Analysis of Marks and Spencer Group Plc

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Analysis of Marks and Spencer Group PLC

Introduction
Marks and Spencer Group (M&S) is an acknowledged leader in retailing foods, clothing, fashion items and home ware in UK. M&S employs more than 77,000 persons and operates in around 40 countries outside UK, however 90% of its revenues - GBP 8,567.9 million came from UK while the rest, only GBP 968.7 million came from international sales in the financial year ending April 2010. The group’s profit rose to GBP 843.9 million representing around 10% increase over previous financial year. Both the Value market share and Volume market share hovered around 11% for clothing and footwear and around 4% for food segments. The M&S’ share price was at GBP 3.46 on 27th August with yearly high at GBP 4.12. M&S revenues rose 5.1% in 2008 (over 2007) while operating profit increased by 15.8 % over 2007 (“M&S Corporate Home”, 2010).

SWOT Analysis
Strengths
M&S has the leading position in UK with 11% share of general merchandise and its revenues and profits have shown consistent growth since 2006. Annual ratios for 2010 show improvement and recovery from last year’s recession. Operating profit margin for FY 2010, though not as healthy as was in the years 2006 to 2008, is still an improvement over the last year. Latest Current ratio statistic shows improvement and is at its healthiest since 2006. Account Receivable Days, ratio, is decreasing progressively showing improved ability of the company to convert its inventories into cash. M&S’ strong market position is fortified by presence of its 690 stores across UK along with 320 international stores, thus providing a significant competitive advantage. The company’s international presence has increased from 291 stores in FY 2009 to 320 stores in FY 2010. In FY 2008, the company’s international business accounted for 7.9% of total revenues which had grown to 10% by FY 2010. International operations help in diversifying risk and helping M&S in better hedging against regional economic fluctuations, and if M&S’ international presences were more pronounced than effects of recession would have been less severe (“Datamonitor M&S SWOT”, 2010) . Direct online sales have improved by 27% for FY 2010, reaching GBP 413 million, and M&S targets the figure of GBP 500 million by 2010/11 (“M&S Corporate Website”). M&S has an average of 21 million customers shopping for food, clothes and household items every week signifying that this brand has a strong position in the retail market.

Annual Key Financial Items|
 |  | 04/03/2010
GBP| 03/28/2009
GBP| 03/29/2008
GBP| 03/31/2007
GBP| 04/01/2006
GBP
restated|
Income Statement Key Items|
Net Sales or Revenues| 9,536.6| 9,062.1| 9,022.0| 8,588.1| 7,797.7| Growth| 5.24%| 0.44%| 5.05%| 10.14%| 4.10%|
Cost of Goods Sold| 5,918.1| 5,690.2| 5,535.2| 5,246.9| 5,885.3| % of Sales| 62.06%| 62.79%| 61.35%| 61.10%| 75.47%|
Gross Profit| 3,190.6| 2,962.9| 3,169.2| 3,058.5| 1,638.4| Gross Margin| 33.46%| 32.70%| 35.13%| 35.61%| 21.01%| (“Thomsan Banker”, 2010)

Annual Ratios Summary|
 | 04/03/2010| 03/28/2009| 03/29/2008| 03/31/2007| 04/01/2006| Profitability Ratios|
Return on Equity - Total| 24.77| 25.16| 45.61| 46.30| 52.34| Operating Profit Margin| 8.25| 8.03| 11.43| 11.34| 10.74| Liquidity Ratios|
Quick Ratio| 0.39| 0.30| 0.25| 0.22| 0.28|
Current Ratio| 0.80| 0.60| 0.59| 0.53| 0.58|
Cash & Equivalents % Current Assets| 41.15| 40.91| 32.60| 27.58| 42.71| Receivables % Total Current Assets| 7.62| 8.67| 9.94| 14.15| 6.08| Inventories % Total Current Assets| 40.34| 38.57| 41.37| 49.18| 32.77| Accounts Receivable Days| 4.52| 4.79| 4.80| 4.02| 3.32| Inventories - Days Held| 35.44| 32.87| 29.85| 27.50| 27.05| (“Thomsan Banker”, 2010)

Weaknesses
M&S’ UK sales had declined by -1.7% for FY 2008 however since then for...
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