Marks & Spencer (LSE:MKS) shares have been a formidable performer over the last five years, outpacing even the FTSE 100 and many of its rivals at the same time.
Since May 2021, the share price has jumped 113.9%. And anyone who reinvested the dividends paid along the way has earned an even greater 119% gain – enough to turn a £5,000 initial investment into £10,951.50 today.
The group’s turnaround efforts of reshaping its stores, improving its product ranges, and upgrading its digital capabilities have clearly created value. But now the question is, can it do it again?
The bull case
Marks & Spencer’s business has fundamentally improved over the last five years.
Its Food division, long seen as the strongest part of the company, has been taking market share and continuing to post solid growth. Even in its latest updates, food sales outperformed the wider grocery sector, driven by improved value perception and a record number of customers returning to its stores.
The Fashion, Home & Beauty side of the business has also been overhauled. After years of struggling with tired ranges and bloated store space, management’s seemingly modernised its fashion offer, targeted younger shoppers, and closed underperforming locations.
But efforts to bolster underlying performance are still playing out. The company’s actively investing in new, more efficient distribution centres and is pressing ahead with store revamps.
Therefore, if management can keep delivering margin improvements while continuing to win market share in food, investors could be on track to enjoy even more impressive gains in the coming years.
What could go wrong?
Not everything has been hunky dory. 2025 saw the company taking a pretty massive hit as a result of a cyber-attack, which disrupted its online checkouts, particularly for the Fashion, Home & Beauty segment, which saw full-year sales slump 7.7% during the 12-month period ended in March.
While this cyber breach has been sorted, looking ahead, the retail environment remains tricky. Food sales are seemingly holding up well, but with consumer discretionary spending under pressure, delivering further growth could prove challenging.
For Marks & Spencer, the firm may be forced to do some heavier discounting activity to retain its recent market share gains. While that’s great news for shoppers, it’s less so for profit margins and the bottom line. And don’t forget, profitability’s already getting squeezed as a result of the recent National Insurance and Minimum Wage changes in the UK.
So is the rally over?
Marks & Spencer seems to be in a much stronger position today compared to five years ago, even after the cybersecurity breach. And with the stock trading at just 9.4 times forward earnings, the valuation isn’t too demanding either.
As such, when looking at the latest share price forecasts from institutional investors, the consensus is that Marks & Spencer shares still have more room to grow. With that in mind, while the risks of margin pressure are real, investors seeking to diversify into the retail sector may want to consider taking a closer look.
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Zaven Boyrazian does not hold any positions in the companies mentioned.
