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Hi @valueplay.
With food deliveries being made via Ocado and the rest of their offering already being delivered one way or another, I think they are far less likely to be knocked sideways by a second wave.
I also think people will be less inclined to stay in second time round having worked out their own appetite for risk when balancing their lives.
But neither of us has a crystal ball - time will telll.
The level of risk is fully reflected in both companies SP's.
Anyone who brought Ocado more than about six months ago would already have seen the big capital gain that the market has priced in but is unlikely to see the same percentage gain in the next year or so, although new contracts won around the world will certainly boost the SP.
M&S on the other hand is a low sentiment share with little of the potential priced in and lots of baggage.
The overriding concern for investors is that they get rid of the baggage and the judgement to invest here rests on if you think that they will.
Personally I think that they will and that the Corvid crisis will give them the necessary push.
Then we must look at the future for M&S with Ocado Retail. The main point here is that because of technology M&S will be making money from home delivery - to all their competitors it is just an extra expense. Also their competitors are being badly squeezed by the discounters from the bottom so they have to keep their prices keen - they are stuffed.
Ocado Retail holds just 1.7% of the UK grocery market worth £193.6 billion, this share can only increase and it could increase substantially - hence my optimism for M&S.
@Tame2017 I referred to the Ocado tie up in my post. It will go well, will mitigate some risk. Problem is there is a huge amount of unmitigated risk in the rest of the MKS business susceptible to a second wave of Covid. Ocado having no stores and deriving most of their value from their technology sales do not face these risks. They would benefit wholly from that scenario.
@Valueplay - I think you might have missed my point that the partnership with Ocadao should mitigate some risk for MKS.
Who needs share price rises when you have nostalgia and Percy pigs eh? Good luck
Time will tell, you know it wasn't that long ago that Apple was deemed inferior to Microsoft or Nokia. I think nostalgia has more value than a sock-puppet.
@neilhumphreys5ya, yes market's value based on the future. Todays 7%+ move in the Ocado share price is backing my view that its future profits still are not sufficiently priced into its current share price. I know that the board are trying to revolutionise MKS. The scale of change though and the cost of it is causing MKS to be a laggard in share price moves and will constrain it going forward as other competitors share prices outpace MKS.
Valueplay, your objective is clear here based on your history of posts and labouring on historical facts, and you are of course therefore correct. However you should also know markets are based on future profits and markets will price that in. The future at M&S clear and the board could not be clearer, they know bricks and mortar/digital mix and ways of working were wrong and that’s why they have acted albeit slow, but they have acted to correct the past. Ocado, food, shop closures, new DC in MK, international, clothing stockturn, marketing. It’s all changed! Future is what we’re investing in not the past!!!
@Tame2017
So many people do not understand Ocado's business so I'm unsurprised by your question. The vast majority of Ocado's value is in its technology arm. A second wave would give further impetus to retailers all around the world to sign up to Ocado's Smart platform to run their online grocery delivery businesses profitably. These contracts are extremely lucrative to Ocado and explain why Ocado has a market capitalization value of around 8 times that of MKS.
MKS in a second wave will lose huge amounts of store revenue. Consumer confidence would be knocked further. A large amount of that revenue will not be taken up by MKS's online operations. Their tie up with Ocado would go well but it is at its limit capacity wise so there are only modest capabilities in the short term of more sales to further expand sales.
MKS's failing store network will cost a huge amount to restructure to the new normal world. Vast amounts of its stores are in expensive locations that are not suitable to the current pandemic consumer environment. Post pandemic many consumer behaviours will have changed permanently. More work from home, less city centre buzz will hit their stores hard
@Trojanhorse
MKS's share price has fallen year on year for good reason. Failure to innovate until a last grasp of the straw in making an expensive more to tie up with Ocado. That move will pay off for them but they should have made moves many, many years ago. Shares do not fall from £5 to £1 because of noise. There's a lot of sentiment on this board. The market is savage at the moment. It can see the weaknesses in MKS's business and has no room for sentiment.
It's all noise, Mark's share price has been lowering for over five years despite remaining profitable throughout. I believe they are re-thinking their strategy, concentrating on food, focusing on more popular clothing lines, expanding online. In a time when restaurants are difficult to visit and fast fashion seemingly unethical Marks should thrive.
@Valueplay
I don't understand how you are concerned for MKS in the second wave (I am working on the assumption that it will be Winter) but are feeling comfortable with Ocado ?
MKS already have a pretty decent online ordering and delivery service for all the non food lines.
A bit, yes, but think you'll need to be patient, if you can, I'm thinking it will take months before we get anywhere with these.
This is getting depressing
The councils should have been doing better. Bloated and quite well paid by comparison with great pensions. Where are the tree lined streets and city centres, cycle lanes, there are a few but not many. Not much accountability either.
Valueplay
I agree that it isn't yet clear when things will turn around for M&S and as will other contrarian investments this is always something that is very difficult to predict, also Corvid-19 will continue to dictate the agenda but when things do improve M&S will be well placed to benefit.
In fact the decisions forced on the board during the coming months to close stores will be the main reason for the reversal of fortunes and give M&S the full benefit of online without the baggage. This will in turn improve sentiment and lift the SP.
The key to shutting down redundant retail space will be reusing the land or the buildings.
If this can be done for profit that would greatly help the process.
The aim should be to work with local authorities to develop residential schemes in town centres to utilise the existing infrastructure, including redundant shoppers car parks, that would ensure the local shops, restaurants and other local services prospered. This would include M&S food outlets.
main thing is that they seem to have the will to radically change the business and unlike most of their rivals can do so without decimating it because of the Ocado deal. Their shareholders will back them 100%.
Your research.
No short. Just observations from the research I've carried out. I'm long OCDO which is a very solid investment for the coming months...
I smell a shorter!
They will have to decimate their store model/locations. It is totally it out of tune to the new normal we have going forward. Share holders will back and be understanding until the scale of the losses and cost of reorganization is revealed. Significant second wave of Covid will put MKS in a world of difficulty
main thing is that they seem to have the will to radically change the business and unlike most of their rivals can do so without decimating it because of the Ocado deal. Their shareholders will back them 100% - you wrote that.
Good last hour today. Massively undervalued IMO
I view it as a poor contrarian investment. Much better candidates out there. Broken business model (the store side of their business). Second wave of Covid likely to hit consumer confidence in the high street extremely hard and further imbed changes in consumer behaviour. Ocado tie up will not make up for failings on the store side.
Retail is bound to be a magnet for the shorts with sentiment being so low.
Long term holders have to look beyond this period at the positives - especially online.
This is a time to accumulate - not to make profits - this is what contrarian investment is all about.
The share price is drifting down and the shorters are circling in larger numbers for good reason.