Financial Analysis Of Marks And Spencer
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Contents
Executive Summary 1
Introduction, Profile & Mission Statement 2
1. Ratio Analysis 3
1.1 Profitability 3
1.2 Liquidity 5
1.3 Working Capital Efficiency 6
1.4 Long Term Financial Structure 7
1.5 Investors Ratio 8
2. Challenges Faced By Senior Management 10
3. SWOT Analysis 11
4. Porter’s Five forces Analysis 14
5. Empirical Observation of M&S 15
6. Limitations of Ratio Analysis 18
7. Conclusion 20
8. Bibliography 21
List of Figures
Figure 1.Profitability Graph for M&S 3
Figure 2.Liquidity Graph for M&S 5
Figure 3.Working Capital Efficiency Graph for M&S 6
Figure 4.Long Term Financial Structure of M&S 7
Figure 5.Investors Ratio Graph for M&S 8
Figure 6.Five Forces Analysis 15
Figure 7.Market Share of M&S, Next & Tesco 16
Figure 8. M&S Customers Chart 16
Figure 9.Reason for Disliking M&S Products 17
Excel Sheet of Ratios with Formulas 24
Executive Summary
The main purpose of this report is to evaluate the position of Marks & Spencer in terms of financial strength, market position, current performance and forecasting.
To identify M&S financial strength, current performance and forecasting, we have taken ratio analysis. SWOT analysis with the support of Porters 5 forces helped us to identify Marks & Spencer’s market position, risks and its opportunities to fight against these risks.
The investigation on Marks & Spencer brought in our knowledge that only showing the profit does not mean that company is successfully moving towards it goals and in stable position. Liquidity ratio near 2 and low gearing also plays the major role in company’s performance, so we can not ignore them as well.
The other main point is to never make decision on increasing share price of the company because increase in share price does not always reflect the high sale and profitability of the company, this increase could be the result of company’s other internal operations that are hidden and would not be long term.
Sometimes multinational companies take new strategic approaches and new ideas to accomplish their goals in order to get competitive edge over its competitors. Unfortunately these new strategies sometimes fail and increase risks for business that result in new challenges to be faced by senior management.
At the end it remains with the strength of the company that how effectively and efficiently it faces the challenges, how much it satisfy its customers and how it compete in the tough market.
Introduction
Marks and Spencer PLC, established as a partnership in 1884 and now it is the leading retailer in UK. Total number of outlets and franchises, operated by Marks and Spencer are 526 in 2003. Total turnover of the company in 2003 was ₤8.1 billion, out of which ₤7.1 billion was derived from UK.
According to research, Marks and Spencer retail sales increased by 6% in 2003 compared to a fall of 5.7% in 2002. The continued losses to company from international operations shows that they were refocusing on UK business in 2002 which resulted in ending up of its Continental European stores and sales of its Brook Brother clothing stores in US and Asia. (Euromonitor, 2004)
Company Profile
Marks and Spencer is running stores that sell clothes, food, beauty and house hold products. They also provide financial services like loans, savings and credit cards. In the beginning they had 70,000 employees in almost 40 countries. After such a good reflection, Marks and Spencer adopted a new strategy to withdraw itself to prepare for the future. Marks and Spencer took the decision to sell most of its stores to other countries. Now they have sold 18 stores to France, 10 in Hong Kong, 220 Brooks Brothers outlets to USA and Asia and 25 food stores in New Jersey (USA). Marks and Spencer is very dynamic in Ireland and got 300 successful stores in UK. (MKS.L, 2005)
Mission statement
Mission Statement of Marks and Spencer is to offer high quality, valuable clothes, food and home products in easy—to—shop stores. To work strictly on mission statement, they have employed 65,000 people in their UK stores and offices and owned stores in Ireland and Hong Kong. They are working