M&S to open 200 food stores after clothing sales fall

By Matt Atherton

- Last updated on GMT

M&S will open 200 new food stores by the end of 2019
M&S will open 200 new food stores by the end of 2019
Marks & Spencer (M&S) will open 200 new Simply Food stores by the end of 2019 and downsize its Clothing & Home division, as part of a strategic redirection, it revealed with its latest financial update.

The high street retail chain planned to focus on its growing food division and close about 60 Clothing & Home stores in a five-year plan, it announced in its half-year results yesterday (October 8).

M&S said it would convert 45 full-line stores – those with both Clothing & Home and Simply Food divisions – to wholly food outlets over the five years. The focus on food sales would help to achieve a simpler, sustainable business, claimed ceo Steve Rowe.

‘Aim to build a sustainable business’

“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,”​ said Rowe.

“Over the next five years we will transform our UK estate with ​[around] 60 fewer Clothing & Home stores, whilst continuing to increase the number of our Simply Food stores.”

M&S’s 10 worst international markets

  • China
  • France
  • Belgium
  • Estonia
  • Hungary
  • Lithuania
  • The Netherlands
  • Poland
  • Romania
  • Slovakia

M&S reported a 4% food sales rise to £2.7bn in its half year results – exceeding expectations by 17% – while Clothing & Home sales dropped 5.3% in the six months to October 1.

M&S’s food division increased its market share by 0.2%. Its Food to Order sales were up “double digits”​ on the year previous, and 21 new Simply Food stores were opened during the same period. But, like-for-like sales were down 0.9%, which the firm blamed on “a competitive market”​.

M&S group profits before tax were down 19% to £231M over the six months, compared with the same period last year. Basic earnings per share were down to 1p from 10.5p.

Reducing staff numbers by about 525

The company planned to cease trading in 10 international loss-making markets, it revealed (see box on the right). Its five-year plan also involved downsizing its head office​, reducing staff numbers by about 525, and 400 London-based jobs.

Rowe said: “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.”

Consumer confidence experienced its biggest drop for more than 20 years after the Brexit vote, according to market research group GfK. M&S blamed​ the weakened consumer confidence for its 0.9% food sales drop in July.

Meanwhile, analysts expressed dismay at the retailer’s latest results, with one describing it as “pretty poor”​. See box below for more comments.

M&S half year results – at a glance

  • Group underlying profit before tax down 19% to £231M
  • Simply Food like-for-like sales down 0.9%
  • Clothing & Home like-for-like sales down 5.3%

What they say about M&S half year results

  • Shore Capital​ head of research Clive Black: “With hindsight, we probably should have stood back from our positive stance on M&S stock at the completion of phase I of the strategic thinking updates in the late spring, knowing that the property and international assessments were coming down the line and that they would potentially lead to some uncertainty. Whilst so, we remain of the view that Mr Rowe is the right man for the job and we do not like ebbing and flowing with our stock recommendations. 
  • XTB.com​ market analyst David Cheetham: “This latest trading update looks pretty poor on the face of it.​ Higher than expected exceptional costs of £206.2M, which is largely due to a significant charge relating to pension changes, is arguably the worst piece of news in the release with ceo Steven Rowe clearly trying to solve unwanted problems that begun well before his tenure as part of a strategic review after recent poor performance.”

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