M&S retreats from foreign markets in store shakeup

Marks and Spencer has announced a far-reaching store closure programme affecting one in ten of its clothing stores in the UK and most of the overseas outlets it owns, as the company battles to turn itself round after years of market share losses.

The chain will stop selling clothes at a further 45 UK locations, replacing existing full-line outlets with smaller Simply Food stores. The overhaul to the company’s retail estate will take five years and cost £350m.

Chief executive Steve Rowe, who took the top job in April, has given up on his predecessors’ ambition of creating a global retailing group, opting to shut almost all the chain’s stores outside the UK. Among the stores to go will be a flagship on the Champs-Élysées in Paris that former boss Marc Bolland opened to loud fanfare in 2011.

M&S shares in London were flat after half an hour of trading on Tuesday, and have fallen more than a fifth so far this year.

The international business sunk to a £43m loss in 2016, and Mr Rowe concluded that it was too small – and knew too little about customers in far-flung places such as China, Estonia and France – to have a chance of making a profit. Only locations in Ireland, Hong Kong and the Czech Republic will be spared.

“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,” Mr Rowe said.

Underlying profit before tax in the six months to October 1 fell 17 per cent compared with the same period a year earlier, to £231m, on flat revenues. That result beat analysts’ expectations by 8 per cent, according to a survey compiled by S&P Global Market Intelligence.

Clothing sales fell by 5.3 per cent as the company stretched to its fifth consecutive year of market share losses in apparel. But the grocery business notched up a 4 per cent gain after opening 21 new stores.

Since taking over earlier this year, Mr Rowe has slimmed down the top management team and announced plans to cut hundreds of head-office jobs. He also reduced the number of sales and promotions to focus on reducing everyday prices, a move which prompted a sharp downturn in sales but which the chief executive insists will win back customers over time.

Mr Rowe said M&S planned to absorb the currency pressures from the weakness of the pound. “We’ve obviously got currency pressures that have come on to us recently but we intend to mitigate those through better sourcing, by better volumes with our manufacturers and our intention is we won’t have to pass those price rises on to the consumer in the new year,” he said.

He said 1,700 M&S lines had come down in price this Autumn.

He dismissed suggestions the company should focus solely on food saying “I believe our customers like M&S as a single unit. They shop both parts of our business and will continue to do so.”