Marks and Spencer 2006 Annual Report Download - page 6

04 Marks and Spencer Group plc
Strong advertising, highlighting our quality
and value, drove more people into our
stores. Customer visits increased by nearly
350,000 a week to just over 15 million (last
year 14.7 million). In the last quarter, the
number of those purchasing also increased,
with a total of 10 million customers every
week. We expect to see this positive trend
continue as we reap the benefits of offering
better products, stores and customer service.
In Clothing, better values, better buying, and
better styling resulted in better performance.
Womenswear improved from September
with well-received ranges beginning to re-
establish our fashion credentials, including
more frequent additions of new product into
stores. ‘Per una’, led by George Davies and
his team, had another very strong year. It is
a major brand, approaching £500m, with
wide appeal and strong growth potential.
Menswear successfully rationalised its
brands and further extended its more
fashion-led ‘Autograph’ offer. Lingerie
benefited from a clearer offer with only five
brands, including the new ‘per una’ range.
Beauty performance was weak and we are
re-assessing our offer. Our share of the
childrenswear market remained level, with
school clothes and Babywear the sole areas
of strength. We restructured Childrenswear
in November 2005, handing responsibility
for it to our Womenswear and Menswear
teams, with the aim of regaining our leading
position in this important market.
Our decision to concentrate our Home offer
on stylish products with mainstream appeal
in our core areas of kitchen, dining,
bedroom and bathroom is working. Sales
increased over the year, supported primarily
by a strong performance in furniture and
very competitive pricing.
Food had a very successful year thanks to
a renewed focus on outstanding quality and
innovation, backed by powerful advertising.
Sales at £3.6bn were 7.0% higher and
3.6% ahead on like-for-like terms. Demand
for responsibly sourced, healthy food is a
strong trend we have successfully tapped,
not least with our ‘Eat Well’ products,
superfoods like pomegranates and
blueberries and our additive-free ‘Marks &
Spencer Cook!’ range. We continue to offer
everyday food of exceptional quality, like our
‘Oakham’ chicken. Customers again made
us their first choice for food at key times of
the year like Christmas and Easter.
Our stand-alone ‘Simply Food’ format also
performed strongly, supporting overall
performance. We are now opening around
one new store every week. We are
monitoring results of the initiatives we are
trialling in our Food Halls – ‘Hot Food to Go’
and our new bakeries, patisseries and
delicatessens – which we launched in
2005/06 to explore new opportunities
to extend our Food offer.
Our International business continued to
grow and we now have 198 franchise stores
in 30 territories, as well as wholly-owned
stores in Hong Kong and the Republic of
Ireland. We agreed the sale of Kings Super
Markets in the US, our only non-M&S
branded business, for £35.4m ($61.5m)
ahead of the year end. International sales
were up 14.7% to £522.7m (up 14.3%
at constant exchange rates).
M&S Money provided a net operating profit
of £9.6m from our ongoing partnership with
HSBC, to whom we sold the business in
2004. This is a strong franchise and we see
exciting opportunities to drive the business
in the future.
Product
Lower prices, quality maintained
Improving our values was the key objective
during the year. In many areas, we had
been uncompetitive. In response, we
repriced ranges across all price points,
without compromising our high quality
standards. We benchmark prices against
our nearest rivals to offer clear, competitive
choices at every level with the major focus
being on value for money. Customers have
responded very positively and their
perceptions on the value we offer improved
over the year.
Some 30% of our products are now at
‘Opening Price Points’. This compares with
12% in 2003/04. We saw strong sales on
basics such as the £6 bra, women’s
t-shirts from £5, men’s jeans at £9, three
saucepans for £9.50 and sofas from £349.
Our mid and higher priced products also
provide outstanding value and by the end of
the year we were seeing growth across all
price points.
Better buying
Better buying has also been an important
part of driving the business. Our buyers,
merchandisers and designers are trained
in our Buying Academy to make sure they
We have restructured our
prices, so that our customers
get clear choices and great
value right across our ranges.
31% of our products are now
at opening price points,
including £1-per-pair socks
and £5 t-shirts.
Good
31%
Better
52%
Best
17%
OUR PRICE
ARCHITECTURE