What's Really Happening in Retail and the High Street?

We recently had the Marks & Spencer quarter update with a 40% fall in profits.  
So what's really happening at Marks & Spencer?  My sister-in-law was at Westfield today, she said the parking had gone down in cost and it was empty.
I'm a bit of a fan of the company, it strikes me as a good old-fashioned British company that attempts to do things properly.

I think Rose, 60-year-old executive chairman of Marks & Spencer has done a decent enough job, I rarely walk round the food hall of my local M&S without feeling almost pride that I'm there and enjoying the fine quality before me. Rose has done an incredibly successful job of, in the main, regaining customer loyalty and, indeed, much of their custom, during times when it has seemed prudent for many to trade down. This success will become very evident only when sales and profits resume their upward trend as trading on the High Street normalises - as it will, at some point.   In this respect I think he's playing the long game, so as to hand over a healthy morsel to his successor. Very laudable.

Conserving cash by cutting the dividend is the clue (some had expected it to be cut by as much as 50%). This will permit continued renovation to stores, systems, infrastructure, and distribution, and innovative marketing. Some say that their food-hall offering has already been fixed, and that the summer women's' wear is again exciting.  Meanwhile, the present fall in profits and dividend reduction were both widely signalled, and the Board seems to have a sure touch in handling the City (unlike Lord Myners, who seems recently to have become a bete noir).

It is the rest of M&S that gets to me though. Apart from their suits, which are really hard to get wrong, I think their men's clothing is generally aimed at a dying, perhaps already dead, breed of male who perhaps went to university in the 80's, became a Doctor or Lawyer and feel a bit laid back about his dress sense and wants to chill out with rugby tops of multi-coloured striped polo-shirts. Rather them than me.  Personally, I find the menswear generally overpriced (why should I pay more for shirts at MKS than for the immeasurably finer-quality ones at the likes of Charles Tyrwhitt for less money)?

When I have to accompany my partner into a River Island or the like I can tell the products look good, are good value and contemporary, uber. In Marks and Spencer's you are essentially shopping for your church-going granny or mother who wants something conservative but reasonably colourful to wear to her Bridge class. You'd have thought someone who'd want to buy something so hideous wouldn't have to pay an arm and a leg for it but they do!

Marks and Spencer's still feels all wrong to me in that respect, perhaps it's time they aimed at a different type of shopper, a younger shopper. They, after all, will need to be shopping in M&S in the future for it to survive in the years to come.

As for the retail sector in genera I've never ever seen so many voids up and down the High Street and the malls. The easy explanation is in just one word: Recession. Too easy?

Part of the problem is that landlords have got away for far, far too long with crazy rental demands, upwards-only rent reviews, shorter and shorter rent review patterns, and generally onerous lease covenants - none of which likely to be sustainable in the long run, particularly in the down-cycle of a cooling economy.

To that extent, the likes of Land Securities have much to answer for, particularly now that they themselves are passing round the begging bowl for fear of breaching their own banking covenants.

And where has it got us? Thousands of shop-workers out of a job, uncollected rates from busted companies, and lousy returns for the investments and pension plans of millions. Sad. But true.   In the meantime I keep shorting the retailers through contracts for difference positions to profit from any short term to medium term weakness in both Next and Marks & Spencer.