Marks and Spencer 2004 Annual Report Download - page 4

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Marks and Spencer Group plc
Group operating profit before
exceptional items increased last
year by 12% to £866 million (on a 53
week basis), due to the relatively
strong performance from Menswear,
Lingerie and women’s casualwear,
improved margins and tight control of
costs. On a 52 week basis Group
operating profit before exceptional
items increased by 6.5% to £822.9
million after absorbing £59 million for
the launch of the ‘&more’ card.
Clothing market share for the year
declined by 0.2 percentage points to
11%, because of a decline in
Womenswear and weak performance
in Childrenswear. We have
strengthened our clothing teams,
particularly in Womenswear, to deliver
our key priorities of improved ranges,
choice and value. This includes the
major expansion of our Limited
Collection, a new approach to our
‘smartwear’ offer, which will arrive in
66 stores from September 2004. We
are delivering greater choice to
customers in 90 stores, building on
the success of initial trials. And we will
make the Womenswear sales floors
easier to shop learning from our
success in Menswear. We continue to
reinvest part of our sourcing gains in
lower prices, particularly in our entry
price points.
Food held its market share last year,
benefiting from the roll-out of Simply
Food stores. Consumers are tending
to increase their spend on large,
‘weekly’, supermarket shops and,
with the increasing number of quality
convenience stores, are spreading
their ‘top up’ shops more widely.
We, therefore, face some significant
structural and competitive issues but
I’m confident that we can respond
to them.
Our customers continue to rate
our food offer more highly than our
competition. They see us as selling
food that is a real treat and of better
quality. We plan to develop the
appeal of our offer while reducing
reasons for customers to go elsewhere.
We are on-track against our existing
plans to open 500,000 sq ft of
additional Food-only space by March
2006. We are planning to extend this
total footage and will communicate
our plans later this year. We will
continue to develop our product
ranges in global and special occasion
food as well as in fresh and healthy
food. We aim to renew at least 30%
of our food ranges this year.
We will follow the opening of the
Marks & Spencer Lifestore in
Gateshead with two further pilot
stores. We will also continue to re-
position our Home offer, taking
lessons from the recent introduction
of new product.
Our significant investment in Money
has created a customer base of over
two million ‘&more’ credit and loyalty
card accounts. Our immediate priority
is to increase card spending and
balances so that the credit card moves
into profit during 2006.
More than five years ago we moved
manufacturing of our clothing offshore
and this now represents over 90% of
our production. This move improved
our margins by 7.6% between 2000
and 2003. We are committed to
achieve a further 3% increase in
margins by 2006 through additional
changes to our supply chain.
The rapid and low cost refurbishment
of our stores over the last three years
helped in our initial turnaround, but
we want to go further now, focusing
on our existing city centre and high
street stores and testing new concepts.
We are fortunate to have a dedicated
workforce with a relatively low staff
turnover, but we can be more efficient.
As a result we will be accelerating our
Retail Change Programme in stores
and cutting costs at our Head Offices
with the expected loss of 1,000 jobs.
I have strengthened my top team,
appointing Vittorio Radice to take
responsibility for Clothing, store
development and Home, Maurice
Helfgott to take charge of Food and
Mark McKeon to be Executive Director
of Retail, International and Outlets.
In the last three years we have
restructured the business, stabilised
our core operations and opened up
routes to future growth. However, we
still have a significant amount of work
to do to secure the full potential of
the business.
I am under no illusions about the
challenges we face, but I am confident
we can succeed. I believe that our
plans can put the business on a more
secure footing and deliver benefits to
our customers, employees,
shareholders and suppliers.
Roger Holmes
Chief Executive
Chief Executive’s review ROGER HOLMES
In the last year we have established new areas of growth in Money
and Home, but the initial surge in recovery of our core Clothing
and Food business faltered. We will now take fundamental action to
improve our products, supply chain, stores and ways of working.