MARKS & SPENCER PLC1In 1985, Britain's best-known retailer was thesubject of a gusher of a book: Marks &Spencer: Anatomy of Britain's Most EfficientlyManaged Company. Nowadays, any book on the115-year-old food and clothing chain wouldneed a new title. Comedy of Errorsis more likeit.Businessweek – 18.10.99IntroductionMarks & Spencer Plc (from now on M&S) is an international retailer with 718 locationsacross 34 countries. The group sells clothing, footwear, gifts, home furnishings andfoods under the St. Michael trademark in its chain of 294 stores in the United Kingdom.Approximately half of the group's overseas stores are franchised to local partners. Thegroup also owns the clothing retailer Brooks Brothers and the Kings Super Marketschain in the United States of America. Direct mail helps M&S meet the core objectiveof providing customers with wider, easier access to their products such as homefurnishings, flowers, hampers and wine. The financial services comprise of operationsof the groups financial services companies providing account cards, personal loans, unittrust management, life assurance and pensions. Retailing accounted for 96% of fiscal2000 revenues and financial services, 4%.The company was always considered to have a great management support that helped inits growth. But the last years, M&S’s managers seem to fail on their strategic decisions,leading the group to lower and lower sales and profits. The share price is also droppingand shareholders feel insecure for the future (figure 2). Group structure and financial performance The group’s 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 thecompany had only £1.3m profit this year. For the same reason, the dividend cover wasalso zero. Last year the dividend cover was 1,0p as the company paid the shareholdersall its profit. For doing so the company had to cut the dividend from 14,4p to 9,0p. Thisyear 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, theInternational Retail and the Financial Services. UK Retail division1This case study has been written by Georgios Karaliopoulos and Oriol Amat, Department ofEconomics and Business, Universitat Pompeu Fabra (Barcelona). Some data relating restructuring costshave been forecasted by the authors of this case.1
The UK Retail division, the largest of the operating divisions, is itself sub-divided intoseven business units, each representing a defined area of merchandise: Womenswear,Menswear, Lingerie, Childrenswear, Beauty, Home and Foods. The first six businessunits are reported as “General”, and footage is allocated between them depending ondemand and seasonal factors. The space allocated to the largest single business unit,Foods, is relatively inflexible.