Retailer unveils cutbacks

Marks & Spencer to close stores as profits dive

M&S labelMarks & Spencer is to close 30 UK stores while 45 will be scaled down or replaced by food only outlets. There will be 60 fewer full-line stores.

It will shut 53 overseas as it withdraws from 10 loss-making markets.

The company is also ditching a number of its clothing sub-brands, but will open 200 Simply Food outlets. The total number of stores will increase.

About 525 employees will lose their jobs, including 400 in central London.

The company announced an 18% fall in underlying pre-fax profits. Clothing and home sales are down by 5.9% while like-for-like food sales are also down 0.9% in the 26 weeks to 1 October. Total food sales rose 4%.

In 2015/16 the overseas business lost £31.5m and operating profits were down 39.6% to £55.8m.

“This is not sustainable and we have undertaken a comprehensive review of our International business,” said the company in a statement.

It will close ten stores in China and seven in France, as well as all its stores in Belgium, Estonia, Hungary, Lithuania, the Netherlands, Poland, Romania and Slovakia. The closures will affect 2,100 staff.

The company will continue to operate in the Republic of Ireland, Hong Kong and Czech Republic.

Steve Rowe, M&S CEO, said: “In May, we laid out a number of questions which we would answer as part of our strategic review.  We committed to creating a simpler business with customers at its heart, and taking action to start to recover our Clothing & Home business and continue to grow in Food.

“Our aim is to build a sustainable business which will delight our customers, provide a robust foundation for future growth and deliver value for our shareholders in the long term. We have made good progress on our plans and customers are already noticing a difference, particularly in Clothing & Home.

“In addition, we have made major steps towards fairer pay and pension arrangements, streamlined our senior management team and our plans to implement a simpler Head Office structure are well underway.

“We have now completed a forensic review of our estate both in the UK and in our International markets.  Over the next five years we will transform our UK estate with c.60 fewer Clothing & Home stores, whilst continuing to increase the number of our Simply Food stores. In the future, we will have more inspiring stores in places where customers want to shop that complement our growing digital offer. 

Marks & Spencer“Internationally, we propose to cease trading in ten loss making owned markets, but intend to continue to develop our presence through our strong franchise partners.

“These are tough decisions, but vital to building a future M&S that is simpler, more relevant, multi-channel and focused on delivering sustainable returns.”

On the latest moves to boost the clothing division, he said: “In a tough market, we are seeing early signs that our actions to recover our Clothing & Home business are working. We are restoring our price integrity and have seen strong volume improvements, particularly in opening price points, as we ensure we are price competitive.  Nevertheless, total sales declined 5.3%. 

“We are focused on delivering contemporary wearable style and being famous for quality wardrobe essentials.  We now have 10% fewer clothing lines that we have bought with greater authority and we have introduced a more contemporary colour palette for autumn.  We also delivered on our commitment to improve the ‘fit’ of wardrobe essentials and saw strong performances in core areas such as bras and T-shirts.

“For autumn launch, availability was up eight percentage points and we made further improvements to core availability. This is making a difference even in areas where we already lead the market. For example, school uniform sales were up c.10% year-on-year in quarter two.

“We’ve also changed the layout of our stores to reflect how our customers like to shop, with more of our clothes grouped together in product categories, rather than in brand co-ordinated departments. We’ve hired 3,300 new customer assistants to work in areas that really matter to our customers such as fitting rooms and till points. As a result, our customer satisfaction levels are the highest they have been for over three years.

“We continue to improve our core M&S brand and simplify product choices by focusing on the brands that are most relevant to our customers, such as Autograph, per una and Blue Harbour. As a result, we will remove Indigo, Collezione and North Coast sub-brands. ” 

John Ibbotson, director of the retail consultancy Retail Vision, said: “M&S’s humiliating withdrawal from 10 overseas markets is nothing less than a Dunkirk moment for an iconic British brand.

“When in July it posted its worst results for a decade, many thought things couldn’t get any worse for the venerable retailer. But they just have. And then some.

“The collapse in profits reveals both the systemic problems in the brand’s offering, and its abject failure to tackle them.

“Despite the consistent success of its food lines, clothing and general merchandise still accounts for half of M&S’s business – and its seemingly terminal decline has turned it into a giant, profit-sapping albatross around Steve Rowe’s neck.

“Phase 2 of his turnaround strategy concedes as much – and effectively admits defeat on clothing to focus more on food.

“Reallocating floor space from food to clothing should boost sales in the short-term but won’t address M&S’ inexorable slide towards fashion irrelevance.

“Today’s younger shoppers simply don’t have an emotional bond with M&S clothing, and older people are losing it.

“As a result, they’re shopping elsewhere, whether at Next, New Look, Primark and other affordable luxury brands.

“No matter how successful its food offering, there’s something rotten in the state of M&S – rails of clothes that no longer connect with the buying public.”

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