Marks and Spencer 2016 Annual Report Download - page 18

16
MARKS AND SPENCER GROUP PLC
STRATEGIC REPORT
OPERATING PERFORMANCE
CONTINUED
R A We take a rigorous approach to
maintaining strict ethical standards in our
supply chain. The standards we expect from
our suppliers are clearly defi ned and our
regional teams in all the areas we source
from regularly visit our suppliers’ factories
to ensure our standards are upheld. Since
2010 we have trained over 762,000 supply
chain workers in subjects such as fi nancial
literacy, worker rights and healthcare. We
understand that when people are treated
with respect, work in decent conditions
and earn fair rates of pay, they, their families
and their companies benefi t. Ultimately,
our customers benefi t too, as they can
have the peace of mind knowing that we
are sourcing our products in the right way.
INTERNATIONAL
Our International business had a
challenging year. We now operate in 58
markets, with 468 international stores and
an online presence in 21 markets. Like-for-
like sales in our owned businesses rose by
1%. However, the combination of Euro
devaluation, challenging macro-economic
environments and operational infrastructure
challenges impacted profi ts, which fell
39.6%. Chinese economic growth slowed,
which a ected the number of Chinese
tourists visiting Hong Kong; geopolitical
unrest hit our franchise stores in Russia,
Turkey and Ukraine; and falling oil prices
impacted franchise stores in the Middle East.
Our European performance was hit by the
adverse exchange rate as we absorbed the
additional costs rather than pass them on
to customers in higher prices. We closed
our 12 stores in the Balkans, and a number
of stores in Western Europe and China
underperformed. As a result, overall
performance was behind our expectations
and this resulted in an impairment charge of
£102.4m, which signifi cantly impacted
statutory profi t.
Whilst our Food sales grew by 23.4%,
our international performance in Clothing
& Home was not satisfactory. Our exposure
to emerging markets and weaker consumer
demand will remain into 2016/17. Some
of the internal issues that a ected our
Clothing & Home business in the UK were
also felt in our International operations.
We are working hard to improve our
international supply chain as we su ered
from availability issues in some territories.
Despite these challenges, we remain
committed to the long-term opportunities
that exist internationally and we continue
to develop the shopping experience. We
introduced a boutique in-store format
at our new Brussels fl agship and rolled this
out successfully to a handful of stores in
Asia, including our fi rst store in Beijing.
Our Indian business continued to perform
strongly and delivered double digit like-for-
like growth. We opened eight new stores in
India and it now has the largest number of
M&S stores outside the UK.
We continued to expand our standalone
Food presence internationally, targeting
Hong Kong and Western Europe; with seven
openings, more customers now have
access to our high-quality, di erentiated
food o er.
As consumers the world over are
increasingly choosing to shop online, we
are embracing this channel shift and taking
M&S into new markets in a capital-light,
low-risk way. Whilst still a relatively small
part of our business, our international
online business performed well. We
launched owned websites in seven
countries, including Australia, and our
franchise partners also launched hybrid
‘bricks and clicks’ strategies. We experienced
solid growth with the T-Mall marketplace in
China and expanded on the leading
marketplaces in India, Myntra and Flipkart,
benefi ting from their scale, infrastructure
and local expertise.
R Testing global economic conditions
pose a potential risk to our business.
We benefi t from the local knowledge
provided by franchise and joint venture
partnerships and ensure we have a
su ciently broad geographical spread.
We are looking at every part of our
International operations to make sure
our strategy is fi t for the future.
SERVING OUR CUSTOMERS
We constantly monitor and analyse how
our customers shop to ensure we adapt
to their changing behaviour. We want to
give customers as simple and enjoyable
a shopping experience as possible,
whichever way they choose to shop with
us. Some 7.4 million customers shopped
through M&S.com this year, our highest ever
number. The website saw record levels
of customer satisfaction. Sales increased
by 23.4%, ahead of the market, and we grew
our online market share.
Two years after its launch, M&S.com is
easier to navigate and richer in content.
Customers like our strong editorial voice
and fi nd the site both aspirational and
A We launched a new campaign to raise
£13m over the next fi ve years in support of
Breast Cancer Now. It featured seven women
whose lives have been a ected by the disease.
In collaboration with Rosie Huntington-Whiteley,
we launched a post-surgery bra; the fi rst in the
Rosie for Autograph range.
Our creative digital division, M&S Venture Lab,
uses lean start-up techniques to experiment with
ways to improve the shopping experience for our
customers. Projects include TryTuesday.com, an
online personal stylist service, and the Cook with
M&S recipe app, which includes clever features like
timers and a step-by-step cooking mode.
A We teamed up with Style for Soldiers as the
charity’s o cial tailoring partner, providing suits
and shoes for injured servicemen trying to get
back into work and embarking on new careers.
David Gandy, designer of our successful David
Gandy for Autograph swimwear and loungewear
range, is also an ambassador to the charity.