FINANCIAL ANALYSIS OF MARKS & SPENCER

Financial Analysis of Marks & Spencer



Table of Contents

Introduction3

Historical Overview3

Analysis of Data6

Revenue and Growth6

Profitability Ratios7

Gross Profit7

Net Profit Margin7

ROCE8

Net Asset Turnover9

EBITDA/Capital employed9

Limitation of Ratio Analysis:10

Conclusion11

References13

Financial Analysis of Marks & Spencer

Introduction

Marks and Spencer Group (M&S) is a holding company. Company is engaged, through its subsidiaries, in the retailing of home products and clothing in addition to food, sourced from around 2,000 suppliers worldwide. Two operating segments are operated by Co.: UK and International. The UK retail business and UK franchise operations are comprised by the UK segment. Headquartered in London, M&S operates in more than 40 countries across Europe, Asia and the Middle East and 78,169 people are employed by it.

In the financial year 2011 (FY2011), revenues of £9,740.3 million was recorded by the company (i.e. around $15,158.8 million); over FY2010, there was an increase of 2.1%. In FY2011, £836.9 million was the operating profit of M&S (about $1,302.5 million), a decline of 1.8% in comparison to FY2010. £612 million was the net profit in FY2011 that approximates $952.5 million; there was an increase of 16.3% over FY2010. (Marketline, 2012, p.3)

Historical Overview

In 1894, with the partnership of Michael Marks who was a small retailer and Tom Spencer- a cashier at a wholesale company, the foundation of Marks and Spencer plc was laid. A warehouse was acquired by them in Manchester, in 1901, in 1904, in Leeds, they acquired retail premises. Marks & Spencer, in 1914, purchased the Penny Bazaar Company in London, when the company was being run by their successors. They took on a policy change in 1920, and rather than purchasing from wholesalers, they began buying from manufacturers directly. They started selling textiles in 1926, and started operating their flagship store in 1930 at Marble Arch in London. In 1931, their food department was become open. The company tried many innovative things, between 1930 and 1955, for instance opening up of café bars, setting up a staff welfare service, opening a research lab and experimenting with the self service option. All their goods were sold, by 1956, under the St. Michael Label. (www.marksandspencer.com)

M&S, in April 2012, declared that it will go for second-hand clothes at UK outlets so as to recycle into other fabrics or reuse overseas by the Oxfam charity in a plan to cut waste.

M&S 2011 in figures (M&S annual report, 2011, p.2 - 4):

Total turnover £9.7bn

Total UK turnover of £8.7bn split between General Merchandise (Clothing & Home) and Food.

Clothing & Home £4.2bn sales (+3.9% in sales from 2010): UK Market Share 11.7% (+0.5%) M&S is the UK's largest clothing retailer.

Food £4.5bn sales (+4.1% in sales from 2010) UK market share: 3.9% (+0.3%) One of UK's leading provider of “high quality” food

Online: M&S Direct £543m sales (+31% in sales from 2010)

International: £1.0bn (+6.1% in sales from 2010)

Mark and Spencer UK and International Operations

UK retail sales are approximated to be around £303bn (www.brc.org.uk). From the above list of top 10 retailers in UK, one can see that M&S and John Lewis Partnership ...