Marks & Spencer to close c.60 stores

Marks & Spencer has reported on half year results for the 26 weeks ended 1st October 2016.

Group revenue increased by 0.9% to  £4,993.5m, compared with £4,951.3m in 2015. Underlying pre-tax profits declined by 18.6% to £231.3m, while statutory profit before tax dropped by 88.4% to £25.1million - down £216m at the same point last year.

M&S stated it had made 'good progress' against strategic priorities set out in May and advised that lower clothing and home sales had impacted underlying profits. It said that there had also been a significant charge associated with pensions which affected non-underlying items.

The retailer has put a five-year plan in place to improve productivity of its UK store estate by repositioning c.25% of its clothing and home space, closing around 60 Clothing and Home stores and converting dozens of others to its Simply Food format.

Furthermore, M&S is proposing to focus its International business on a franchise model, exiting its loss-making owned business across ten markets, at a non-underlying cost of £150m-£200m over the coming 12 month period, thereby eliminating annual losses of £45m.

CEO Statement:

Steve Rowe, M&S CEO, said: “In May, we laid out a number of questions which we would answer as part of our strategic review. We committed to creating a simpler business with customers at its heart, and taking action to start to recover our Clothing & Home business and continue to grow in Food.

“Our aim is to build a sustainable business which will delight our customers, provide a robust
foundation for future growth and deliver value for our shareholders in the long term. We have made good progress on our plans and customers are already noticing a difference, particularly in Clothing & Home.

“In addition, we have made major steps towards fairer pay and pension arrangements,
streamlined our senior management team and our plans to implement a simpler Head Office structure are well underway.

“We have now completed a forensic review of our estate both in the UK and in our International markets. Over the next five years we will transform our UK estate with c.60 fewer Clothing & Home stores, whilst continuing to increase the number of our Simply Food stores. In the future, we will have more inspiring stores in places where customers want to shop that complement our growing digital offer.

“Internationally, we propose to cease trading in ten loss making owned markets, but intend to continue to develop our presence through our strong franchise partners.

“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.”

Analyst View

Martin Lane, a representative at www.money.co.uk, gave us his view:

“M&S’s results and plans to close stores are a direct consequence of shoppers' obsession with buying clothes online. I feel sorry for M&S in a way because they tried going after a younger audience with their Alexa Chung line and then when they confessed to putting their efforts into an older audience they were lambasted for that too. “It’s not all doom and gloom though, what is going their way is the changing way we shop for food. There is a growing pattern that consumers shop for staple foods in discount stores and then treat themselves to upmarket goods in the likes of Waitrose and M&S. Their strategy to turn their clothes stores into food stores is definitely a good one.” 

Source : Insight DIY / Marks & Spencer

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