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The devil is in the retail

By Camilla Palladino

www.breakingviews.com

Marks & Spencer's investors must feel as if they are on a roller-coaster ride. One week the UK clothing and food retailer's shares plunge on disappointing sales, the next they are up on rumours that M&S might be the latest retailer to succumb to a bid from a private-equity house.

What this turbulence does indicate is that investors no longer trust M&S's strategy to deliver a recovery. But they shouldn't hold their breath for a private-equity bid, either. Things would probably have to get quite a lot worse before that would be doable. The best hope is that M&S will really shake itself up. But even that isn't guaranteed.

Paying for prices

Take a look at what is actually wrong with the company. After a will-o-the-wisp recovery a couple of years ago, it is again losing market share. The reason? Its prices are totally out of whack with the rest of the high street. M&S might have held – or even trimmed – prices over the past few years. But in the meantime, cheaper rivals such as Sweden's H&M have changed customers' perceptions of what good value for money actually is.

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