Marks and Spencer Group p.l.c.

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Marks and Spencer Group p.l.c.

Waterside House
35 North Wharf Road
London, W2 1NW
United Kingdom
Telephone: (+44-20) 7935-4422
Fax: (+44-20) 7487-2679
Web site: http://www.marksandspencer.com

Public Company
Founded: 1894
Incorporated: 1903 as Marks and Spencer Limited
Employees: 70,310
Sales: £7.8 billion ($13.56 billion) (2006)
Stock Exchanges: London
Ticker Symbol: MKS
NAIC: 452111 Department Stores (Except Discount Department Stores); 445110 Supermarkets and Other Grocery (Except Convenience) Stores; 442110 Furniture Stores

Marks and Spencer Group p.l.c. is one of the largest retailers in the United Kingdom, with around 300 company-owned Marks & Spencer (M&S) department stores in its home market. The stores, known colloquially as "Marks & Sparks," sell clothing, furniture, home products, and food, nearly all under private-label brands. Food comprises about half of the company's U.K. business, and the firm also owns or franchises more than 140 Simply Food stores, which are small, standalone food outlets. Internationally, Marks and Spencer owns and operates 11 stores in the Republic of Ireland and eight in Hong Kong and franchises nearly 200 stores located in 30 territories in western and central Europe, the Middle East, central Asia, and the Asia-Pacific region. The company's international operations were considerably curtailed in the early 21st century. As a result, less than 7 percent of overall revenues are generated outside the United Kingdom.

EARLY HISTORY

In 1894 Michael Marks, born circa 1863 in a Jewish ghetto at Slonim in the Russian Polish province of Grodno, entered into a partnership with Tom Spencer, born in Skipton, Yorkshire, in 1851, with Spencer paying £300 for his half-share. Ten years earlier, Marks, a peddler, had opened his first stall on a trestle table at the Kinkgate Market in Leeds, selling a range of inexpensive goods all priced at one penny, including hairpins, dolly dyes, and black lead; he is said to have paid 18 pence for the privilege. Spencer, cashier for Leeds textile wholesaler Isaac Jowitt Dewhirst, was an experienced bookkeeper, and Dewhirst had helped Marks by teaching him English and providing him with small loans.

By 1894 Marks had moved house from Leeds and, after living in Wigan, had settled in Manchester, where he acquired a shop and a home. He also had opened market stalls—bazaars, he called them—in several towns, including Warrington, Bolton, and Birkenhead. The new partnership immediately looked further afield to Birmingham and Newcastle and in 1899 to London. Manchester, however, remained the headquarters, and the first Marks and Spencer warehouse was opened there in 1897. In 1903 the partnership was converted into a limited company (Marks and Spencer Limited) with £30,000 in £1 ordinary shares of which 14,996 each were allotted to Marks and to Spencer, the latter retiring in 1905. Upon Marks's sudden death in 1907, his executor, William Chapman, a self-made handkerchief manufacturer, became the dominating force in the business.

In each of the first Marks and Spencer bazaars the slogan had been "Don't ask the price, it's a penny," but this selling policy soon changed. It was a landmark date in 1904 when a new store in a shopping arcade was opened in Leeds not far from Marks's first market trestle table. Two years later the most successful store was Liverpool, with yearly receipts of £9,857. Brixton was second with £9,766. Leeds came third with £8,701 and Manchester fourth with £8,459. In 1907 profits reached a new peak of £8,668 and the dividend paid was 20 percent.

Marks's son Simon acquired his first allocation of shares in April 1907, eight months before his father's death, and from the start he was determined to acquire full control over what he conceived of as a family business. It was not until 1916, however, that he ousted Chapman and became chairman. By then the company had expanded significantly; its turnover in 1913 was already £355,000. In addition, it had successfully braved World War I. In 1915, a year of bitter boardroom battles—concerned not with management policy but with financial control—its turnover was more than £400,000, and a dividend of 50 percent was paid. By then there were 145 branch stores, only ten of them in market halls. No fewer than 56 were in the London area. Some of them had been bought in clusters from existing chains.

