MARKS & SPENCER (MKS) Very Top Heavy - Short from £4.01p Oct 2005

Sales volume is not the only game with this share but it seems the only focus.

There is strong free cash flow with reducing borrowings BUT there is also considerable potential to raise margin significantly through supply chain improvements even if volume stands still. Historically( over the past 6 years or so) MKS has had a very inefficient supply chain ( at least compared with the like of Next and BHS )with costs being 60% over best practice. If Rose can reduce these costs to the level at Next/BHS then there will be a considerable gain to the bottom line.

The other impact on 2006 profitability for which there is no historic guidance is the new convenience store formula with its focus on food. This could be an important factor in sales growth outside of like for like growth.

Finally, how many plugs is Ric Stein going to give MKS: my wife has pointed out about 3 or 4 in his books and on the TV for loganberries,sardines and cheese etc.Maybe an casual indicator,and not to be taken too seriously,but perhaps MKS is becoming fashionable in a luvvie sort of way.

Too many potential vatiables to be comfortable in shorting and too much cash being generated