the times | Thursday November 11 2021 49Business
The largest initial public offering in the
world this year and one of the biggest in
American history made a spectacular
start yesterday as shares in a company
touted as a future rival to Tesla surged
by as much 53 per cent.
The market value of Rivian Auto-
motive, an electric vehicle start-up,
briefly eclipsed $100 billion after its
shares started trading on New York’s
Nasdaq exchange. In contrast, Ford,
one of the company’s investors and a
titan of the American carmaking sector,
is valued at $77.4 billion, while General
Motors, another traditional industry
heavyweight, is worth $86 billion.
The race to snap up Rivian shares
eased and the shares closed up 29.1 per
cent, or $22.73, at $100.73.
Rivian is expected to produce only
1,200 vehicles this year, but investorsJanuary 2021 April July October
-80-60-40-20020406080Asos
M&S
Boohoo
Source: Refintivprawns. Stuart Machin, 51, the food
division boss since 2018, was shocked by
its levels of waste and creaking supply
chain. Until last September M&S
shoppers couldn’t buy food online.
A joint venture with Ocado fixed that
issue and while it is still waiting on new
warehouses to reach more customers,
sales of M&S products accounted for
£300 million on Ocado.com during the
past six months. Those sales are sepa-
rate to those reported by M&S yester-
day, with store food sales rising by
10.3 per cent. Food operating profits are
also 55 per cent higher.
M&S has focused on broadening the
appeal of its food business, selling more
groceries, becoming more affordable
and more appealing to families as anElectric vehicle start-up Rivian
motors on to the stock market
Callum Jones
US Business CorrespondentHigh street’s
old stalwart
fires back at
young guns
alternative to a Saturday night take-
away. Ocado has given the business the
volumes and buying power to do that.
Food basket sizes are still 30 per cent
higher in store than they were before
the pandemic, but that’s a sign that
customers have different reasons to
come to M&S than before.
Rowe has been frustrated in the past
that M&S investors don’t sufficiently
value the retailer’s separate compo-
nents — such as its outperforming food
division, its share of Ocado and its
status as Britain’s second-largest online
clothing retailer after Next. There is
still work to do, including an overhaul
of its shop estate, but these results show
that M&S is shaking off its malaise. And
the City is starting to pay attention.T
he retail industry’s old
guard is fighting back
against the young upstarts
(Emma Powell writes).
That is the narrative you
could interpret from the sharp
ascent in the shares of Marks &
Spencer, that stalwart of the high
street, compared with the sell-off in
Asos and Boohoo, the fast-fashion
players in recent months. However,
some context is needed.
Even after M&S in August initially
raised its guidance for profits for
this year, scepticism remained over
whether the group could
reinvigorate its clothes business,
which has been a drag on sales in
recent years. The shares were valued
at the bottom rung compared with
their publicly listed peers and at a
forward earnings multiple of just
under ten.
In contrast, the lofty market
valuations attached to Asos and
Boohoo left them priced for fast
growth and vulnerable to
disappointment. Rising inflation and
warnings that margins would come
under pressure this year, plus a
slowdown in sales since the
lockdowns, had a predictable impact
on the share prices of both online
clothes sellers.
M&S shares still trade at an
earnings multiple of 11, based on
forecast earnings for next year,
which is below the pre-pandemic
range and could leave room for
them to be re-rated further if the
company continues with the success
of its turnaround strategy. They
closed yesterday up by 32p, or
16.5 per cent, at 226½p.
Asos shares closed the day 245p,
or 9.5 per cent, higher at £28.22
after it reiterated a fresh strategy to
pursue a “more focused”
international expansion and to boost
revenue from its own brands.
However, while inflationary
pressures loom and it searches for a
new chief executive, there is every
chance the shares could struggle to
find sustained momentum.Never-ending story
may have an end
S
ome “transformations” are
anything but ordinary. Take
Marks & Spencer’s. It’s been
going on all century,
defeating a string of bosses:
Luc Vandevelde, Roger Holmes, Lord
Rose, Marc Bolland. So you can see
why the latest one, Steve Rowe, isn’t
getting carried away.
As he put it: “Given the history of
M&S we’ve been clear that we won’t
overclaim our progress.” Sensible,
that. Still, is there a glimmer of lost
sparkle? In August, the retailer came
up with its first profits upgrade this
millennium. And now it’s followed up
with a second one: forecast-beating
half-year results and an uplift to
guidance that left house broker
Shore Capital “positively
flabbergasted”. News that full-year
profits before one-offs would be
around £500 million prompted a 40
per cent upgrade to its estimates, as
well as lifting the shares 16 per cent
to 226½p.
Perspective is crucial. Rowe took
over in April 2016 with the shares
about 390p. And anyone would think
“transformation” was the Millwall FC
fan’s terrace chant given his use of
the word. The 2018 full-year figures
came with the headline
“Transformation Underway”: a bit of
a shock to investors who thought it
had started 18 years earlier under
Vandevelde. But maybe there’s a
linguistic clue to progress. The T-
word cropped up 28 times in 2019’s
half-year figures, 19 times in 2020’s
but only 15 times in the latest set. Is
that a sign it’s finally happening?
He says it’s “clear that the
underlying performance is
improving”, with the “hard yards of
driving long-term change” starting to
pay off. And there’s stuff in the
figures to bear him out. On the togs
front, Rowe set out to wean M&S off
promotions, making prices stick. So
even if sales fell 1 per cent, the key
number was the 17.3 per cent rise in
“full price” ones. The upshot?
