M&S chairman sounds alarm on rising costs: Consumers 'want better and better things at lower and lower prices'
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Your support makes all the difference.BETTER-QUALITY merchandise and improved value for money were the key to a 16 per cent rise in full-year profits at Marks and Spencer, according to Sir Richard Greenbury, chairman. But his warning that raw material costs could rise this year unsettled the market and the shares dropped 12.5p to 412p.
'I do not think that most British consumers are trading down,' Sir Richard said, pointing to the strong performance of the group's food business as evidence. 'They want better and better things at lower and lower prices.'
But he took issue with those retailers who believe that the 1990s will be an era of lower prices and lower profits. 'There is a place in every market for a price-led business, but that is not how we have ever handled it,' He said.
Price rises were, however, negligible as the group continued its 'outstanding value' campaign. Despite that, pre-tax profits rose from pounds 736.5m to pounds 851.5m on sales 10.4 per cent ahead at pounds 6.5bn.
Clinton Silver, deputy chairman, said that outstanding value would continue. But he added that 'more accurate merchandising - predicting what people want to buy' had reduced the need for markdowns of stock, so protecting the group's margins.
Profits from the British stores rose 18.4 per cent to pounds 809.9m on sales 9.5 per cent ahead at pounds 5.5bn. That was helped by an extra week's trading, but Sir Richard estimated that sales, on a comparable basis, were up by 7.5 per cent in the clothing business and 7.1 per cent in the food business.
Overseas, European profits fell slightly to pounds 27.1m as recession depressed sales in France and Spain, but the US - including Brooks Brothers - recovered to pounds 21.6m ( pounds 18m). The Far East continued its spectacular growth with a 43 per cent jump in profits to pounds 15.2m, helped by the opening of a new store in Hong Kong.
Sir Richard said the group was in 'an extremely aggressive mood on expansion'. Capital spending of pounds 1bn is planned for the next three years.
The group is looking at further expansion in the Far East, and has a team evaluating the opportunities there. Sir Richard said that would take at least 18 months - 'but no one disputes that the Far East has to be the next really major consumer boom area'.
Earnings per share were 20.9p, up 16.1 per cent, and the dividend was increased 13.6 per cent to 9.2p via a 6.7p final.
(Photograph omitted)
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