Marks and Spencer 2008 Annual Report Download - page 30

28 MARKS AND SPENCER GROUP PLC
International
In 2007/08 we announced plans to grow our
International business to between 15% and
20% of total Group revenues within the next
five years.
We’re pleased to report strong progress
towards this goal. Not only have we
expanded our franchise operation, but
we have also entered into partnerships
in some of the world’s most dynamic
emerging economies.
A growing contribution
In 2007/08 our International business
contributed over 7.9% of total Group
turnover. At £712.9m, sales were up
16.8% on last year, and operating profit
was up 33% to £116.4m.
During the year, we increased our overseas
stores by 38 bringing the total to 278,
and increased our space by over 18% to
almost 266,400 sq m. In 2007/08 we entered
Lithuania, Serbia, Taiwan and Ukraine, taking
our global reach to 39 territories.
A flexible business model
Our expansion to date has been primarily
through franchising which remains our
preferred model for smaller or particularly
challenging markets.
Looking ahead though, we intend to invest
our own capital to increase returns to our
shareholders. In some cases we will invest
alongside partners who will bring local
knowledge and expertise. In other markets
we may choose to go it alone.
One of the most exciting examples of this
new plan can be seen in India, where in April
2008 we announced our intention to open
up to 50 new stores in the next five years
with Reliance Retail.
At the end of 2007/08 we also completed
two deals in Europe with existing franchise
partners. The first in February 2008 was
with the Marinopoulos Group, the leading
private company in Greece. Marinopoulos has
been our franchise partner for 30 years and
currently operates 38 M&S stores in Greece
and the Balkan states, including Romania and
Bulgaria, as well as Switzerland. The €50m
deal to acquire a 50% share of the business
will see an additional 50 new stores opened in
these markets over the next few years.
The second deal was signed in March
2008 with another existing franchise partner
– COMS a.s – to expand in Central and
Eastern Europe. With a 51% stake in the
partnership, we will work to open around
30 new stores in the Czech Republic,
Slovakia, Latvia, Lithuania and Estonia
over the next few years.
Investing in Ireland
In 2007/08 we opened four
new stores in the Republic
of Ireland bringing the
portfolio up to 17 stores in
total. The pipeline of future
developments is strong, and
we expect to add between
30% and 40% to our footage
in the next few years.
Expanding in India
One of the world’s fastest growing economies, India is expected to become the world’s
fifth largest consumer market by 2025 (McKinsey). With an estimated 350 million
middle-class consumer base by 2015, India presents an exciting opportunity for growth.
Whilst we have traded in India for a number of years through a franchise agreement,
in view of the long term opportunity, we set out to find a new partner who could help
us grow in the market. One organisation stood out from the crowd, and in April 2008
we entered into a partnership with Reliance Retail, subject to the approval of the Indian
Government’s Foreign Investment Promotion Board and certain other conditions.
Reliance has great strength in technology, logistics and property in India.
With a 51% stake in the venture, we will work with Reliance to open around 50 new,
stores in the next five years. The new stores will sell a wider range of products than
previously, and at lower prices, including a full range of clothing and homeware, and
a growing number of products sourced from local suppliers.
INDIA
Deal signed
with Reliance
Retail
Stake in
partnership
New stores
in the next
five years
April
2008
51%
30-50
16.8%
Sales increase