BEGINNING OF SIMON MARKS AND ISRAEL SIEFF REIGN

Simon Marks, a man of intelligence and drive, in effect entered into his own partnership in 1915 when his close friend Israel Sieff, keenly aware of world trends both in politics and in science, joined the board after having been blocked previously by Chapman. In 1916 Marks won a lawsuit against Chapman, and in June 1917 Chapman resigned. The firm's initials M and S now stood symbolically for Marks and Sieff. The two friends had first met in Manchester, and each was to marry the other's sister. If their talents were complementary, their vision was shared, and it was a vision that extended far beyond the confines of the business. Succession seemed natural in 1964, when on Simon's death, Israel became chairman, to be succeeded in 1967 by his son Marcus, who like Simon Marks and Israel, became a peer.

In 1926 the company, needing an injection of cash, had been converted into a public company (Marks and Spencer p.l.c.) to raise new capital, fully supported by the Prudential Assurance Company, which played a key role in the negotiations. The capital consisted initially of one million ordinary shares of ten shillings each, £330,000 of which were issued, and 350,000 cumulative participating preference shares at £1. There were to be further appeals to the public in 1929 and 1934, when the nominal value of the capital of the company was raised to £3.05 million. The new A shares issued then carried no voting rights. Indeed, there was to be a sharp distinction between management and ownership until 1966, when Israel Sieff concluded that the granting of voting rights was by then "in line with the enlightened policy which governs our business."

Marks hoped in 1934 that in the future there would be "an ample margin of working capital" for management to promote a substantial development program that included the purchase of properties as well as store building, and the hope was fulfilled. Already by 1930 approximately four-fifths of the new company's assets consisted of freehold and leasehold properties, and between 1931, a year of international depression, and 1939 no fewer than 162 new stores were built or rebuilt, all on inner-city sites. On the eve of World War II, Marks placed more emphasis on replacement of old premises by new than on an increase in the number of stores in itself. Store design had been transformed. Customers were to be attracted into them, to look around even when they did not buy.

COMPANY PERSPECTIVES

We are one of the UK's leading retailers, with over 15 million people visiting our stores each week. We offer stylish, high quality, great value clothing and home products, as well as outstanding quality foods, all responsibly sourced from suppliers we trust. We employ 65,000 people and have over 450 UK stores, as well as a flourishing international business.

The business philosophy that Marks and Sieff shared was associated with social change even in years of economic depression. As Marks put it in 1936, "Goods and services once regarded as luxuries have become conventional comforts and are now almost decreed necessities. A fundamental change in people's habits has been brought about. Millions are enjoying a substantially higher standard of living. To this substantial rise in the standard of living our company claims to have made a definite contribution."

"Efficient distribution," he went on, "is not a static conception. It involves constant alertness and study of the changing habits, desires and tastes of the consumer." Sieff, who has given his own account of the ten years from 1926 to 1936, described his "mission" in practical terms. "We saw not through visionary idealists' clouds but from practical results in days of high competition that production and distribution could become a cooperative process making a positive contribution to the common good." Neither he nor Marks wanted to be involved in production, but through bulk buying they were able to influence the policies of those who were producing for them.

In the first postwar year, 1919, turnover had been £550,000; in 1939, when World War II broke out, it was £23.45 million. In the latter year there were 234 stores and more than 17,000 employees. In 1924 the head office of the company moved from Manchester to Friendly House, Chiswell Street, London EC1. In 1928 it was moved to a new building, named Michael House, in the same street. Three years later, there was another move to Baker Street, where the headquarters were located until 2004. Meanwhile, the familiar trademark, St Michael, had been applied first in 1928 to products sold in Marks and Spencer stores, and its use was extended gradually until Marks referred to it for the first time in a chairman's speech in 1949.

The Marks and Spencer stores of the interwar years represented a new form of business, challenging the role of older department stores. Yet such interwar stores were simple and unpretentious when compared with the superstores of the late 20th and early 21st centuries that were to be visited by prime ministers and royal families. Indeed, the total cost of a new store in the 1920s was exceeded by the costs of electrical installation in the stores of the 1960s.

