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Tuesday, November 2, 1999 Published at 11:13 GMT


Business: The Company File

Marks fights back against slump

The company hopes its new clothes range will provide a boost

Marks & Spencer, once considered the UK's favourite store, has been living something of a nightmare.

Once it could count on regularly turning out fat profits, handsome shareholder dividends - and maintaining a traditional reputation as offering the highest quality goods on the high street.


[ image:  ]
It was the store everyone turned to for basics from underwear to ready meals. And all with neither advertising nor accepting credit cards.

Company chiefs never dared think the unthinkable - that M&S could one day fall from the top spot.

Now they find themselves in the humiliating position of having to work out what has gone wrong.

For shoppers have stopped flocking through the doors, loyalty has vanished and turnover has been on an apparently endless decline.

Marks & Sparks, as it is affectionately known by many British people, has suffered from stiff competition by US retailers, such as Gap, muscling in on the UK market.

Frocks 'on the rocks'

Its clothes lines have been condemned by fashion critics as dowdy and uninspired.

Even the company itself admitted last year there was a "clear decline in consumer confidence".

M&S was relatively slow to join the internet shopping revolution, lagging behind competitors.

In a world where many shoppers have moneyback incentives to use their credit card for purchases, the store inevitably suffered from its refusal to entertain the idea.

And while sales abroad began to decline two years ago, store expansion at home ate into M&S profits.

Job cuts amid gloom

Together with a strong pound, the combination sucked the company into a downward spiral from which it has never recovered.

The stream of gloomy news from the store has been endless as costs were cut.


[ image: The range still includes winter woolies]
The range still includes winter woolies
Last year, it was forced to scale back a huge £2bn investment programme by £300m.

As the turmoil continued, chairman Sir Richard Greenbury announced his retirement, a year earlier than expected.

There were also job cuts: more than 500 management posts were axed in a management shake-up, as executives realised drastic action was needed to turn their fortunes round.

The prestigious management trainee programme was also scrapped, following several hundred redundancies.

The company sold off its US stores, while ongoing store modernisations at home, meanwhile, were costly.


[ image: Men are not forgotten in the style revamp]
Men are not forgotten in the style revamp
The bad news culminated in a 41% drop in profits last year and a 44% fall in the latest six-month results.

Despite upbeat predictions from new chairman Peter Salsbury, profit warnings continue to come.

This year, autumn and winter clothing sales got off to a poor start. The company blamed the weather; observers said it was no more than the continuation of Marks having fallen out of favour.

So, after numerous months of poor performance, the store giant has been making strenuous efforts to make a comeback.

It has aimed its clothing at younger more demanding women shoppers, trying desperately to keep up with fashion trends.

It has also finally given in to commercial pressure. This summer, it started large-scale advertising, including, for the first time, television commercials. And now it has just announced it will accept credit cards.

It has also cut ties with traditional suppliers in favour of more modern labels in an effort to woo back younger customers.

Even designer labels will appear in store.

The company's latest plan is to start selling more goods directly online.

Until now, web surfers have been able to view goods and order catalogues. But managers realise if they can improve online sales, it will boost profits without incurring the vast overheads of running a store.



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