M&S to close stores at home and abroad as profits fall

Retailer to shut about 30 outlets in the UK, change 45 to only food

Britain’s Marks & Spencer (M&S) said it would shut about 30 stores at home and 53 abroad, with its new boss seeking to revive the retailer by focusing more on food and less on its struggling clothes and homewares ranges.

The retailer, whose shares have fallen 22% so far this year, reported an 18.6% slump in first-half profit and another fall in quarterly clothing sales.

Steve Rowe, a 26-year company veteran, took over as CEO in April and has the tough task of reviving a 132-year-old British institution that has fallen out of fashion over the last decade.

“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,” he said.

So far, Rowe’s priority has been trying to turn around M&S’s underperforming clothing and homewares business.
But yesterday, he outlined how the firm will streamline its British store estate of over 900 stores over five years and detailed a rationalisation of its international operations.

M&S would reposition about 25% of its UK clothing and home space, closing about 30 full-line UK stores and changing around 45 stores to only sell food. Other stores would be relocated.

The cost of the programme would be £50mil (US$62mil) for the next three years, rising to about £100mil in years four and five.

Expansion will focus on M&S’s food business, which contributes over half of group revenue and about a third of profit. In May, Rowe said M&S would add an additional 200 food shops by 2019.

M&S will also exit its loss-making owned business across 10 international markets, including France and China, at a cost of £150mil-£200mil over the coming 12 month period, thereby eliminating annual losses of £45mil, leaving it with franchised stores.

The firm currently trades from 468 overseas stores across 58 international markets, with 194 owned stores and 274 franchise stores.

Rowe has pledged to revive M&S’s clothing by improving ranges and availability, cutting prices and reducing promotions.

However, his plan, outlined in May, came with a warning of a short-term dent to sales and profit.

M&S reported an underlying pre-tax profit for its first half to Oct 1 of £231.1mil – better than analysts’ consensus forecast of £216mil but down from £284mil a year earlier.

Second-quarter clothing and home sales at stores open over a year fell 2.9% – ahead of analysts’ average forecast of down 3.9% and an improvement on a first quarter slump of 8.9% which was its worst performance for a decade. – Reuters

– Business News, Wednesday, 9 November 2016