Final Results - Part 1

Marks & Spencer PLC
23 May 2000


PART 1

                 MARKS AND SPENCER PLC
               PRELIMINARY RESULTS ANNOUNCEMENT
              FINANCIAL YEAR ENDED 31 MARCH 2000

      Group sales £8.2 billion (last year: £8.2 billion)
                               
     £557.2 million profit before tax and exceptional items 
                 (last year: £628.4 million).  
     The 52-week equivalent profit is estimated at £517.2 million.
                               
        Full year dividend of 9.0p proposed (last year: 14.4p)

    Commenting on these results, Peter Salsbury, Chief Executive, said:
    
    'Last year I said we needed to reshape our business.
    Twelve months on there are few people within this
    organisation whose jobs have not changed.
    
    We have radically refocused the Company towards our
    customers, who are noticing a difference in our stores and
    products.  We have slowed the sales decline and current
    trading continues to improve.
    
    I am confident that the changes we have made to
    reposition Marks & Spencer as a modern, customer-facing
    business will achieve a sustainable recovery.'
         
    Luc Vandevelde, Chairman, said:
    
    'I took on the role of Chairman at the end of February this year.  After  
    three months in the job, I am convinced that M&S will have a future as    
    successful as its past.

    The Company is going through a period of significant change.  We are being
    transformed from a traditional retailer with unique supply side strengths 
    into a multi-channel retailer with unique customer understanding.

    We are building the capabilities to satisfy customers needs across a wider
    range of goods and services, first in the UK as we recover, then          
    internationally.

    We have embarked upon a profound transformation that will take time and   
    require difficult but necessary decisions.

    I would ask shareholders to accept our current financial performance and  
    recognise that this affects our dividend payout.  I am not ignoring the   
    past but we need to be realistic about today.

    We cannot compromise our future investment capacity.  Consequently, we are
    proposing a final dividend of 5.3p, a total dividend of 9.0p per share for
    the year (versus 14.4p for last year).  The extent of our confidence in   
    the future is indicated by the fact that the dividend represents a payout 
    of 100% of net profit.

    The establishment of strong Operating Divisions and consequent changes to 
    the structure and processes in marketing, buying and selling, allow the   
    Marks and Spencer Board to concentrate on matters of strategic direction  
    and corporate governance.  This has further reduced the need for          
    functional representation on the Board, as reflected in changes announced 
    today.'

     FINANCIAL RESULTS

     Group
     
     Group sales at £8,195 million are similar to last year
     (£8,224 million).
     
     The full year Group profit before tax and exceptional
     items is £557.2 million, with the value of the 53rd week
     estimated at £40 million.
     
     Exceptional charges of £139.7 million include an
     additional £47.3 million of restructuring costs in stores
     and Head Office incurred since the half year.
     
     The results are analysed by Operating Division in more
     detail below:
     
     UK Retail

     Turnover for the 52 weeks is £6,351 million (last year
     £6,601 million) and operating profit before exceptional
     items £386.8 million (last year £478.9 million).  The
     effect of the 53rd week is to add £132 million to sales
     (giving £6,483 million) and an estimated £33.3 million to
     operating profit (to £420.1 million).
     
     A sales analysis, broken down by trading periods, is
     given below.  Like-for-like sales are now estimated by
     comparing total sales with new and developed stores
     excluded without any adjustment for deflection.
     
                            Sales Performance
                Q1      Q2    15 wks 11 wks  Total   8 wks
                              to     to      52 wks  to
                              8/1    25/3            20/5
              % v LY  % v LY  % v LY  % v LY % v LY  % v LY                   
                                    
     General   -9.2   -10.4    -6.0   -2.4    -7.2    +3.8
                                                        
     Foods     -1.2    +0.4    +3.2   +1.8    +1.2    +4.7
                                                        
     Total     -6.1    -6.2    -2.8   -0.5    -4.0    +4.2
                                                     
     Like-    -10.3    -9.9    -5.6   -3.3    -7.2    +2.1
     for-
     like
          
     At the year-end, total UK selling space is 12.3m sq ft,
     compared to opening footage of 12.0m sq ft.  The weighted-
     average selling space has increased by 6.1%.

     We opened two major stores during the year, in Braehead,
     Glasgow (91,000 sq ft) and Manchester (198,400 sq ft,
     replacing temporary footage of 98,800 sq ft).
     