The prewar stores owed something to American experience, for it was after Marks first visited the United States in 1924 that he decided to follow, if not to copy, American developments. In 1927 a price limit of five shillings per item was set and there was a continuing emphasis on value for money, but there was an increasingly wide range of goods on sale. By 1932 there were more than 20 departments in the biggest stores, including ladies' and children's drapery; men's and boys' wear; footwear; fancy goods; household linens; gramophone records; confectionery; toiletries; lighting; toys; haberdashery; millinery; china, enamel and aluminum ware; stationery; gifts; and food, recently introduced into a number of stores. Along with textiles, sales of which increased three times between then and 1939, food was to be a Marks and Spencer staple of the future. Another key development during this period was the adoption of the revolutionary policy of buying directly from manufacturers, bypassing wholesalers, a move initiated during the 1920s.

KEY DATES

1884:: Michael Marks opens his first stall at a market in Leeds.
1894:: Having relocated to Manchester, Marks enters into a partnership with Tom Spencer.
1903:: Partnership is converted into a limited company, Marks and Spencer Limited.
1904:: First covered arcade store opens in Leeds.
1924:: Head office is moved to London.
1926:: Firm is converted to a public company, Marks and Spencer p.l.c.
1928:: St Michael brand is introduced.
1956:: Operation Simplification is launched.
1972:: First overseas store opens in Canada.
1985:: The Marks & Spencer Chargecard debuts.
1986:: Furniture is introduced into Marks & Spencer stores.
1988:: Company enters the U.S. market, acquiring Brooks Brothers and Kings Super Markets.
1997:: Marks and Spencer becomes the first British retailer to achieve £1 billion in pretax profits.
1999:: Pretax profits plunge by 45 percent.
2001:: First Simply Food stores open; stores in France and Spain and the Brooks Brothers chain are sold.
2002:: Marks and Spencer Group p.l.c. is set up as a holding company.
2004:: Under new chief executive Stuart Rose, Marks and Spencer fends off hostile takeover bid.
2006:: Kings Super Markets is sold.

Marks was right to emphasize how in relation to textiles, in particular, his business within a changing society was both to respond to consumer tastes and to develop them; in an address to shareholders he stated that "it is the function of the modern distributor to purchase healthier and more attractive clothing." The revolution in food followed a generation later with the introduction of such items as iceberg lettuce, smoked salmon, Indian and Chinese foods, avocados, kiwi fruit, and wine. By then Marks and Spencer stores also were selling toiletries of all kinds, travel and holiday ware, and fashion clothes for men as well as women.

POSTWAR BOOM

Wartime and immediate postwar austerity were bound to influence both consumer tastes and company profits, although even then the company benefited from the standardizing element in the government's Utility Scheme that regulated the design of a range of consumer goods and favored bulk buyers; the scheme remained in operation until 1952 and in modified form until 1955. The company also was well poised to establish an overseas presence. A Marks and Spencer Export Corporation had been founded in 1940, and in 1955 it was exporting goods to the value of £703,000 to other overseas retailers. It was in 1954 that one of the first editions of a new in-house journal, St Michael's News, claimed rightly that by then Marks and Spencer was "news to the general public." This was the year when the chancellor of the exchequer, R. A. Butler, claimed that the country would double its standard of living during the next quarter of a century, and the company was well positioned to move into the unprecedented consumer boom of the late 1950s and 1960s.

Turnover rose from £95 million in 1954 to £148 million in 1960, and profit before tax increased from £7.87 million to £12.81 million. It was in 1960, too, that a ten-year progress record became a convenient and impressive feature of the published accounts. The ten-year progress record for the years from 1973 to 1984 was to be even more striking in terms of sales and profits, although economic conditions during that period were to be far more difficult. By 1973 turnover had reached £496 million (excluding new sales taxes); in 1984 it was £2.9 billion. Meanwhile, profit before tax leapt from £70 million to £265 million. More sophisticated statistics revealed that sales per employee had risen during the same ten years from £18,651 to £73,099 and per square foot of floor space from £96 to £372. Profit per square foot had risen from £14 to £38.

