Marks and Spencer 1998 Annual Report Download - page 26

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Far East
DESPITE A SAVAGE DOWNTURN IN ASIAN ECONOMIES, WE ARE CONFIDENT
THAT OUR LONG-TERM STRATEGY FOR THIS REGION IS ON TRACK.
a very mixed year. While
the first quarter saw us sustain highly
profitable growth throughout the region,
the remaining months brought a sudden
and critical drop in retail spending across
many markets.
Although the difficult conditions seem
set to continue in the medium term,
Marks & Spencer’s positioning as an
affordable, high-quality Western brand
remains durable. Our excellent franchise
partners are maintaining high standards
and we have made important progress in
developing our regional operations,
particularly in local sourcing, distribution,
training and management.
During the year the number of owned
and franchised stores rose by nine to 43,
while total footage increased by 28% to
477,000 sq ft. For the future we have
reviewed the timing, but not the strategy,
of further expansion.
BUILDING THE BRAND IN HONG KONG
Our 10 stores in H ong Kong represent all
our directly-owned business in the Far
East. We opened two suburban stores
there during the year, demonstrating our
ability to move beyond central districts
into areas where we serve mainly local
customers. This expertise is of value to
our representative office in Shanghai,
where we are studying the most practical
ways to develop a retail business in
mainland China.
Recognition of our brand and of M & S
as a blue-chip employer is growing in
Hong Kong. Sales grew strongly prior to
the downturn and we made good progress
in management training and our
innovatory programme for National
Vocational Q ualifications.
A SIGNIFICANT FRANCHISE BUSINESS
ACROSS THE REGION
Throughout our overseas operations we
adjust strategy to suit local conditions. For
much of the Far East the Group operates
through franchise stores, which have
proved effective for swiftly and profitably
growing into new markets, while limiting
our capital risk. Currently there are 33
franchise stores in six markets across the
region. These businesses have inevitably
been hit by the region’s economic
difficulties. H owever, the positive response
of our partners, coupled with the
underlying strength of our offer, gives us
confidence in their long-term prospects.
During the year new stores opened in
Thailand, the Philippines and Indonesia.
Three stores opened by our franchise
partner in Korea – the first in this market
– were unfortunately hit by the economic
crisis before they became established. They
may face some rationalisation in coming
months.
In Australia we formed a partnership
with an experienced local clothing retailer.
If the right sites emerge in Sydney and
Melbourne, we hope to open franchise
footage in this new market in the coming
year.
TURNOVER £128.3m
OPERATING PROFIT £18.3m
NUMBER OF MA RKS & SPENCER STORES 10
NUMBER OF FRA NCHISE STORES 33
This was
24 OPERATIONAL REVIEW