M&S Financial Analysis

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Date Submitted: 03/20/2011 07:47 AM

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Marks and Spencers (M&S) operate within the retail industry and span a variety of sectors including food, mens and women’s clothing and home wares (technical and furniture). Trading mainly in the UK but with growing presence in the global market M&S is a solid and well-known brand. It is has had a turbulent decade with a face-lift in the early 2000’s to get rid of its stuffy image that came in the form of the new Per Una range for women. Declining share values and a close call with a takeover bid by Sir Philip Green in 2005, was followed by a new marketing campaign and the entry of Sir Stuart Rose. Since 2005 there has been mixed feeling towards M&S, discontent was widely felt by the shareholders and investors with Sir Stuart controversially holding both the Chairman and the Chief Executive posts on the board, but turnover and performance has remained strong. The retail sector has generally suffered in the current economic climate, but M&S’s trading prospects remain strong. The future looks bright with the introduction of Mark Bolland as the new Chief Executive officer due to start in 2010. The following financial statement analysis report uses figures obtained from the M&S Annual Report 2009 unless otherwise stated.


Using the current ratio as an indicator (2009: - 0:60:1), the short-term liquidity appears to be quite poor. In relation to current ratios for companies in FAMES peer report this is the lowest rating, with key competitors such as John Lewis Partnership (’09: - 0.95:1) a general guideline is that anything between 2:1 and 1.5:1 is good. However this ratio should not be used as the sole gauge for liquidity. Looking at the industry median for ’09 of 0.95:1 (FAME Peer report), it would suggest that it is not uncommon within this industry for the current ratio to be lower than the traditional guide figures. Also looking at other factors in more detail...