Rose began by announcing the sale of the financial services arm of the company to HSBC for £762m, the purchase of the Per Una brand from George Davies for £125m, the closure of the Lifestore experiment and 650 job cuts. His aim was to get the company back to functioning as “one shop”. He told City analysts – “there would be no growth in 2004-5 and indeed not much growth in 2005-6”. His motto was “focus, drive and broaden”. He began by focussing on quickly shifting £2bn of stock. He spent £500m on revamping the stores with new lighting, flooring and wide open spaces. He halved the number of area managers, whilst naming flagship stores and upgrading those store managers to inspire a sense of pride. He cut the 429 different pay groups down to 4, and for Christmas 2005 paid higher rates to attract better holiday staff. He reinstated the training programmes and forged ahead with an ambitious marketing and advertising campaign, which proved hugely successful and resulted in the best Christmas sales figures for 2 years. M&S had turned the corner.
In other to review the financial and business performance of a company for users of account, one most consider various analysis such as SWOT, financial ratio, profitability, efficiency, growth, financial risk, liquidity and investment. These analytical techniques will assist users of accounts such as investors to make investment decision, analyst to identify possible future acquisition and assist customer and suppliers to evaluate the company’s financial strength. The diagram below illustrates how analysts critically evaluate the performance of companies.
Diagram: 1
(Source: Boczko 2005 pg 149)
The company’s Financial Statements 2008 was audited by PricewaterhouseCoopers LLP according to IFRSs as adopted by the European Union and the Remuneration report was prepared in accordance with the Companies Act 1985 and, as regards to the group financial statements, Article 4 of the IAS Regulation.
According to the company financial statement for 2004 and 2008 the number of stores has increased from 375 to 622 respectively and the simply food sores has increased from 33 to 98(including 64 Bp stores).
From the table below, clothing use to account for 50.1% of their uk retail sale in 2004 but by 2008 food has taken a bigger share moving from 48.4% in 2004 to51.1% in 2008 these could be as a result of opening of more simply food stores and their total turnover has also increased from £8301m in 2004 to £9,022m in 2008.
Review and Comparison of Marks and Spencer Share Price
Marks and Spencer Group Plc is listed on the FTSE 100 and their shares are traded on the London Stock Exchange. As Marks and Spencer Group Plc operates in the retailing business, a review of their share price movement will be compared to like-to-like business such as Next Plc, Arcadia group and Tesco plc.
The FTSE 100 in recent years have performed terribly and the recent economic crisis such as the UK going in to recession has not helped matters and the following quote from the Financial Times website confirms the above statement; ‘As of last close on Nov 10 2008, FTSE 100 Index (FTSE: FSI) closed at 4,404, 20.15% above the 52 week low of 3,665 set on October 27, 2008,’ (ft.com 2008).
The graph above (diagram 2) illustrates and confirms FT statement with regards to shares price plummeting in the past year and Marks and Spencer Group Plc share price peaked in 2007. Since then there has been continuous drop in price. This is not favourable for the company as they may have to result in debt financing to raise funds as part of there core plan for long term growth such as continuous expansion in the emerging market.
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PERFORMANCE
- The number of stores has increased from 375 to 622 and the simply food stores has increased from 33 to 98(including 64 BP Stores).
- Clothing sales account for 50.1% of the UK retail sale in 2004 but by 2008 Food retail has taken a bigger share moving from 48.4% in 2004 to 51.1% in 2008
- Total turnover has also increased from £8301m in 2004 to £9,022m in 2008.
- Marks and Spencer Group Plc is listed on the FTSE 100 and their shares are traded on the London Stock Exchange.
By 2004 M&S International comprises 9 wholly –owned stores in Hong Kong and 155 franchised stores in 28 territories.
In 2006 the company planned an ambitious international expansion programme to open an overseas store every week for the next three years.
The scale of the expansion scheme - 150 new outlets - is substantially greater that the group had so far indicated. At the retailer's annual profits announcement Stuart Rose said he had plans for 25-30 new overseas stores.
The programme was to take the total number of M&S international outlets to more than 350.
The vast majority of the new stores would be franchised operations, where M&S sets out how the stores should look and sells its branded goods, but accepts no responsibility for the running of each store.
However, some of the new outlets were likely to be directly owned by M&S, marking a new strategy for Mr Rose, who is less than halfway through a £570m plan to refurbish M&S's UK outlets.
M&S operates in 29 countries and Hong Kong. It has 198 franchised outlets together with 19 directly owned stores in Hong Kong, Gibraltar and Ireland.
UK retailers have a chequered history in their attempts to export UK high street brands abroad. Among those to have tried to expand overseas and failed are Next, Dixons, J Sainsbury and Boots.
However an increasing number of retailers have turned to franchises to extend their brand without risking shareholders' cash. Among those using franchises are Debenhams and Mothercare, which had both opened stores in India with local partners.
Of the M&S franchised stores 65 are in the Asia-Pacific, 60 in Europe, 45 in Central Europe with the balance in central Asia and the Middle East. The new expansion scheme includes more stores in India - currently nine outlets - and Russia – two stores opened in Moscow in 2005 when M&S's international contributed 9% to group profits.
M&S used to own 38 stores across France, Germany and Spain, but they were closed down in 2001 which was later considered as a mistake.
In 2007/08 the group entered Lithuania, Serbia, Taiwan and Ukraine, taking its global reach to 39 territories in addition to the 30 new stores in Czech Republic, Slovakia, Latvia and Lithuania. The total number of international stores including franchised grew to 278.
