Gbirtwistle_1 - The Recovery of Marks Spencer Grete Birtwistle Glasgow Caledonian University Abstract For decades Marks Spencer(M&S was the most

Gbirtwistle_1 - The Recovery of Marks Spencer Grete...

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The Recovery of Marks & Spencer Grete Birtwistle, Glasgow Caledonian University Abstract For decades Marks & Spencer (M&S) was the most successful retailer in the world. Its clothes were affordable, the quality was excellent and its food department created the first range of high quality ready-made meals. The City loved it, staff enjoyed the best benefits on the high street and the company was highly profitable. In 1998, it was the first UK retailer to make more than £1 billion in profit, but in the following year it all went wrong. The media went to town, customers voted with their feet and the shares plunged. This case study sets out to examine how Marks & Spencer recovered its position with consumers, the media and the City. Introduction In 1882, Michael Marks established the firm that was to become a household name in the UK by borrowing £5 from Isaac Dewhirst. He used the money to purchase goods from the Dewhirst warehouse and pedalled them around Yorkshire villages. Two years later he had market stalls in Leeds and the surrounding areas. Purchasing regularly from Dewhirst he met with one of their cashiers, Tom Spencer, and the rest is history. In 1998, when Richard Greenbury was the Chairman and Chief Executive, profit before tax for the year ending March was £1.2bn; almost double the £640m profit made six years previously in 1992 with return on sales being increased to 14 per cent (Bevan, 2002). However, customers were beginning to find the M&S offer tired, providing poor value, with boring fashion styles and sales began to decline. In April 1999, Kate Rankine wrote in the Telegraph Saturday magazine the most damaging article ever written about M&S stating that the clothes looked drab and dowdy while the shop assistants, if you could find one, were often rude and unhelpful (Bevan, 2002). This opened the floodgates of negative publicity and the share price plummeted. The directors, Peter Salesbury, Luc Vandevelde and Roger Holmes, all commenced various recovery projects and brought in consultants but any upturn was short lived (Table 1) (Rankine, 2003). Table 1: Profit and Loss from 1998 to 2004 Year ending 31st March 1998 £m 52 weeks 1999 £m 52 weeks 2000 £m 53 weeks 2001 £m 52 weeks 2002 £m 52 weeks 2003 £m 52 weeks 2004 £m 53 weeks Turnover 8,243.3 8,224.0 8,195.5 8,075.7 8,135.4 7399.0 7,727.1 Operating profit 1,103.7 512.0 471.0 440.5 590.5 622.8 722.7 Dividends 14.3 14.4 9.0 9.0 9.5 10.5 11.5 Retained Profit/(Loss) for the year 406.8 (41.2) 17.9 (263.8) (85.9) 261.3 289.1 Source: Marks & Spencer Annual Reports (2001, 2002, 2003, 2004) 1568
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