By 1974 there were 17 overseas stores; the first of them opened in Canada in 1972. A Paris store was opened in 1975. Also in the early 1970s came the acquisition of three Canadian chains: Walker's clothing stores, which were eventually converted to Marks and Spencer stores; D'Allaird's women's clothing stores; and Peoples general merchandise stores. Between 1974 and 1977 exports tripled to more than £40 million and the company won the Queen's Award for Export Achievement. It was deeply committed also to another national achievement, supporting British producers whenever it could and encouraging them to develop efficient new lines of business. In the process it established close connections with a number of suppliers, which placed it in a virtually monopolistic position. Relationships with the firms from which it was buying were handled as carefully as relationships with customers.

Before 1939 the main emphasis had been on the price-reducing advantages of bulk buying; during the 1960s and 1970s the focus was on quality control, not least in textiles and in food, then the company's two biggest lines of business. There was continuity, however, rather than a basic shift. As early as 1933 a merchandising committee had been formed to coordinate the work of the various buying departments; a small textiles laboratory had been created in 1935, and a merchandising development department had followed a year later. In 1946 a factory organization section, later called the production engineering department, had been opened "to assist manufacturers in the progressive modernization of their plant and to adapt themselves to the latest technical advances," and two years later a food development department was created. The department dealt both with British and with foreign suppliers, including suppliers of Israeli oranges; there were visits to Israel, a country especially favored as a supplier as it was close to the hearts of Marks and Sieff, to deal with storage and packing.

Apart from research development and publicity, the company had devised its own approach to the buying process through the training of specified "selectors," so described for the first time during the 1930s, and merchandisers, who meticulously studied store demand and turnover before placing orders with producers. The system was integrated, and there was feedback from store to factory.

Quality control, encouraging suppliers in the interests of quality to use the most modern and efficient techniques of production provided by the latest discoveries in science and technology, was a "principle" upon which Marks and Sieff insisted. Unlike most retailers, Marks and Spencer had its own laboratories and employed its own scientists. Other "principles," and they were formulated and listed as such by Israel Sieff in 1967 after Marks's death, were to guarantee customers high quality when they bought products using the St Michael's brand name, "to plan the extension of stores for the better display of a widening range of goods and for the convenience of our customers," "to simplify operating procedures so that the business is carried on in an efficient manner," and "to foster good relations with customers, suppliers and staff." "Operation Simplification," introduced in 1956, led to the saving of huge amounts of paper and electricity. The lessons were never lost.

Staffing matters had been taken seriously even before the 1930s, when a personnel department was set up in 1934, a year when the word welfare began to be used inside the business. Thereafter a wide enough range of "welfare activities" was organized to make Marks and Spencer a kind of welfare state in itself. They were appreciated by most employees, although a small minority found them somewhat stifling.

Meanwhile, great attention was paid to breaking down what Marcus Sieff called the "fear, suspicion and insecurity that threatened human relations in industry." The familiar term industrial relations was taboo at Baker Street; it seemed to imply that there were two sides. In consequence, there was some trade-union criticism of the approach. "We are human beings at work, not industrial beings," Sieff emphasized in 1980. In the same year he stressed that training was not mostly a matter for workers on the shop floor whose talents needed to be mobilized. It began at the top. The first task of the chairman was "to impart the philosophy of our evolving business to our executives." The philosophy extended from employees to pensioners and to schemes for neighboring communities as well as for inner-city stores.

In 1965 Israel Sieff became chairman of the company and Marcus, who had joined the company in 1935 and became a director in 1954, was made vice-chairman. He became chairman in 1972 after J. Edward Sieff, Israel's brother, who had joined the company at Simon Marks's invitation in 1933, had had five years in the chair. There was thus a strong family thrust behind the company and Marcus (Lord) Sieff remained chairman until 1984, when a man born outside the family circles, Derek (Lord) Rayner, took over and rigorously developed the group's activities overseas. Spotted by Marcus Sieff as a young manager, he had joined the company in 1953 and became a director in 1967 and joint managing director in 1973. In 1979 he was seconded to Prime Minister Margaret Thatcher's newly elected government in an effort to streamline the civil service, returning to the company in 1982.

