Marks & Spencer is set to bolster its international business by opening its first store in China. The group will enter China on a wholly owned, rather than franchise, basis and has also signalled its intention to accelerate its growth in India, where M&S currently has around 10 stores. The news came as the group posted better-than-expected profits, but warned of an “uncertain” economic outlook.
M&S Chief Executive Stuart Rose said its first outlet in the fast-growing Chinese market – likely to be in Shanghai – will open in the next financial year, which starts in March.
The company shrugged off the impact of the poor summer weather and a major store refurbishment programme, to post underlying pre-tax profits of £451.8 million for the half-year to September 29 – 11.5 per cent ahead of last year. UK like-for-like sales across the group grew by just 1.6 per cent in the first half.
Up until late 2002, the company traded in 30 countries worldwide following an expansion programme which began in the 1970s. M&S made record profits of more than £1 billion in 1997 and 1998, but the figure dived as low as £145.5 million in 2001.
The Western European stores were closed in 2001, just two years after the last stores in Canada were sold off. The American venture, the Kings supermarket chain, acquired in 1988, was sold at a loss in 2002 to allow bosses to focus on the company’s UK operations.
The preceding year, M&S had sold the Brooks Brothers chain to Retail Brand Alliance for 225 million US dollars (£107.8m), a third of the 750 million US dollars (£359.4m) it paid for the upscale clothing business in 1988.
The UK operation was saved at the expense of the overseas sales, which were accompanied by a radical overhaul of the brand, including refurbishing shops and bringing in new fashion and food ranges.
Under a turnaround led by Rose, M&S announced a 28 per cent increase in annual profits to £966 million in May.
In recent years the company has turned to franchises to extend the brand without risking shareholder’s cash. It now has 257 franchise stores in 36 countries. Of the M&S franchised stores, 65 are in the Asia-Pacific region, 60 in Europe, 45 in Central Europe, and the balance in Central Asia and the Middle East. The group also has directly owned stores in countries including Hong Kong, Gibraltar and Ireland.
The international business currently contributes around 8 per cent to group revenues, although Rose is looking to lift this to between 15 per cent and 20 per cent over the next five years.
– Bangalore Bureau