Underlying profits from the clothing
and home wing up 42.5 per cent
versus 2019 to £156 million.
Better buying’s played its part, too.
Instead of a rag-bag of assorted
fashions, M&S has cut its ranges by
around a third but focused on getting
enough sizes and availability in
clobber styles that work. Take
women’s denim, where sales per
option is up 56 per cent on 2019 after
a 29 per cent cut to ranges. To boot,
Covid forced M&S to finally get its
act together online, now 34 per cent
of the clothing wing’s sales.
The food division tells a similar
story: more price-competitive, bigger
in “mainstream” grub and better
geared to a family shop, with average
basket sizes up 30 per cent on pre-
pandemic levels. Underlying profits
rose 55.9 per cent on 2019 to £144
million. And that’s before the £28.1
million from M&S’s half-share in
Ocado Retail, cleverly bought for
£750 million in time for a pandemic.
There are caveats. There was the
usual slug of adjusting items —
£82.1 million, mainly for store
closures. And the underlying
£269 million half-year profits were
flattered by £47.5 million of UK
business rates relief — on top of the
£175 million last year, none of which
has been paid back. There’s no
dividend yet, either. And Covid andsupply chain risks remain. Still, at
least Rowe — and chairman Archie
Norman — finally have something
to show for M&S’s never-ending
transformation.Nuclear deterrent
M
ore proof it’s not just wine
where the French keep the
good stuff for themselves.
Now they’re trying the same trick
with nuclear reactors. Apparently
EDF is to build six new domestic
plants that are an “improved” version
of Hinkley Point C. The cost of this
nuclear nirvana? A mere €46 billion,
or so says EDF. So how come we’re
getting a worse Gallic nuke for
£23 billion? Anyone would think the
French do this sort of thing
deliberately.
It’s the type of provocation that’ll
do little to quell enthusiasm for the
mini-nukes being pushed by our very
own Rolls-Royce — modular plants
of 470 megawatts each that are a
fraction of the size of the 3,200MW
Hinkley monster but also a fraction
of the cost. Rolls reckons it can build
them for £2.2 billion a pop, with
customers expected to pay no more
than £60/MWh for the ’leccy rather
than a comparative £92.50/MWh
from Hinkley. It’s worth the taxpayer
chipping in £210 million, too, to see
whether Rolls’ adaptation of its
nuclear subs technology really is a
solution to our energy needs.
Even so, is it the right tech? A new
paper from the Adam Smith Institute
reckons the government’s 2050 net-
zero ambitions are an “excellent
aspiration” but one that has
“generated no coherent quantified
strategy”, what with it requiring “an
increase of around eight times” the
UK’s present “electricity capacity”. It
also sees a sizeable role for advanced
modular reactors, far more
“economic”, it reckons, than mega-
nukes. But it wants fourth-generation
kit, such as the “molten salt reactors”
being developed in Canada, not
second-generation “pressurised
water reactors which were designed
for nuclear submarines” and are
“widely considered out of date”. True,
that’s only a view from a think tank.
But, alongside Rolls, it would be
remiss not to look at newer tech.The biter bit
A
nother victory for Third Point
Investors, the London-listed
fund managed by Dan Loeb:
the pot-kettle activist now gunning
for Shell who doesn’t like the same
treatment himself. Loeb has got
himself his own activist, Asset Value
Investors, which, with other investors
holding more than 10 per cent, has
twice tried to call an extraordinary
general meeting.
Last month, one of the fund’s
directors, Josh Targoff, irascibly
explained that AVI couldn’t have an
EGM because it had come up with
nothing tangible, claiming company
law did not permit the calling of
EGMs just to kick ideas around. So
he must be delighted with AVI’s
latest move. It’s calling for an EGM
to try to oust him. Nicely tangible.[email protected]business commentary Alistair Osborne
makes electric vehicles at a manufac-
turing site in Normal, Illinois. Its range
includes the R1T pick-up truck and the
R1S sports utility vehicle. The company
aims to lift production to an annual rate
of 150,000 by the end of 2023 and is
pushing for a million units by the end of
the decade.
Rivian is backed by Amazon, which
recently disclosed a 20 per cent stake
and has ordered 100,000 electric vehi-
cles, to be delivered by 2030.
Tesla’s recent surge on the stock
market ended abruptly this week after
Elon Musk, its billionaire chief execu-
tive, said that he would sell a tenth of his
stake in the company following a social
media poll. The shares remained in
sharp focus yesterday, having declined
by almost 16 per cent since Musk, 50,
announced his intention to reduce his
holding over the weekend, and the
company’s valuation fleetingly slipped
back below $1 trillion.are betting that it will become one of
the dominant players in a rapidly grow-
ing market dominated by Tesla, whose
valuation recently reached $1 trillion.
The start-up raised $11.9 billion by
selling 153 million shares at $78 apiece
in an offering that was increased as a
result of demand; a week ago, the com-pany’s sights had been set on a valua-
tion of $53 billion at $62 a share. It was
the sixth-biggest initial public offering
on the US stock market, according to
Bloomberg.
Founded in 2009 by Robert “RJ”
Scaringe, 38, and based on the west
coast of the United States, Rivian$100bn
Rivian’s market value early yesterdayBehind the story