     UK General - Sales and Margin
                            
                            Sales Performance
                Q1      Q2   15 wks  11 wks  Total   8 wks
                             to      to      52 wks  to
                             8/1     25/3            20/5
               % v LY % v LY % v LY  % v LY  % v LY  % v LY
                                                        
     Clothing,  -9.8   -10.3   -6.7    -3.6    -7.8    +1.5                   
     Footwear 
     and Gifts     

     Home      -1.6   -11.6   +6.0   +11.7    +1.0   +35.6
     Furn-
     ishings                                          
         
     Total     -9.2   -10.4   -6.0    -2.4    -7.2    +3.8
     General                                         
                                                     
     Like-    -14.6   -15.1   -9.2    -6.0   -11.1    +1.3
     for-
     like
          
     We reduced the like-for-like sales decline in Clothing as
     the year progressed.
     
     We improved the gross margin, with the first effects from
     new buying methods and better stock management over the
     Christmas period.  Year-end stock levels in all main
     product areas are below last year's and forward cover
     positions have improved.
     
     The rate of increase in Home Furnishing sales has
     accelerated, with a particularly strong performance in
     Furniture.
     
     UK Foods - Sales and Margin
                              
                            Sales Performance
                Q1      Q2   15 wks  11 wks  Total   8 wks
                             to      to      52 wks  to
                             8/1     25/3            20/5
              % v LY % v LY  % v LY  % v LY  % v LY  % v LY
                                                        
     Total     -1.2    +0.4   +3.2    +1.8    +1.2    +4.7
     Foods                                           
              
     Like-     -4.2    -2.5   +0.8    -0.1    -1.3    +3.2
     for-
     like
          
     Our constant innovation and the marketing of new products
     (for example, Organics, Count on Us) have helped food
     sales.  We were the first retailer to guarantee all the
     food products sold in our stores were made without
     genetically modified ingredients and derivatives.
     
     There was no price inflation.  We have delivered an
     improvement in gross margin through better buying
     practices, and the benefits from the planned supply chain
     efficiencies have still to come.

     UK  - Operating Costs
     
     Operating costs have increased by 3.0% on a 52-week
     basis.
     
     We have invested an additional £39 million in marketing,
     customer analysis and visual merchandising in stores, as
     an essential part of our programme to become a customer-
     led business.  Within this total, we spent £13 million
     more on television, radio and print advertising.
     
     We have held personnel costs broadly level on the year.
     The expenses of an additional 1400 sales staff have been
     offset by a reduction in Head Office personnel and store
     management.
     
     International Retail

     All sales and profit comparatives are given on a 52-week
     basis at constant exchange rates.
     
     In our International Retail Division we increased sales
     by 5.9% and made an operating profit of £0.3 million,
     before exceptional items (last year, loss of £9.9 million
     on a comparable basis).  The effect of the 53rd week is
     to increase full year profits to £7.0 million.
     
     In Europe, the second half performance was considerably
     better than the comparable period last year, helped by the
     closure of seven under-performing stores (three in France
     and four in Germany) and the improved performance of our
     franchises, particularly in Greece and Turkey. There has
     been a small improvement in the European bought in margin,
     partly due to better buying practices.  We opened new
     stores in Barcelona and Frankfurt, but overall footage has
     reduced by 129,000 sq.ft.
     
     Sales in the Far East have improved by 7%, helped by an
     improving economy and significantly increased local
     production.  Costs have been well controlled and we have
     reduced operating losses from £14 million to £4 million.
     
     Although sales for Brooks Brothers show an 8% increase,
     higher mark-downs and additional costs arising from US
     expansion have impacted trading profits.  Following a
     first half where operating losses were £5 million
     compared to a £1 million profit in the previous year,
     second half operating profits of £11 million are in line
     with last year.
     
     Kings Super Markets has performed well, increasing sales
     by 7% and operating profit by 5%.  Three new stores were
     opened in the second half-year.
          
     Financial Services
     
     We have increased pre-tax profits by 5% to £115.9 million.
     Within our Financial Services retailing activities (that
     is, excluding our captive insurance company) pre-tax
     profits increased by 15% to £106.6 million.
    
     We increased new personal loan advances by 13% to £905
     million, broadening the range of customers.  Growth has
     been achieved by better analysis of the customer base and
     the use of better-targeted selling methods.  This has
     allowed us to grow scale at acceptable risk and cost while
     also making our rates more competitive.
    
     We have re-priced our pension product to a new stakeholder
     friendly charging structure. A further reduction in term
     assurance rates and the launch of an over 50s Guaranteed
     Protection Plan reinforce our position as one of the most
     competitively priced providers of life and  pensions
     products.  We increased new life and pensions policies by
     28,000 to 58,000.
    
     Unit trust funds under management have increased by 6% to
     £1,166 million, despite lower sales of tax-sheltered
     products.
    
     Account Card profits increased by 9%.
          
     Ventures
     
     We had invested or committed some £16 million in ventures
     by the end of the financial year, the potentially
     significant investments being Talkcast Corporation,
     Temposoft and Splendour.com.
    