INTRODUCTION OF FINANCIAL SERVICES

Rayner was chairman of the company from 1984 to 1991, and in that time several significant events occurred. In 1985 the Marks & Spencer Chargecard was launched nationwide in the United Kingdom. Although this move came rather late for such a large retailer, Marks and Spencer quickly moved deeper into financial services than other retailers. The company soon introduced personal loans, added unit trusts in 1988, and the following year introduced an investment plan called personal equity plans (PEPs), which were tax-sheltered vehicles for share purchases. These financial offerings eventually would form the nucleus of what became known as Marks and Spencer Financial Services.

In 1986 a line of furniture was introduced into Marks and Spencer stores. Two years later, Rayner began to move more aggressively overseas. In addition to opening the first two M&S stores in Hong Kong that year, the company entered the U.S. market for the first time through two acquisitions: the New Jersey-based Kings Super Markets grocery store chain and the Brooks Brothers chain of men's clothing stores, a £493.4 million ($750 million) purchase.

CONTINUATION OF OVERSEAS GROWTH

Rayner retired in 1991 and was succeeded by Richard Greenbury, knighted in the 1992 New Year's Honours List. Keith Oates, who served as deputy chairman and joint managing director under Greenbury, had joined the business at a high level as finance director from outside—a rare kind of appointment—in 1988. Overall, the company continued its foreign expansion under Greenbury, although difficulties with the Canadian operations led to the 1992 sale of Peoples and the 1996 sale of D'Allaird's, which was purchased by specialty retailer Comark. Brooks Brothers also proved nettlesome, but Marks and Spencer was able, finally, to turn that chain around by the mid-1990s. The company conceded by then that it had paid too much for Brooks Brothers, but was heartened by an 81 percent increase in operating profit in 1996.

Meanwhile, the Marks and Spencer chain was being expanded both abroad and at home, with both company-owned and franchised units. M&S stores debuted in Greece and Portugal in the early 1990s through franchise agreements, followed by mid-1990s franchise openings in Denmark, Austria, Hungary, Malaysia, Thailand, Turkey, and the Czech Republic. On the company-owned store front, significant funds were committed to expand the chain's presence in two mainstay nations on the continent: France and Spain. In late 1996 the first M&S store in Germany opened in Cologne, with three additional units opening in Germany over the next couple of years. Two stores opened in Seoul, South Korea, in the spring of 1997. Back in the United Kingdom, the company in July 1997 announced that it would pay Littlewoods Organisation PLC £192.5 million ($323.1 million) to acquire 19 stores, which were converted to Marks and Spencer stores. Another franchise agreement was signed late in 1997 toward the opening of the first Australian M&S unit by late 1998. Additional franchised debuts were to take place in Dubai and Poland, with the company also investigating Latin America, China, Japan, and Taiwan.

Also expanded under Greenbury's leadership were the offerings of Marks and Spencer Financial Services. In 1995 the unit entered the life insurance and annuity market by offering five basic products: a protection policy, a critical illness policy, a combination protection and savings policy, and two personal annuity policies. Of further note during this period was the introduction of an M&S mail-order clothing catalog, the company's first foray into home shopping. In addition, Marks and Spencer in March 1998 won a libel suit against Granada Television over a World in Action program that had damaged the company's reputation by implying that M&S used child labor and misled customers by labeling clothing made overseas as "Made in the UK." Granada made a public apology and paid M&S an undisclosed sum.

Results for the fiscal year ending in March 1997 were impressive, as the company posted a revenue increase of 8.4 percent to £7.84 billion ($12.84 billion) and an increase in group profits before taxes of 14.1 percent to £1.1 billion ($1.8 billion)—marking the first time that a British retailer had achieved more than £1 billion in pretax profits. In November 1997 the company announced that it would spend £2.1 billion ($3.4 billion) in a three-year expansion program, aiming in part to increase the percentage of revenue generated overseas from 17 percent to 25 percent by the early 21st century. A significant portion of the funds were to be spent in Germany, where 20 to 25 additional stores were slated to open. Also to be enlarged was the Brooks Brothers chain, which already had more than 60 stores in Japan, but which would eventually be extended into the United Kingdom and continental Europe.

