Wednesday, 7 November 2007

Marks & Spencer to take on Chinese and Indian Market

Marks & Spencer has decided to take on the Chinese and Indian market as it is stepping up investment to £1.1 billion for the move next year, despite a lacklustre sales performance. Mr Stuart Rose, chief executive of Marks & Spencer, said: “To get to where we are going, we have to make investments. If I said we are cutting back on capital expenditure you would say we have no bottle and the business is going nowhere.”

Underlying sales rose by 1.2%, below the 2% analysts had hoped for and the worst growth for nine quarters. In the six months to September 29, gross margins remained at the same levels as a year before. Mr Rose said: “I did say that weather is for wimps and I had to pretty much eat my words a few months ago. It is pretty tough out there and how much tougher it is going to get I don’t really know. I think it depends on the offer you’ve got.”

Apart from the weather, Mr Rose blamed disruption from store renovations for difficult sales in the past six months, revealing that underlying sales slid 4.2% in those stores affected, compared with a 5.6% rise in modernised stores and a 0.4% rise in the rest of the chain. Despite the slower than hoped for underlying trading, first-half profits rose by 11.5% to £451.8 million, ahead of expectations, as Marks & Spencer controlled staffing costs over the summer, and allocated 46% less cash for bonuses. The company is on track to top £1 billion in full-year profits for the first time since 1998.

M&S said that market share rose in all categories, with food sales benefiting from extra space despite a disappointing 0.5 per cent rise in underlying sales. Market share in clothing rose to 11 per cent from 10.7 per cent a year before and to 4.3 per cent from 4.1 per cent in food. In the years ahead, M&S said growth would come from stepping up expansion in the UK and overseas, broadening the range of merchandise sold in its stores, and improving efficiency by modernising IT and infrastructure.

On international growth, Mr Rose said: “We have to go faster and more boldly.” In the near term, the focus will be on Ireland, where Marks & Spencer intends to open up to 40% more space in the next five years. A £35 million distribution centre is expected to open in Bradford in 2010 to reduce the number of M&S warehouses. Mr Rose said that online sales had risen by 60% over the half year and the retailer plans to push for growth in this area. Marks & Spencer shares closed up 21p at 653p. (source: Timesonline)

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