     Exceptional Items

     The closure of our Canadian business was completed at a
     cost of £21 million compared to an estimated £25 million.
     Goodwill previously written off to reserves of £24.4
     million increases the total exceptional charge to £45.4
     million.
    
     Total European restructuring costs of £17.0 million are
     made up of £8.7 million of redundancy and related costs
     and £8.3 million of losses on store disposals.
    
     The exceptional charge for UK restructuring is £63.3
     million.  Of this, £16.0 million of redundancy costs were
     reported at the half year following the rationalisation of
     UK store management structures and the closure of a
     distribution centre (Tyneside).  The additional £47.3
     million now provided for includes:
    
    * Head Office costs of £18.5 million resulting mainly
      from restructuring of UK Retail into Customer Business Units.
     
    * £28.8 million that relates mainly to the cost of
      restructuring store roles to refocus staff activities towards the       
      customer.
     
    The net loss on property disposals (excluding European
    stores noted above) is £14.0 million, of which a £17.2
    million accounting loss relates to the disposal of The
    Gyle.  The actual profit realised from the sale was £53.4
    million, but cumulative revaluations since acquisition
    have been recognised through reserves and are not written
    back to the profit and loss account, in line with the
    Accounting Standard for investment properties.
    
    Balance Sheet and Property

    Of the intended £400 million to be raised through the sale
    or re-financing of non-operational properties, to date
    approximately £240 million has been realised from
    disposals, the largest of which were The Gyle Shopping
    Centre and an investment property in Newcastle.

    Group capital expenditure was £451 million in the year
    just ended.  We expect the figure to fall in the current
    year, with a further reduction in new store openings and
    footage developments.
    
    Dividend
    
    We are proposing a final dividend of 5.3p per share,
    making a total of 9.0p for the year (last year 14.4p),
    equivalent to 100% of net earnings.
    
    This will re-base the dividend to a level from which
    appropriate earnings cover can be re-established more
    quickly, improving our ability to invest in the Company's
    future growth.
    
    Current UK Trading
    
    In the last 8 weeks, total sales rose by 4.2% or 2.1% on a
    like-for-like basis.  The aggregates were helped by strong
    sales in Home (+36%).  Cold and wet weather in April was
    balanced by a warm May.  Both 8 week periods include an Easter week.

    Credit card sales now represent 11% of the total.
    
    PROGRESS

    In May 1999 we set out four priorities designed to
    transform the business and move closer to the customer.
    They were:
    
    (1) Create clear profit centres.
    
    (2)  Change our business to be more customer-facing.
    
    (3)  Restore profitability overseas.
    
    (4)  Build the Financial Services business.

    We identified these objectives as essential priorities to
    enable us to deliver sustained recovery and build a
    platform for long-term growth.
    
    Organisation
    
    The first step was to create clear profit centres to
    structure our business to meet customer needs.  To achieve
    this, we:
    
    * Established 5 Operating Divisions - UK Retail;
      International Retail, Financial Services, Property and
      Ventures.  Each Operating Division is accountable for
      delivering profit and value created targets.

    * Created within UK Retail 7 Customer Business Units:
      Womenswear, Menswear, Lingerie, Childrenswear, Home, Beauty
      and Food.  Each unit has integrated buying and selling teams
      dedicated to their customer groups.
    
    Creating a customer-facing business
    
    We have focused on, first, the brand, and next, buying in
    response to customer needs.
    
    Brand

    We undertook a fundamental review of the Marks & Spencer
    brand and what it means to our customers.  Consequently,
    we have:

    * Designed and launched an updated look for our brand.

    * Established a Customer Insight Unit to understand the
      shopping habits and demographics of our customers.

    * Developed local store cataloguing to tailor our products
      and store layouts to meet customer needs.

    * Introduced clearly differentiated ranges that broaden and
      build upon traditional markets such as our Autograph designer
      collections, Salon Rose lingerie, and Count on Us calorie and
      fat reduced foods.

    * Created new product areas such as nursery and maternity
      wear, mobile telephones.

    * Largely achieved the restructuring to put 4000 customer-
      facing advisors on the sales floor to deliver better customer
      service.  This will be completed by the autumn.

    * Completed a transitional modernisation of 178 stores.

    * Opened the first of three prototype stores in Sutton, to
      be followed by Fosse Park (June) and Kensington (July).  Here,
      we will evaluate new customer facing initiatives and test new
      concepts.  These stores illustrate our progress to date in
      better understanding and applying our knowledge of customers'
      needs.

    Buying and Logistics
    
    The changes to our supply chain, and their resulting
    impact, are of great significance to us.  We have
    fundamentally changed the way we source, buy and
    distribute our products.  This has been a difficult
    process not only for our own people but also for our
    suppliers.  However, these changes are necessary to
    improve our competitive position and could not have been
    achieved without their co-operation.
    
