The fall of Marks & Spencer (Part II)

Marks & Spencer was the fifth most highly-valued public company in Europe by 1982.

Part I of this history of Marks & Spencer can be read here.

Growth of the business
Marks & Spencer was the largest clothing retailer in the world by 1966.

Marks & Spencer overtook Woolworth as the leading retailer in both sales and profits in Britain in 1968. The company was one of the largest in Britain, with a market value of £615 million in 1970.

Marks & Spencer employed 37,094 people in 1972, placing it just outside the top 50 employers in Britain. The retailer was the fourth largest public company in Britain, with a market capitalisation of £837 million in 1973.

Marks & Spencer began to sell frozen food from 1972. Convenience food was being sold at 100 stores by 1973.

Marks & Spencer expands overseas
Marks & Spencer had saturated the British mid-market clothing sector by the early 1970s, and began to look overseas for further growth. The company acquired a 50 percent stake in three Canadian clothing retailers in 1973. A controlling interest was acquired three years later.

In order to increase margins the company began to sell luxury items in its British stores.

A Marks & Spencer outlet was opened in Paris in 1975. The store ranked among the company’s top ten worldwide in terms of sales and profitability by the mid-1990s.

Marks & Spencer developed a reputation for treating its staff well, and employee absenteeism rated at just three percent in 1976.

Marks & Spencer was the fourth largest British public company in 1979, with a market capitalisation of £1.5 billion.

Marks & Spencer claimed one seventh of the British clothing market by 1980. It was the fifth largest food retailer.

Marks & Spencer had the fifth-largest public company in Europe by 1982, with a market capitalisation of US$3.7 billion and annual sales of just under £2.2 billion.

Marks & Spencer was considered one of the best-managed companies in the world throughout the 1970s and 1980s.

The first non-family member was appointed as chairman and chief executive in 1984.

Marks & Spencer was the 93rd most valuable public company in the world in 1986, with a market capitalisation of $8.3 billion.

The first location outside a town centre was opened in Gateshead in 1986.

Marks & Spencer made two United States acquisitions in 1988; Brooks Brothers, the clothing retailer, and Kings Supermarkets of New Jersey. It was widely suggested that Marks & Spencers overpaid for the 47-strong Brooks Brothers, which it acquired for $750 million, which at the time represented the highest price ever paid for a US retail chain. Forbes commented on the purchase cost, “a lot of people nearly burst from laughing”.

Marks & Spencer operated 275 stores in Canada and eight stores in France by 1990. That year the company opened its first store in Spain.

Marks & Spencer was the 63rd largest public company in the world by 1992, as measured by market value. The company employed 55,750 people, and was the twentieth-largest private employer in Britain.

The Canadian venture had been unprofitable in all but three of its twenty years by 1993. Brooks Brothers continually underperformed.

Marks & Spencer was the only retailer in the world with a AAA credit rating in 1994. The business had a reputation for quality and value for money. It boasted a turnover of over £5 billion and 679 stores.

Marks & Spencer held a 17 percent share of the British clothing market by 1996, and five percent of the food market.

Subsequent troubles
Marks & Spencer reported a sudden slump in profit in 1998. Senior management was regarded as complacent. Excessive margins had eroded customer loyalty. Competition had increased from the likes of GAP, Next and Zara.

The company withdrew from the Canadian market in 1999.

Marks & Spencer announced a radical restructuring of its operations in 2001. The British business was revamped and its United States retail operations and company-owned stores in Europe were divested. Brooks Brothers was sold for $225 million, less than a third of what M&S paid for it thirteen years previously.

Marks & Spencer was relegated from the FTSE 100 in September 2019.

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