DOWNTURN LEADING TO TURNAROUND EFFORTS

The company's fall from this peak came remarkably swiftly. Following another stellar year in fiscal 1998, Marks and Spencer stunned the investment community with a November 1998 announcement of a 23 percent drop in midyear profits. For the full year ending in March 1999, the company's pretax profits plunged 45 percent compared to the previous year. The reasons for the downturn were myriad, including a precipitous drop in sales of women's clothing in Britain, as consumers eschewed the fashions that had been stocked at M&S stores, and difficulty in converting the ex-Littlewoods stores into the M&S portfolio. In addition, as clothing sales in Britain, Europe, and the Far East all were falling, the company was unable to financially support the massive international expansion that had been launched.

In the midst of this rapid decline, a battle to succeed Greenbury provided a further distraction and more bad press. Oates lost out on his bid to become chief executive to Peter Salsbury, who was promoted from joint managing director to the top executive position in early 1999. Greenbury stayed on as nonexecutive chairman. Under this new leadership team, Marks and Spencer suspended its international expansion plans and began a restructuring with an overhaul of senior managers that included the ouster of 31 executives. In April 1999 the company announced plans to close all 38 M&S stores in Canada after having sustained losses in that country in 24 of the previous 25 years. By mid-1999, shares in Marks and Spencer stock had lost nearly half of the value they had had at the end of 1997. Other changes implemented by Salsbury—such as finally accepting non-M&S credit cards at its stores, increasing the amount of clothes sourced outside of Britain, and introducing new lines of designer clothing—failed to turn the financial tide as pretax profits fell a further 24 percent in the fiscal year ending in March 2000, to £417.5 million ($664.7 million).

Greenbury resigned in mid-1999, leaving Marks and Spencer without a permanent chairman. Finally, in January 2000, Luc Vandevelde joined the firm as chairman, having led French hypermarket chain Promodès SA before its fall 1999 takeover by Carrefour SA. Also in early 2000 Marks and Spencer fended off a takeover bid by British investor and retail turnaround whiz Philip Green. Around this same time, the company began deemphasizing the St Michael brand, in favor of "Marks & Spencer." In September 2000 the first M&S television ads appeared as part of a poorly received marketing campaign centered on the slogan "Exclusively for Everyone." That fall, dissatisfied with the company's direction, Vandevelde shook up the top management ranks by ousting three executive directors, including Salsbury. Vandevelde took on the additional role of chief executive. He also hired Roger Holmes away from another U.K. retailer, Kingfisher plc, as managing director of British retail.

Vandevelde launched a remodeling effort to overhaul the U.K. M&S stores, making them brighter and more spacious. The stores were losing sales on both the low end, to ASDA Group Limited, which had been taken over by Wal-Mart Stores, Inc., in 1999, and the high end, where fashion-conscious shoppers were turning to specialty stores, such as those run by The Gap Inc., Spain's Zara International, Inc., and Sweden's Hennes & Mauritz AB. Seeking to modernize M&S's fuddy-duddy image, Vandevelde signed up George Davies to design a new range of fashion-conscious clothing for younger women. Davies was the mastermind behind the successful NEXT plc clothing chain and later launched the George line of inexpensive but fashionable clothing for the ASDA chain. At Marks and Spencer, Davies called his new line Per Una, the name translating from Italian into "for one woman." It was launched in September 2001. Also debuting in 2001 were the first Simply Food stores as Marks and Spencer sought a new avenue for growth in these small, standalone food-only outlets.

In the meantime, Vandevelde began slashing the company's overseas operations. The stores in both Spain and France were sold, and Brooks Brothers was sold in December 2001 to Retail Brand Alliance, Inc., for just $225 million, amounting to a huge loss. A deal to sell the Kings Super Markets chain fell through the following year. In March 2002 the newly incorporated Marks and Spencer Group p.l.c. became a holding company for Marks and Spencer p.l.c. and its other operations. In September of that year Vandevelde stepped down as chief executive and became a part-time chairman, while Holmes was elevated to CEO.

2004 AND BEYOND: ROSE-LED RENAISSANCE

By this time, Marks and Spencer was being touted as a turnaround tale, but the accolades proved short-lived as sales began to flag once again. By mid-2004 Green had returned to the picture with another takeover bid, eventually offering £9.1 billion ($16.8 billion) for the company. As part of an effort to fend off this new approach, the company board pushed Holmes out in June 2004, and Vandevelde resigned as well, accelerating his already planned exit. Brought onboard as the new chief executive was Stuart Rose, former chief executive of clothing retailer Arcadia Group plc, who had started his career at M&S in 1972 before leaving the firm in 1989. Paul Myners was named interim chairman.