    We have reshaped our supply base to deliver economies of
    scale and to reduce our overheads.  We are increasing the
    effectiveness of our buying and logistics by:


    * Focusing our production volumes on a smaller number of
      suppliers in each product area.
       
    * Increasing the proportion of goods sourced overseas from
      50% to 70% by the autumn season.

    * Leveraging economies of scale to gain logistics cost
      advantages.

    At our Interim results, we identified £450 million in
    annualised cost savings, of which £400 million would come
    from general merchandise and £50 million from foods, by
    2002/03.  We have taken the first steps and will achieve
    over £80 million of cost savings during the second half of
    2000/01.
    
    To drive further supply chain efficiencies, we have joined
    the Worldwide Retail Exchange, a collaborative partnership
    with 16 other retailers, as a founding member.
    
    Other Channels

    E-commerce - Our retail offer on the Marks & Spencer
    website was piloted in the pre-Christmas season, building
    on our established retail infrastructure.  Over the next
    few days, we will enhance the website to incorporate
    increased functionality, simpler navigation and a broader
    product offer. Approximately 1200 products will be
    available by the end of this month, rising to 3000 by
    Christmas.
    
    Future developments will include a new ordering point
    which allows customers to order from our web site in-
    store, as well as access through new mobile and static
    devices such WAP and DiTV.
    
    Direct - We have expanded and improved our catalogues
    following customer feedback and both sales and average
    transaction values are up.


    Restore profitability overseas
    
    Marks & Spencer Stores
    
    We have closed our Canadian operation and seven under-
    performing stores in Europe.  By the end of 2001, 35% of
    European sales will be managed by our European Buying
    Office, of which half will be unique products targeted at
    local customers. In the Far East, over 50% of our clothing
    is already sourced regionally and there is scope to take
    this further.
    
    Brooks Brothers
       
    Brooks Brothers is a high quality brand with international
    potential.  We already have operations in Japan, Hong Kong
    and Taiwan, and have announced a franchising move into
    Italy, Austria and Switzerland with the Della Valle Group.
    We will continue to seek opportunities where we can build
    the brand internationally.

     Our Brooks Brothers merchandise is already sold through
     direct mail and on the internet, and we have put a
     franchising arrangement in place to sell merchandise at
     US airports.

     Kings Super Markets
     
     Kings Super Markets is a profitable, well-managed
     operation but we were unable to achieve a price that reflected 
     the value of the business.  We will continue to grow our business 
     in New Jersey and surrounding areas.  This year we will be
     opening the first stores on Long Island, New York.

    Build our Financial Services business
    
    Changes to the Account Card - we have recently announced a
    substantial reduction in APR to 18.9%, making the M&S card
    rate competitive with the more widely used credit cards
    and 7.5% lower than the average store card.
    
    The acceptance of other credit cards will inevitably have
    an effect on full year profits in this Division, with some
    reduction in the number of active M&S card users.  We have
    and will continue to develop incentives targeted at
    specific customer groups which will generate loyalty to
    the M&S card.
    
    New product development - we have recently announced a
    move into general insurance to increase the range of high
    value products we offer.  A home and contents policy will
    be offered initially and other services will be launched
    thereafter. Additionally, commission-free foreign exchange
    delivered direct to customers' homes is now available to
    all account card holders.
    
    New distribution channels - we are piloting a new
    Financial Services centre within three stores for face-to-
    face selling and servicing of products, with two more
    stores added over the coming months.  We have also seen a
    significant increase in sales volumes through our website
    and we will continue to develop this channel of
    distribution.
        
    FUTURE
    
    We are very aware that our shareholders, customers, employees
    and business partners have all shared the burden of our
    ambitious change programme, and we are grateful for their
    support.

    We have reorganised the Company to be more responsive to our
    customers.  We are now organised to understand them better and
    to apply this knowledge to the entire range of our products
    and services, with a greatly increased ability to tailor our
    offer to their individual needs.  By simplifying and improving
    our processes, we are making the cost savings necessary for
    this to happen.  Moreover, our supply chain improvements are
    making us more competitive, and there is a great deal more to come.

    We are now using these skills to work across categories and
    business areas, to stretch our brand in order to meet
    customers' lifestyle needs with a variety of formats, selling
    channels and new product areas.

    Restoring the performance of our UK retail business must be
    our first priority.  Once that recovery is secure, we will
    have a more effective foundation on which to build our
    international strategy.

    We have identified the priority actions which will lead to
    sustainable recovery and an improvement in shareholder value,
    and we are confident of our ability to achieve this goal.


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