The prospects for UK retail shares such as Marks and Spencer Group Plc (LON:MKS) (MKS.L) may be relatively uncertain in my view.
Brexit could dominate not only news headlines, but also the thoughts of shoppers. Even though inflation is below wage growth, many consumers seem to be adopting increasingly price-conscious behaviour, with consumer confidence being relatively weak at the moment.
In such an environment, Marks and Spencer may find it more challenging than usual to deliver improving sales and profitability in my opinion.
At the same time, there may be other threats facing the business. It is lagging its rivals in terms of its omnichannel capabilities to my mind, with its supply chain not being as slick as some of its peers. Alongside this, the company’s online performance has not been as strong as I would have expected. As a result, it is seeking to invest more capital in the fundamentals of its business, and this could lead to a stronger entity in the long run in my opinion.
Of course, the Marks and Spencer share price has been relatively volatile in recent months. It now has a P/E ratio of around 11, and this suggests to me that it may offer good value for money. Investors may be pricing in potential difficulties from Brexit, as well as the instability which making major changes to a business model can bring.
Ultimately, I believe that in the long run the stock has the brand loyalty to pull through the difficulties it is facing. However, I do think that it needs to invest heavily in order to offer customers the omnichannel capabilities which are increasingly being expected by consumers. Its strategy suggests that this is set to take place, in which case I’m optimistic about its long-term prospects. But in the near term, Brexit and weak consumer confidence could hold back its performance versus the FTSE 100.