Introduction

Growing economic recession has adversely impacted the entire clothing sector as consumers are more wary of their purchases and prices offered by clothing retailers (Mintel, 2007). Despite this downturn, NEXT and M&S captured the greatest market share during 2007 and 2008 (Mintel, 2008). This paper assesses financial performance of NEXT and M&S by analyzing financial ratios and share price information, for previous 3 years and financial indicators will review profitability, efficiency, liquidity and stability of both companies. Share performances are analyzed by scrutinizing share price trends along with an evaluation of Earnings per share and Price to Earning Ratio. In this context, the paper uses secondary data sources such as Mintel, Keynote, FAME, journals and newspaper articles, along with primary resources, comprising of company annual reports.

Company Overview

M&S

M&S originated during 1884 as a small stall in Leeds where all products were sold for a penny (Burt, 2002) and has been established as UK’s most flourishing retailer of clothing, home-ware and food. Despite turbulent economic conditions, M&S recorded tremendous success and is the most preferred brand by consumers. This has been achieved by consistent focus on product quality, value for money and customer services (M&S, 2008). According to a report by Mintel, M&S accounts for 10.5% of total clothing spending by consumers and 43% of the total consumers, shop at M&S outlets (Mintel, 2008). During late 90’s and early 2000’s, M&S experienced deteriorating financial performance due to fierce competition, poor supply chain management, inferior products and ineffective cost management. However, with appointment, Sir Stuart Rose, M&S has regained its eminent position in retail sector, primarily by, refurbishing and modernizing city centre outlets, aggressive advertising campaigns and store expansion (Mintel, 2008). Consequently, M&S reported net profit of £660m during 2007 which increased to £821m in 2008 (M&S, 2008). However, due to growing economic recession in UK, Christmas spending on clothes and other accessories, appeared more subdued and M&S recorded a slow-down in sales (Hamilton, 2008).