MARKS & SPENSER

Marks & Spenser



Marks and Spencer

Overview of the company

Mark & Spencer started off as a stall in 1884 by Michael Marks, with the philosophy to sell products at a moderate price to the customers. The company's new headquarter is in Paddington. The corporation does business in 30 countries and has faction proceedings in excess of £8bn.

Retailing business is accounted for 96% of the total revenue generated by the customers. 4% is received from financial services of Mark & Spencer's, which includes group financial services companies, which provides personal loans, account cards, life and pension insurances and unit trust management's systems for organizations and individual companies. Besides this, direct mail system helps M&S meet the core idea of providing clientele with easier entrée to their goods such as flowers, home furnishings, wine and hampers.

Financial Performance Analysis: 2006

In order to analyze the financial performance of the M&S, financial statements have been analyzed for the critical analysis of the company for the years 2005, 2006 and 2007, so that a proper scenario can be manipulated for the improvement or deterioration in the financial health of the company. Hence, ratio analysis, vertical and horizontal analysis is the best method to see the trend of the company.

Profitability

M&S ROCE indicate a steady enhancement through these three years which has increase 10% in 2005-06 while increase rate reduced to 1.5% in 2006-2007, this can affect the M&S shareholders' earning. This figure is higher than the borrowing rate as it also indicates how well management is using the debt and equity it has at its disposal (Freiberg, Jackie and Kevin Freiberg, 2006, pp 621).

Moreover, ROSF has reduced partially with 2% and hence increase in operating cost with 7.7% to £2,431.7m (£2,257.4m in 2006); the reason for this was the investment in expansion and modernization of M&S stores. Furthermore, M&S managed to enhance the growth in sales and profit over these three years. Due to the higher increase in buying efficiency and superior sales volume, M&S sales increases with 36.25% in 2006 which was due to the higher demand of the M&S product across the world, this increasing trend was maintained by the management of the M&S which reflects that the business's funds are being used effectively.

Efficiency

M&S Stock turnover is showing a decline trend which is has effect the Average stock turnover period days in 2005-2006 which is due to the reasonable level of sells has been experienced by the company in product such as clothing, food and household goods. Moreover, M7S have verified their efficiency by making it a priority to tighten control on stock levels so that revenue is not tied down. M&S has always invested the capital in such an investment which has always generated revenues for them productively which has been clear from the increase in revenue by 2.4 times in 2006 while this increasing trend remain constant with the management of the company comparative to the capital invested which is a slight decline from the 2006 figure but a ...