Anna Draganova

Marks & Spencer is a household name in the UK. It was founded in 189, when Michael Marks, a Russian born Polish refugee formed a partnership with Tom Spencer, a former cashier from the wholesale company IJ Dewhirst.

Today it is one of the leading UK retailers, with over 21 million people visiting its stores every week. Its aim is ‘to offer stylish, high quality, great value clothing and home products, as well as outstanding quality foods, responsibly sourced from around 2000 suppliers globally’. It employs over 75000 people in the UK and abroad, and has 622 UK stores, as well as an expanding international business.

In 1998 it became the first British retailer to make a pre-tax profit of over £1 billion. However, in the early 1990s, it plunged into a crisis which lasted for several years. By 2004, the company’s financial performance had deteriorated to such an extent that it was becoming increasingly vulnerable to takeover. With restructuring in the company and the appointment of Stuart Rose as Chief Executive, the company returned to growth and has shown substantial increases in operating profits and revenues since. The key financial highlights from the year to March 2008 are:

  • Profit before taxation of £821 million, an increase of 24% on the previous year
  • Sales revenue of £9,022 million, an increase of 5.05% on the previous year
  • Total net assets of £1,964 million
  • Earnings per share up 7.9% to 43.6p
  • Retained earnings of £5,707.9 million

On 2nd October this year, the company announced its results for the second quarter of this year (July, August, September). Overall sales were up by 0.4%, but in the UK sales were down 1.6%. These were disappointing results for the company and less than previously forecast. The Chairman, Stuart Rose referred to the current economic downturn, acknowledging that ‘Consumer confidence remains fragile and the retail environment unpredictable’.

As a result of poor sales, the company is now aiming to manage operating costs more tightly, and has cut back on its capital expenditure budget. It had previously planned to spend £800-900 million in the current financial year, but is now expecting to reduce that to £700 million. This planned £700 million investment will be spend mainly on a modernisation programme, new stores, the supply chain and technology.

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There are many ways that a big company such as M&S can raise finance so they can meet its objectives. There are two main sources – Internal, which are available to the company straight away but might be limited, and External when the company might have to go to bank or other institutions to help them to raise funds.

Internal is when the company is using different methods within the business to raise more money to meet their objectives:

  • Using retain ...

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