LONDON — Marks and Spencer Group plc shares spiked almost 7 percent on the London Stock Exchange Tuesday amid rumors of a potential takeover bid for the company.
This story first appeared in the July 9, 2008 issue of WWD. Subscribe Today.
Potential suitors named in the British media included Sir Philip Green, the owner of Topshop, who made an unsuccessful play for M&S in 2004. A spokeswoman for Green declined comment. Reports also suggested supermarket chain Sainsbury’s could be working on a tie-in with the retailer. A spokeswoman for Sainsbury’s said the company does not comment on speculation.
M&S also declined comment.
The retailer’s stock closed at 231.5 pence, or $4.55 a share, almost a week after it slumped 32 percent when the company said first-quarter sales in the U.K. fell 5.3 percent on a like-for-like basis and forecast continuing challenges because of the economic environment.
“I think there is fundamental value in Marks & Spencer given the stock price,” said Luca Solca, senior analyst in general retail and luxury goods at Sanford Bernstein in London. “It could be attractive [as an acquisition target] if management engages in more aggressive cost-cutting measures.” Solca described the market’s reaction to M&S’ trading update last week as “very severe.”
The company’s share price fell after M&S chairman Stuart Rose said overall sales at the company dropped 0.5 percent on a like-for-like basis in the 13 weeks to June 28. The company released its first-quarter trading update a week early, in light of what Rose described as “volatile sales” in April, May and June. The company’s share price at close of trading Tuesday was 64 percent lower than a year ago when it hovered around 650 pence, or $12.79 a share.
While Rose blamed a dip in consumer confidence and a weak economic climate for the slide in sales, London-based analysts criticized him for failing to act swiftly on changes in consumer spending patterns. While M&S is known for its luxury food ranges, analysts have reported that British consumers are turning to more value-led supermarkets as energy bills rise and house prices fall. As Rose last week announced a decline in food sales — traditionally the company’s star performer — of 4.5 percent on a like-for-like basis during the period, he also announced the departure of the company’s head of food, Steven Esom.
Prior to the trading update, the company’s shares had already taken a hit in January, after Rose said M&S’ like-for-like sales fell 2.2 percent in the third quarter. Then, M&S’ share price fell to 387 pence, or $7.61 a share.
Today, Rose will face shareholders at the company’s annual general meeting, when they will also vote on Rose’s proposed new role as executive chairman. According to British press reports, as many as 30 percent of the company’s shareholders plan to either vote against Rose’s promotion to executive chairman or abstain.
In other M&S news, on Tuesday the firm said it will close its three doors in Taiwan. The stores, which M&S operated with President Chain Store Corp., opened last year as part of a trial in the region. A spokesman for M&S described the company’s decision to cease trading there as “an isolated incident, which is not indicative of our international policy.” Outside of the U.K., the company has 282 stores in 39 markets and has announced plans to expand its presence in Greece, Central and Eastern Europe as well as in India.