Marks & Spencer Faces Worsening Trade and EU Expansion Fears

Strategic Insights -

Marks & Spencer, under the chairmanship of Sir Richard Greenbury, is expected to announce a downturn in trade and a halt in European expansion plans amidst pressure on margins and declining like-for-like sales. The company's progress will be revealed in its interim results, which are forecast to show a decline in profits. Analysts have revised their expectations for the full year, with some predicting a profit of as little as Pounds 940 million.

Key Takeaways:

  • The company's interim results are expected to show a fall in profits, prompting analysts to revise their forecast for the full year.
  • Trade has worsened, with declining like-for-like sales and pressure on margins.
  • Sir Richard Greenbury is expected to put the brakes on expansion in Europe, halting plans to expand to 60 stores and instead maintaining 43 existing stores.
  • The majority of Marks & Spencer's Pounds 2.2 billion expansion programme is focused on the UK, where trade is reportedly suffering badly.
  • Analysts have cut their forecasts for the full year, with Tony Shiret at CSFB predicting Pounds 940 million and Robert Miller at Dresdner Kleinwort forecasting Pounds 960 million.
  • Sir Richard Greenbury had previously stated that the strong pound was a major issue for European operations.
  • The company has been committed to most sites for its UK expansion programme for a long time, making it difficult to trim plans.

Statistics:

  • Pounds 940 million: Tony Shiret's forecast for Marks & Spencer's full-year profits (CSFB)
  • Pounds 960 million: Robert Miller's forecast for Marks & Spencer's full-year profits (Dresdner Kleinwort)
  • Pounds 1.12 billion: Robert Miller's previous forecast for Marks & Spencer's full-year profits (six months ago)
  • Pounds 1.1 billion: Marks & Spencer's profit for the previous full year
  • Pounds 2.2 billion: Marks & Spencer's expansion programme
  • 43: Number of stores Marks & Spencer plans to maintain in Europe
  • 60: Original planned number of stores in Europe
  • Pounds 1.12 billion: Robert Miller's previous forecast for Marks & Spencer's full-year profits

Sources:

  • The Times, 1998, "Marks & Spencer Faces Worsening Trade and EU Expansion Fears" Companies section, page 44.