M&S to speed up reshaping as profit and sales fall again
● Boss to prioritise digital and slow down Simply Food store openings
A new fall in sales and profits at Marks & Spencer is going to see the closure of under-performing stores speeded up, a renewed drive online, a slowdown in the expansion of its Simply Food brand and a further cost review.
The move came as the retail bellwether yesterday posted a 5.3 per cent fall in underlying interim pre-tax profits to £219 million in the six months to end-september.
M&S’S like-for-like sales fell 0.1 per cent in both the clothing and homewares division and its food arm in the second trading quarter – the third successive quarter of decline, but not as bad as the City had feared.
Steve Rowe, a company veteran who became M&S chief executive in April 2016, said: “We’ve made good progress in addressing the most immediate issues to arrest the decline of M&S. However, we still have structural issues to tackle.”
The boss’s initial strategy was focused on reduced prices for basic clothing ranges, cutting back on clearance sales and promotions while improving availability and customer service.
His plan also involved switching some UK shop floor space from clothing to food. M&S said last year it would close, downsize or re-locate 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,” Rowe said.
He denied the change of pace reflected the input of M&S’S new chairman, retail veteran Archie Norman, who joined in September. “We’re running this business based on data and based on good understanding of our modelling.”
Retailanalystssaidyesterday that the company was unfortunate that its reshaping was taking place amid weak consumer sentiment due to rising inflation, weak wages growth and the first base rate rise last week in ten years.
“M&S is playing catch-up in a difficult mid-market position and pressures in food are unlikely to recede near-term,” Investec analyst Kate Calvert said.
The group also confirmed it had launched the hunt for a successor to finance chief Helen Weir, who is to leave after three years in post to pursue a “plural career” and seek a variety of board positions and advisory roles.
M&S’S curtailed plans for the food business will now see it open 80 Simply Food shops this financial year, down from an earlier target of 90 outlets.
It flagged more price cuts and product innovation.
However, Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “This is not a pretty set of results for M&S, which has seen its turnaround plan undermined by changing consumer shopping habits and a weaker pound.
“While the retailer can’t carry the can for the knock-on effects of the Brexit vote, the prioritisation of online sales can only be seen as a pretty late arrival at the party.”