M&S shares rally 73% in year to overtake online retailers

M&S shares are on track for their biggest annual gain since 2009.

Shares in Marks & Spencer Group have staged a comeback this year, signaling a reversal of fortunes between the retailer and its joint venture partner Ocado. 

M&S shares are on track for their biggest annual gain since 2009, rallying 73% amid signs of recovery as the retail stalwart increased its profit outlook twice this year. More gains could be in store during 2022 for a stock still down 59% from its 2015 peak.

Attractive valuations on the 137-year-old retailer may help spur the advance: M&S shares trade at 12.5 times estimated earnings, compared with 15.3 times for the Ftse-350 Retailers Index and 20 times for the Stoxx 600 Retail Index. 

Meanwhile, Ocado’s stock has lost more than a quarter of its value in 2021 and is set for its worst annual decline since 2011. M&S has a 50% stake in Ocado’s retail business, though the British online grocer’s valuation is largely based on expectations that the company can expand its licensing of robotic warehouse technology to retailers around the world.

M&S has “seen a huge turnaround in its fortunes this year”, with sales through Ocado accounting for 27% of revenue for their joint venture, Michael Hewson, chief market analyst at CMC Markets UK, said. 

As for Ocado, “we have seen the benefits of this deal in its quarterly revenue numbers, however the progress on last year has still been disappointing”.

Shares in companies focused on e-commerce that prospered during last year’s lockdowns have suffered this year as stores reopened. Clothing retailers Asos and Boohoo have dropped, with M&S’s market capitalisation overtaking them both in September. 

Bloomberg