board (March 12th to March 16th). The report shows that not only an increase in retail shares but the effects seen across the FTSE 100 and FTSE 250 (Financial Times (c)).

Event Analysis:
On the 10th of January 2012, M&S released its Interim Management Statement for the 3rd quarter of its financial year. This quarter has been very successful for M&S as they have achieved most of their targets. UK sales went up by 1.8%, and more specifically, Food sales went up by 4.5% .General Merchandise sales however went down by 0.8%. Like for like sales, which is a means of comparing performance of the assets from last quarter to this quarter excluding new assets, within the UK also increased by 0.5%, food, bringing a rise of 3% and general merchandise showing a drop of 1.8%. Direct sales and international sales have also gone up, by 22.4% and 8.1% respectively. (19/4/2012.corporate.marskandspencer.com)

Mark Bolland (CEO) said that “food business performed very strongly as customers enjoyed our new and traditional Christmas products”. For this Christmas, M&S introduced an astonishing 600 new lines of food products. The clothing sales were also up 1.1% as the focus was primarily on “real value at a time when they (customers) are managing their budgets carefully”, meaning in these hard times of financial crisis the company offers quality clothing at low prices. By introducing a ‘next day delivery’ as well as online ordering, on Direct sales, an improvement of 22.4% was observed. Finally, International sales rose by 8.1%, due to growth in the markets of Shanghai and India, as well as the new M&S flagship store in Paris.

This analysis aims to show how the announcement of the Interim Management Statement on the 10th of January had an impact on M&S share price, and whether the change was negative or positive. We created this graph by appointing our event day as Day 0. Then, M&S share price on January 10th became our fixed day. The graph expands 30 financial days before and after the event. By subtracting Day 0 share price from the other share prices and then dividing it by Day 0 share price again, we found the percentage difference between the share prices each day (compared to Day 0 On Day -30 to day -24 there was a rise in the price of the stock which touched 4% higher than Day 0. This was probably due to the Christmas season which was coming and the market price expecting M&S to fare well in the Christmas season. However, from day -23 until day -11, there is a generic fall in price of the share, from 4% to -4.7% and there were small fluctuations that had a downward general trend. This downward trend is probably explained by the fact that the results for the 3rd quarter of M&S were due and the ‘market’ waited to see how well M&S did. In Day -10 an upward trend begins that stops on Day -5, when the share price almost reaches Day 0 level, but then drops, again probably due to high expectations from the results. From Day 0 to Day 30, just once it seems that the share price falls below Day 0,from Day 2 to Day 4. After the small decline, there is a general rise in share price, which at its peak is more than 12%. This pattern in share prices matches our event since there was no knowledge of the results beforehand which would result in lower than Day 0 prices, and since the results are positive in almost every department that M&S deals with, the share price would eventually increase. The increase shows the faith the ‘market’ has in the corporation for the future.

COMPETITIORS ANALYSIS

The competitors that we have chosen to rival Marks and Spencer's are Sainsbury’s and Next. We have chosen Sainsbury’s as they offer the ‘taste the difference’ range that is of the same standard as the Marks and Spencer's range. Our second choice is NEXT who offer the same quality clothing as Marks and Spencer's.

Graph 1:A graph of the share prices of Sainsbury’s, Marks and Spencers and FTSE100.

As shown in the graph Sainsbury’s started off with the higher share price at the beginning of the October , during the first few weeks after a slight fall the share price steadily goes up, in November the share price falls greatly twice. Over December the share price rises and remains steady but is still declining slightly. After the New Year the share price falls and rises frequently, but by the end of March the share price is looking as if it is rising. In comparison to Marks and Spencer, Sainsbury’s starts off well, they both look as though they have the same trends, until December when Marks and Spencer’s share price falls further than Sainsbury’s. It looks bad for Marks and Spencer until their share prices cross during January, at which point Marks and Spencer's share price remains rising and by the end of March the share price for Marks and Spencer's is ahead of Sainsbury’s.

In comparison to the FTSE100 line on the graph, Marks and Spencer's is below the line until the end of February when the share price passes the FTSE100 line and also rises ahead of it. In comparison Sainsbury’s begins ahead of the FTSE100 line and then remains the same as the FTSE100 line through December till the beginning of January, and then it falls below and eventually just rises above the FTSE100 line at the end of March. Graph 2: A graph to show the relationship between next plc and FTSE100.

