M&S owns up to past errors

UK retailer says it was slow to embrace e-commerce

LONDON: Marks & Spencer Group Plc (M&S) owned up to its mistakes, saying it needs to close more stores and catch up to rivals in e-commerce as chairman Archie Norman tries to pull the UK retailer out of a crisis that has dragged on for more than a decade.

The shares rose as much as 6.6% early yesterday in London, the most since July 2016, after the retailer said it’s accelerating a drive to become a “more commercial, more digital business.”

A decline in sales of food and clothing in the fourth quarter underlined the need for a restructuring of the 134-year-old retailer, including plans to shut nearly onethird of its large stores in the UK.

“Marks & Spencer has admitted defeat on its recent strategy and the proposed revamp of a business whose brand may yet become its saving grace has been well received by investors,” Richard Hunter, head of markets at Interactive Investor, said in an emailed comment.

Chief executive officer Steve Rowe acknowledged the company’s past missteps, saying M&S was slow to embrace e-commerce and to respond to a slump in foot traffic on the UK’s shopping streets. He asked for patience, saying the company envisions a return to “sustainable, profitable growth in three to five years.”

“There are a number of structural issues to address and we are taking steps towards fixing these,” Rowe said in a statement.

Under Norman, who became chairman last year, the fixture of the UK’s downtown shopping dis- tricts is lowering prices and upgrading its e-commerce infrastructure. But competitors are giving it new headaches, with J Sainsbury Plc’s US$10bil acquisition of Walmart Inc’s Asda threatening to intensify price competition in clothing and food.

Soaring costs and stagnant demand are squeezing all of the UK’s store-based fashion retailers.

Same-store sales in M&S’s clothing-and-home division fell 3.4% in the fourth quarter, more than double the rate of decline that analysts expected. Comparable sales in food, long the engine of growth for M&S as its apparel operations slumped, fell 0.6%.

Despite the weakness, M&S’s forecast for the current year is not as bleak as some investors expected, and that helped lift the shares. Short selling – in which investors seek to profit from selling borrowed shares and later buying them back at a lower price – has spiked, with nearly 16% of M&S stock on loan, according to IHS Markit data. That’s the second-highest level of any company in the UK’s benchmark FTSE 100 index.

The retailer recorded one-time charges of £514mil related to the store closings, cutting its pretax profit by 62%, to £66.8mil, in the 52 weeks through March 31. In the last two years M&S has recorded onetime charges worth almost a £1bil.

The company wants a third of its clothing and home sales to be made online, up from about 18% now. M&S said its digital capabilities are “behind the best of our competitors” and its website is too slow.

“Ongoing structural pressures mean that any path to recovery for M&S continues to look long and uncertain,” Liberum analyst Adam Tomlinson said by email. — Bloomberg