Marks and Spencer 2009 Annual Report Download - page 19

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Key actions included changes to the management structure of logistics to
bring GM and Food together, renegotiation of our key third party logistics
contracts, rationalisation of our warehouse network, the introduction of
mechanisation in two of our food warehouses, and the streamlining of
our international distribution systems.
Marketing Our marketing costs were 8.6% lower in 2008/09 at £127.4m
and should be lower again in 2009/10. We will continue to be more effective
in our targeting and use of this spend.
Support We reduced spend in support areas by 2.4% to £391.6m,
through disciplined control of expenditure and reduction in wasted activity.
During the year we made additional changes that will reduce our cost
base in 2009/10. We closed 26 of our smaller, under-performing stores
in order to focus on sites better suited to our customers needs. We also
reduced headcount across our Head Offices by 15%, redeploying as
many colleagues as possible; and made changes to our UK defined
benefit pension scheme. These actions together with ongoing tight cost
control mean that we expect costs in 2009/10 to be 1% below 2008/09
(excluding bonus).
Investing in the business
Following significant investment in the business over the last three years, we
reduced capital expenditure to £652m in 2008/09 from over £1bn in 2007/08.
Stores We opened 75 stores during the year in out-of-town, retail park
and high street locations, while continuing to review the portfolio to ensure
it is working to its fullest potential. These openings included our 100th BP
Simply Food store, with our franchise ‘travel hubs’ continuing to perform
well in service stations, train stations and airports. We also improved
the look and feel of 24 stores, with 80% of our portfolio now in the new
modernised format. We will complete the remaining 20% of the portfolio
in the next few years.
IT We are delivering new tills and point of sale software, which will speed
up customer transactions and allow store colleagues to spend more time
on the shop floor and less time carrying out office duties. We are also
improving our trading and administration systems.
Logistics Construction is underway on a distribution centre in Bradford that
will open in late 2010 – consolidating our stock holdings and improving our
speed and flexibility in getting product into stores. Following two trials we
are also investing in mechanising our food distribution centres to improve
accuracy and efficiency in picking chilled goods.
International We are investing in systems and infrastructure so that goods
produced overseas can now be transported directly to all of our markets
without the need to first come through the UK. This will dramatically reduce
export costs and speed up distribution.
We will spend c£400m in 2009/10, shifting the focus of our capital
expenditure from our property portfolio, where we have made considerable
investment over the last three years, to our IT and supply chain infrastructure.
This will support our international expansion plans and our continued
growth online. It will also increase efficiency in the supply chain leading to
lower costs, as well as better product availability in-store.
Group capital expenditure 2008/09
£652m
-38.2%
Group capital expenditure 2009/10
c £400m
Maintenance
Supply chain
and technology
International
New stores
Modernisation
programme
Modernisation programme
2008/09
2007/08 £536m
£216m
New stores
2008/09
2007/08 £203m
£150m
Supply chain and technology
2008/09
2007/08 £162m
£188m
Maintenance
2008/09 £58m
2007/08 £106m
International
2008/09
2007/08 £48m
£40m