In graph 2, it is shown that Next is ahead of the FTSE100 and remains that way throughout the year. It gradually starts to rise with not many great falls and eventually ends up considerably further than the FTSE100 line. If compared with the share prices of Sainsbury’s and Marks and Spencer's, Next has a considerably low share price level, this may look bad but considering that Next sells only clothing, and Marks and Spencer and Sainsbury’s sell clothing and food, next are doing very well share price wise.

Sainsbury’s is a worthy competitor to Marks and Spencer as they distribute both high quality and cheaper ranges of foods, they do sell clothing as well, it is not of the same quality as the Marks and Spencer's range but nevertheless it is considerably cheaper. Sainsbury’s has recently launched a new TU range of clothing and a new Gok Wan collection, this could help Sainsburys’ share price as it means customers have more choice and the publicity generated from the Gok Wan range could help too, nonetheless Marks and Spencer have a large amount of publicity and celebrity ambassadors.

Next too is a worthy competitor to Marks and Spencer's, Next offers more variety of clothing and have different ranges of prices that are available, this shows when the share prices are compared, as shown in the previous graphs Next is well ahead of the FTSE100 line and is slightly below the line of Marks and Spencer's and Sainsbury’s, taking into consideration the fact that Next is only clothes based, they are doing very well compared to Marks and Spencer and should be considered a competitor. However during researching for competitors we could not find an exact competitor who sell both high quality clothing and food, and so if a consumer was looking to buy both high quality food and clothing they would probably prefer to shop in Marks and Spencer's than go to two separate shops.

Conclusion In summary, Marks and Spencer’s is undoubtedly a substantial and successful company. This precise analysis of the company, an event and its competitors gives a good insight to where Marks and Spencer’s stands in the market and provides explanation to some of the reasons for fluctuation in their share prices. The analysis of the Interim Management Statement gives a solid overview on how management policy can affect Marks and Spencer’s share price and indicates the recent success the company has had. The analysis of competitors leaves us with the conclusion that although Marks and Spencer’s is vulnerable to fluctuations, and although its competitors Next and Sainsbury’s may be close in share price, Marks and Spencer’s is the only company that produces both food and clothing at a similar quality level. Therefore from this analysis we can conclude that Marks and Spencer still remains a market leader due to its distinctive niche of both high quality food and clothing products.

References: Financial Times (a), Bryce Elder, 27th February 2012, http://www.ft.com/cms/s/0/c5467fc6-610f-11e1-a738-00144feabdc0.html#axzz1rUDtzE4r Financial Times (b), Lex Team, January 11th 2011, http://www.ft.com/cms/s/3/62bc5f9c-3c66-11e1-8d38-00144feabdc0.html#axzz1rUDtzE4r Financial Times (c), Michael Hunter, 16th March 2012, http://www.ft.com/cms/s/0/cad40f8e-6f43-11e1-9c57-00144feab49a.html#axzz1rUDtzE4r FTSE.com, FTSE 2010,http://www.ftse.com/Indices/UK_Indices/Downloads/UKX.pdf
Graph 1- Investis plc, 2012, J.Sainsbury’s, (http://www.j-sainsbury.co.uk/investor-centre/share-price/share-price-chart/#tabbed_section), [Accessed April 2012]

Graph 2- Investis plc, 2012, J.Sainsbury’s,(http://www.nextplc.co.uk/financial-information/share-price.aspx ) , [Accessed April 2012].

Marks and Spencer Plc. "Timeline". [Available online] http://corporate.marksandspencer.com/aboutus/ourhistory [Last viewed on: 25-Feb-12] Press releases (2012), Quarter 3 2011/12- INTERIM MANAGEMENT STATEMENT [Available online ]http://corporate.marksandspencer.com/page.aspx?pointerid=1e98a98242d64fbeb1133ec5f3d7cba6 [Last Viewed on: 19- April-12] Yahoo Finance, Yahoo Inc 2012, [Available online] http://uk.finance.yahoo.com/q/hp?s=MKS.L&b=30&a=08&c=2011&e=23&d=02&f=2012&g=d Yahoo Finance, Yahoo Inc 2012, [Available online] http://uk.finance.yahoo.com/q/hp?s=%5EFTSE&b=30&a=08&c=2011&e=23&d=02&f=2012&g=d