What’s happening on the high street? Ask Marks and Sparks. The clothes-to-food seller is seen as Britain’s bellwether retailer. It sells enough stuff to know how consumers are thinking – maybe more than all the ‘confidence’ surveys put together.
So today’s news that UK like-for-like sales rose less than 1% over the year to 27 March hardly justified cracking open the champagne. There was the usual corporate guff about “strong foundations in place and core values intact”, as Sir Stuart Rose hands over to new boss Marc Bolland. But the final dividend – a sign about future confidence – was left unchanged, following the one-third cut in the interim payout that caused rather a stir at the time.
And though the company reckons the worst of the recession has now passed, it’s worried about how bad next month’s emergency budget will be. Overall the “outlook for the year ahead remains cautious”.
No wonder the shares dropped 2% on the news, though to be fair, the FTSE is having a horrid day too. And with M&S down almost 20% in 2010, and yielding over 4.5% on a p/e of ten, some will argue it could even be starting to look good value.
But be careful. That doesn’t mean the stock can’t fall further. As John Stepek explains in Money Morning today, there could be more market woes in store. Indeed, Marks itself may be pointing the way ahead. Look at the chart below.
The red line is the FTSE All-Share index. The green line is the M&S share price – but ‘advanced’ by six months. That’s because over the last four years, where Marks has led, the rest of the market has followed – some six months later.
So not only is the company a high street bellwether, it appears that it’s a leading stock market indicator as well. In other words, investors could soon be applying the message from the M&S tills to their analysis of the overall prospects of UK Plc.
And this would be clearly bad news for FTSE bulls. Indeed, it rather suggests the falls we’ve seen so far could be just the start.