M&S to shut down failing foreign shops

Marks & spencer is set to shut some of its international stores as part of a major cost-cutting drive.

Britain’s biggest clothing chain will use Tuesday’s half-year results to signal the closure of a raft of shops around the globe, including in China.

The poorly performing international division, which has a network of 468 stores, has been a drag on the business.

New chief executive steve rowe wants to shift away from owning stores, which are expensive to run, in favour of growing the network of franchise shops.

He launched a review of the international business back in May and said he would deliver an update next week.

China and France will be worst affected along with a raft of other regions.

The chain first entered the Chinese market in 2008 with a store in shanghai. It currently has nine stores in and around the city and one in Beijing. There are 14 in France.

M&s owns 194 stores around the world. There are a further 274 under franchise in russia, Thailand and also France.

In May M&s, whose shares closed up 3.2pc, or 10.9p, at 351.2p, said annual profit from its international arm almost halved to £55.8m from £92.3m. stores it directly owns were worst performing, which posted a £31.5m loss.

While profits fell at the franchise arm by 5.3pc, it was in the black to the tune of £87.3m.

rowe is under pressure to turn M&s around after inheriting a business that has struggled to shift women’s fashion. He has already taken drastic action by scrapping more than 500 head office jobs and slimming down layers of senior management.

scaling back the firm’s international expansion will be the first step towards dismantling the legacy of predecessor Marc Bolland.

The Dutchman returned M&s to Paris in 2011 amid much fanfare following a withdrawal by previous management 15 years ago. a second retreat will not be well received.

M&s had wanted to crack international expansion to mimic rivals such as H&M and Zara. This would also leave it less exposed to just one market. Freddie George, an analyst at broker Cantor Fitzgerald Europe, said: ‘I don’t think this withdrawal sends the right signals. They should take a longterm view on international expansion. I don’t necessarily think it’s the right thing to do, but I understand it.

‘I think the market will have mixed views.

‘China is a big growth market and it will be hard to come back to it. What most retailers are doing is developing flagship stores and franchise brands around that.

‘It is obvious M&s is desperate to cut costs. It has laid off quite a lot of people at head office recently. There is a new management team and they are taking a fresh look at the business and are taking a more conservative approach.’

M&s has as many as 400 staff at its head office in Paddington, West London, dedicated to the international stores it owns.

running a franchised operation needs fewer people and involves less capital and risk. This is because franchisees take control in exchange for a bigger share of the profit.

M&s said: ‘We decline to comment on rumour and speculation ahead of the half-year results.’