Marks & Spencer is to axe 30 UK stores and slash shop space devoted to its troubled clothing ranges as it focuses more on food under a shake-up unveiled yesterday.
The retailer also gave warning of about 2,100 job losses under plans to shut 53 shops across ten overseas markets, including China and France.
Chief executive Steve Rowe, who took over from Marc Bolland at M&S’s helm earlier this year, announced the latest restructuring alongside a 88 per cent slump in interim pre-tax profits to £25.1 million, partly due to higher pension costs.
Underlying profits, stripping out exceptional items, slid 18.6 per cent to £231.3 million. M&S said clothing departments would be shut in 60 of its 304 full-line stores, with 30 stores closing altogether, and 45 shops to be converted into Simply Food outlets, downsized or relocated.
It came as M&S revealed that same-floorspace clothing sales tumbled 5.9 per cent in the six months to 1 October. Around 100 stores overall will be affected by the changes over the next five years, it said.
The group declined to say how many UK staff will be affected or which stores would close, but said that, where possible, it would keep “job continuity” for employees.
Shopworkers’ trade union Usdaw said M&S staff would be “extremely concerned” by the news. Analysts at Peel Hunt said the overhaul was “far more aggressive than we were expecting”.
Rowe said it was “not about the M&S brand disappearing”, adding that the group would have more stores overall under plans to open more than 200 new Simply Food outlets.
“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.
The group narrowed the like-for-like clothing sales decline from 8.9 per cent in the first quarter – its worst performance for more than a decade – to 2.9 per cent in the second quarter.
Same-store food sales fell 0.9 per cent over the half-year, while it saw growth of 0.3 per cent at M&S.com.
The company, which has 87 fully-owned stores in Scotland, added that profit margins will be hit by slide in the value of the pound since the Brexit vote, but that it will continue to cut prices in the clothing and food businesses.
Rowe – an M&S veteran with 26 years’ service – had already announced that 525 jobs at the retailer’s head office in London’s Paddington district will go in a bid to cut costs, while making changes to staff pay and pensions, as well as cutting back on promotions in favour of lower prices on everyday clothing lines.
The group said the UK restructuring will cost it around £350m over five years, while its international retreat will come at a cost of £150m to £200m over the next year.
The firm currently has 468 overseas stores across 58 international markets, with 194 owned stores and 274 franchise stores.