Rose and Myners moved quickly to keep Green's hostile bid from succeeding. In July the company announced a turnaround strategy cooked up by Rose that involved the sale of Marks and Spencer's financial services arm to HSBC Holdings plc for £762 million ($1.4 billion), the return of £2.3 billion ($4.3 billion) to investors, and a refocusing on the company's core business in part by pulling the plug on a nascent effort to launch a trendy home-furnishing retail chain called Lifestore. In addition, Marks and Spencer agreed to buy the successful Per Una brand from Davies for £125.9 million ($224 million), and Rose further aimed to cut costs, overhaul the company's antiquated supply chain, and revamp the product ranges, promising to stock "what girls want." With this plan in place, the company board rejected Green's latest offer, and the high-profile investor reluctantly walked away, ending what was considered one of the most acrimonious takeover battles in U.K. history. In October 2004 the purchase of Per Una was completed, and the sale of the financial services division was consummated one month later. In the meantime, Marks and Spencer in September 2004 completed a move into new headquarters at Waterside House in North London, ending more than 70 years at the Baker Street site.

Rose's plans began to pay dividends in the latter half of 2005, when Marks and Spencer's financial results turned sharply positive and remained impressive through the end of 2006. Ruthlessly cutting costs, Rose earmarked much of the savings for an ambitious, multi-year store refurbishment program. Perhaps most importantly, the chief executive simplified the procurement process so that new lines of clothing could be introduced quickly, and he restored the reputation for reliable and affordable quality upon which the Marks and Spencer empire had been built. Cementing these efforts on the consumer side was the launch of a very well received advertising campaign centered on the slogan "Your M&S."

In the spring of 2006 Marks and Spencer finally offloaded its last remaining North American asset, and its only non-M&S branded business, Kings Super Markets, selling it to a consortium of U.S. investors for $61.5 million. In July, Lord (Terry) Burns, the chairman of the U.K. bank Abbey National plc, took over as chairman of Marks and Spencer, having served as deputy chairman since October 2005. The company in November 2006 announced that its pretax profits for the first half of the fiscal year had jumped 32 percent, to £401.5 million ($751 million), lending credence to the notion that this turnaround might prove more lasting. Building on this momentum, Rose announced plans to increase annual capital spending to £800 million to both continue the refurbishment program and to increase the amount of retail floor space by 4 percent each year. The company also planned to "stretch" the M&S brand by expanding into new categories. For instance, electronics departments were slated to be added to 100 stores offering such items as iPods, televisions, and DVDs. Some bigger stores were to be retrofitted with restaurants, while a larger number of sites were to add deli counters, bakeries, and hot-food-to-go outlets. Rose also planned to expand the M&S Internet retailing operations and began laying the groundwork for a return to growth for the company's overseas arm, which had been reduced into mainly a franchising unit. India and Russia were two possible new territories for growth, and company-owned units were likely to be part of this international expansion. The investment community was suitably impressed both with the company's financial turnaround and its future plans: Marks and Spencer's share price ended 2006 at more than 700p, well above Green's final offer of 400p in 2004, a clear vindication of the board's rejection of the takeover bid.

Asa Briggs

Updated, David E. Salamie

PRINCIPAL SUBSIDIARIES

Marks and Spencer plc; Marks and Spencer International Holdings Limited; Marks and Spencer (Nederland) BV (Netherlands); Marks and Spencer Finance Inc. (U.S.A.); Marks and Spencer (Ireland) Limited; Marks and Spencer (Asia Pacific) Limited (Hong Kong); Marks and Spencer Simply Foods Limited; M.S. Insurance L.P. (Guernsey); Marks and Spencer Investments Limited; St Michael Finance plc; Marks and Spencer Finance plc; Amethyst Leasing (Properties) Limited; Amethyst Finance plc; Marks and Spencer Chester Limited; Marks and Spencer SCM Limited; Per Una Group Limited; The Zip Project Limited.