Marks & Spencer to speed up store clo­sures as prof­its fall

Business World - - WORLD BUSINESS -

LON­DON — Marks & Spencer (M&S) will speed up store clo­sures after fall­ing sales and cost pres­sures dragged first-half profit lower, un­der­lin­ing its strug­gle to re­gain the loy­alty of British shop­pers.

M& S, Bri­tain’s big­gest cloth­ing re­tailer, also said it would ac­cel­er­ate the re­lo­ca­tion and down­siz­ing of other stores — part of Chief Ex­ec­u­tive Of­fi­cer (CEO) Steve Rowe’s fiveyear turn­around plan that is set to ini­tially dent prof­its.

And while still plan­ning to grow its food busi­ness, M& S will slow down open­ings of stand­alone ‘Sim­ply Food’ stores. Mr. Rowe said its food prices needed to be more com­pet­i­tive in a tough mar­ket, while both ranges and avail­abil­ity needed to im­prove.

The plan is the lat­est in a long line of turn­around at­tempts by one of the best known names in UK re­tail which has lost ground to ri­vals from H&M and Zara to on­line site ASOS, whose fast- chang­ing fash­ions have won over younger shop­pers.

Mr. Rowe, an M&S lifer who be­came CEO in April last year, de­nied the lat­est changes were a di­rect re­sult of re­tail veteran Archie Norman join­ing as chair­man in Septem­ber, say­ing they were based on data and fi­nan­cial mod­el­ing. M&S had not lost as many cus­tomers as ex­pected when stores closed, mak­ing quicker and fur­ther clo­sures vi­able, he said.

M& S also said fi­nance chief He­len Weir would leave the firm when a suc­ces­sor was found after less than three years in the role. She said she wanted a “more di­verse port­fo­lio” of jobs.


Norman, best known for turn­ing round su­per­mar­ket chain Asda in the 1990s, told re­porters the 133-year-old M&S had been “drift­ing, un­ful­fill­ing its cus­tomer prom­ise” for 15 years, fail­ing to de­liver the pace of change re­quired.

“This is our mo­ment to start do­ing it,” he said.

“The gen­e­sis of any turn­around starts with the recog­ni­tion of the unvarnished truth — the un­spar­ing state­ment of where you stand to­day, where the com­pe­ti­tion is, what the chal­lenge is ahead,” he said.

Norman praised Mr. Rowe for “grasp­ing net­tles and slaugh­ter­ing some sa­cred cows” over the last 18 months.

Mr. Rowe has scaled back M&S’ in­ter­na­tional op­er­a­tions and cut bu­reau­cracy. His cloth­ing strat­egy is fo­cused on re­duced prices for ba­sic ranges, cut­ting back on clear­ance sales and pro­mo­tions while im­prov­ing fit, avail­abil­ity and cus­tomer ser­vice.

His plan also in­volves switch­ing some UK shop floor space from cloth­ing to food. M&S said last year it would close, down­size or re­lo­cate 105 stores over five years. Six have closed so far.

“At this stage the num­bers that we’ve given out pre­vi­ously are the min­i­mum num­bers we in­tend to work to. But the key thing is the pace of that change will be quicker than we pre­vi­ously said,” said Mr. Rowe.

Mr. Norman said that be­cause of Mr. Rowe’s ac­tions “we no longer have a hem­or­rhag­ing busi­ness.”

Mr. Rowe said M&S would fur­ther mod­ernise its cloth­ing sup­ply chain to make it faster and lower cost. He set a tar­get for a third of its cloth­ing and home­ware sales to be made on­line and plans to sub­stan­tially cut its cost base.

Shares in M&S, down 6% so far this year, were up 1% at 1555 GMT, as falls in first half profit and se­cond-quar­ter sales were not as bad as feared.


“M&S is play­ing catch-up in a dif­fi­cult mid­mar­ket po­si­tion and pres­sures in food are un­likely to re­cede near term ... the shares are un­likely to per­form un­til ev­i­dence of sus­tain­able re­cov­ery is seen,” said In­vestec an­a­lyst Kate Calvert.

Its task is be­ing made harder by a squeeze on con­sumers’ spend­ing power as in­fla­tion rises and wage growth fal­ters. Last week UK in­ter­est rates also went up for the first time in a decade.

Some be­lieve more rad­i­cal think­ing is re­quired. Last week, Whit­man Howard an­a­lyst Tony Shiret said the ben­e­fits of M&S merg­ing with ri­val Next were at­trac­tive, though he said it was un­likely to hap­pen.

M&S’ pre-tax profit fell 5% to £219 mil­lion ($ 288 mil­lion) in the 26 weeks to Sept. 30. Se­cond-quar­ter cloth­ing/ home­ware and food like-for-like sales both fell 0.10%.

Mr. Rowe said M& S was “quite pleased with the start to Christ­mas” (trad­ing).

Re­cent sur­veys and data, how­ever, show UK re­tail­ers had a tough Oc­to­ber. —

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