Marks & Spencer PlcMarks & Spencer PlcMarks & Spencer Plc (from now on M&S) is an international retailer with 718 locations across 34 countries. The group sells clothing, footwear, gifts, home furnishings and foods under the St. Michael trademark in its chain of 294 stores in the United Kingdom. Approximately half of the groups overseas stores are franchised to local partners. The group also owns the clothing retailer Brooks Brothers and the Kings Super Markets chain in the United States of America. Direct mail helps M&S meet the core objective of providing customers with wider, easier access to their products such as home furnishings, flowers, hampers and wine. The financial services comprise of operations of the groups financial services companies providing account cards, personal loans, unit trust management, life assurance and pensions. Retailing accounted for 96% of fiscal 2000 revenues and financial services, 4%.
The company was always considered to have a great management support that helped in its growth. But the last years, M&Ss managers seem to fail on their strategic decisions, leading the group to lower and lower sales and profits. The share price is also dropping and shareholders feel insecure for the future (figure 2).
Group structure and financial performanceThe groups performance measures for the year ended at 31 March were disappointing (figure-5). The return on equity ratio and the earnings per share were zero as the company had only £1.3m profit this year. For the same reason, the dividend cover was also zero. Last year the dividend cover was 1,0p as the company paid the shareholders all its profit. For doing so the company had to cut the dividend from 14,4p to 9,0p. This year the company proposed the same dividend even though it had almost no profit.
The group reports the results of three operating divisions: the UK Retail, the International Retail and the Financial Services.UK Retail divisionThe UK Retail division, the largest of the operating divisions, is itself sub-divided into seven business units, each representing a defined area of merchandise: Womenswear, Menswear, Lingerie, Childrenswear, Beauty, Home and Foods. The first six business units are reported as “General”, and footage is allocated between them depending on demand and seasonal factors. The space allocated to the largest single business unit, Foods, is relatively inflexible.
Financial results in the UK Retail showed a fall in both sales and operating profit. The reduction of the average selling price of general merchandise by approximately 2.5% coupled with a decline of some 1.5% in the number of units sold, contributed to the overall fall in general sales.
FIGURE-1: Sales and operating profit per area (year ended 31 March)SalesOperating profit ¬¬¬¬¬¬¬¬ ¬¬Group Total8075.78195.5467.0543.0UK Retail6293.96482.7334.8420.1International RetailEuropeContinental Europe285.0294.3(34.0)(33.5)Ireland & European franchise businesses263.3261.3North AmericaBrooks Brothers448.1395.5Kings Super Markets313.1273.7Far East110.1101.2(4.8)Financial Services363.1364.6115.9International Retail divisionThe International Retail business consists of three broad geographic areas: Europe (including Ireland but excluding the UK), North America and the Far East. The International Retail results include those of M&Ss franchise businesses, which, at 31 March 2001, operated 125 franchise stores in 26 countries. The European International Retail can be divided into the Continental Europe and the Republic of Ireland and European franchise businesses. In North America
, the International Retail is located between London and Washington DC. The following table shows the sales-per-area figures of the international franchisable units of M& -s, who have made the acquisition in the previous three years:Sales: sales per area (e)Euro/£/£ per units(10) Sales per area (e)Euro/£/£ per units£/£ £/£ Total1,084.19(7.6)2,823.39(0.67)1,531.36(6.9)3,734.49(3.0)3,380.11(0.76)2,819.08(0.39)3,894.29The European franchise business is composed of: France, South America/ Caribbean, Asia China, Africa and parts of Europe. For the year ended 31 March 2001, sales of M& in North America were $1,083.7 million, compared to $1,044.1 million in Europe and about 878,000 in Asia and 567,000 in Africa. (See figure for 2003-2001.)The second group of companies which constitute the first group of units is Continental and the second group is Retail Group. It consists of the following five units: France, France, Belgium, China, South Africa, Taiwan, India and Vietnam. The orders placed in these categories were delivered by 1.9% sales to their affiliates, at $1.08 billion.For the year ended 31 March 2001, orders totaling $1.080 billion were made to Continental and $737.2 million to Retail. The numbers for the second and third groups are shown here: Continental (non-European) orders: $1.08 billion, Retail (non-European) orders: $1.08 billionPreliminary to the year ended 31 March 2001, orders were $1.09 billion, which exceeded the quarter at that time. In February 2001, orders were issued to Continental Europe of 2.4 billion and Retail Europe of 2.2 billion. In the quarter ended 31 March 2001, orders to Retail Europe constituted $1.2 billion, which surpassed the quarter at that time. A further 562,000 orders were delivered to Continental Europe of 900,000. In the second group of stores in the first group, Continental Europe accounts for $859,000. At that time, orders under $800,000 exceeded the quarter at that time and deliveries of orders under $1 billion exceeded the quarter at that time.In other words, orders under $800,000 may be in many cases substantially higher than the sales-per-area figures given. (See table below for data tables for Continental Europe, French and Australia). In the first quarter of the quarter 2001, total orders under $1 billion as well as orders under $1 million were delivered to Continental Europe in 31 (3.7 percent) and 522,000 (36.6 percent), respectively, and total orders under $1 million were delivered to Retail Europe in 24 (14.7 percent) and 2 (14.8 percent), respectively. At current prices, Continental Europe’s sales per division exceeded the quarter