The group acquired 51% of COSMS which already operates 13 M&S stores under franchise in the region. Only three weeks earlier the chain spent 50m Euros on a 50% stake with Marinopoulos, its franchise partner in Eastern Europe already operating 38 M&S stores in Greece, Romania, Bulgaria and Switzerland. The plan is to open 50 new stores in those markets and to invest in the world’s emerging economies including India and China.
Marks and Spencer Financial Services
Through the same core values : Quality, Value ,Service ,Innovation and Trust, Marks and Spencer Money (called initially Marks and Spencer Financial Services) was founded in 1985. The financial services play a significant roles within M&S offering a wide range of products in the credit, investment, insurance and savings sector.
Business growth has been steady across all sectors and the company now employs approximately 1,500 staff at its award winning headquarters in Chester (UK). In November 2004, Marks & Spencer sold M&S Money to HSBC, one of the world's largest banking and financial services organisations with over 9,500 offices in 76 countries and territories. Marks & Spencer and HSBC have entered into a 50:50 profit sharing partnership.
The M&S and loyalty scheme is a truly integrated customer proposition from Marks & Spencer, offering a competitive , linked to a reward scheme that spans the whole Marks & Spencer business.
Home Stores-Furniture
In 2007, M&S announced that new, dedicated stores for home furnishings were to be launched. Stores have been opened in in and in the Barton Square section of , Manchester. ( ). The Home Stores accounted for 5.4% of the total revenue for 2007.
The difference is that while homewares has been an integral part of the M&S offer for some years, there has, to date, never been a space of sufficient magnitude to allow everything that can be found in the catalogue to be shown under one roof.
Two years after the retailer pulled the plug on its failed Lifestore furniture venture in Gateshead, M&S is re-entering the sector with two stores already agreed and is understood to be looking for two more outlets for the new format, possibly in Preston and Cambridge.
Although a spokesperson for M&S said the new venture did not amount to a return to its failed Lifestore concept and could include other lines such as food as well as furniture, industry insiders said the company was following a trend set by other high street retailers.
Argos, Next and BHS are all understood to be looking for sites to expand their existing furniture offerings after the success of sales through online directories.
The failure of the Gateshead Lifestore outlet, which was sold to Ilva, the Danish retailer, as part of M&S's takeover defence in 2005, cost the company an estimated £15m and was credited as the reason for the demise of Vittorio Radice, its architect. Radice, M&S's home director at the time, had been planning to open 20 Lifestores across Britain.
Although investors and analysts have applauded the strong growth under Stuart Rose, the chief executive, matching the performance in the future will be a tough task.
Conclusion
Marks and Spencer Group Plc have performed relatively better than its competitor with the exception of Tescos, although its share price has dropped over the last few years but it market share has not dropped. The company’s has seen continuous growth of sales and profit margin through its expansion in to the emerging market and UK markets. Its liquidity ratio indicates management prudent and efficiency, but its gearing ratio debt over equity has increased over the last few years. The company’s trade receivable of 3.4 day compare to trade payable of 15 days shows the company receives its cash approximately 12 days before its pays its creditors. This financial and business review illustrated that in other to analyse a company’s financial performance analyst and users of account have to take in to consider various financial technique so as to understand and get a fair view of the company’s financial position.
WORD COUNT: 2,400 ………………MINUS EDDIE’S WORK
REFERENCES
1.Atrill, P. and McLaney, E. (2006) , 5th Edition, Financial Times/ Prentice Hall.
2.Bevan J. (2007). The Rise and Fall of Marks and Spencer…and how it rose again. P.161
3.Bevan J (2007). The Rise and Fall of Marks and Spencer…and how it rose again. P 228
Websites:
Finance Group Presentation--Appendix
2nd May 2009
Team members: Edet Umoren (team leader), Modupe Taiwo, Fiona Taylor, Kaliana Nikolaeva and Rodica Nedescu.
As a group we decided to work strategically in order to complete the project in time.
Combining work, family responsibilities, research on the topic and the group meetings was quite challenging , but by identifying the time and dates for our meetings and sticking to them, allocating the workload for each member of the group and supporting each other with the relevant information we managed to complete the work in time.
Group strategy: building up a successful team
- Dividing the Marks & Spencer financial report into segments
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Clear goals were agreed that everyone understood and committed to.
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Everyone understood the tasks they have to do and help each other.
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It had a coordinator who did adopt a democratic –he made sure the ‘’pieces’’ of the presentation were all together in the right place, encouraged the rest of the team and found solutions when they were needed
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There was a balance between the task (what do we need to do?) and the process (how do we achieve this?)
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There was a very supportive, informal atmosphere where members felt able to take risks and say what they thought
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The group was comfortable with disagreement and could successfully overcome differences in opinion.
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There was a lot of discussion in which everyone participates. Group members listen to each other and everyone's ideas were heard.
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Members felt free to have different opinions and say what they thought but this was done in a positive, constructive manner.
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Each member of the group completed a 1st draft and consulted himself/herself with the rest of the group in time in order to make the necessary changes, deciding together on the format of the presentation and content
- We did stick to the meeting times and attending all three meeting every Thursday evening at 6.15pm was very important for the project.
Good Communication Skills
A strong bond was established within the group –each member of the team was able to access the rest of the group via the group emails or via the telephone.
Conclusions –working in a group
Sourcing out the main purpose of the group work and what needs to be done was the base of our research. We enjoyed to work as part of a team, contributing to the whole process in a very supportive environment and realised that group projects are quite useful in building up work relationships, motivating people to progress and develop further.
