Hundreds of Marks & Spencer staff will find out today or tomorrow whether their store is closing, as the retailer accelerates its retrenchment from struggling UK high streets.
The M&S chief executive, Steve Rowe, is shutting 100 of its large clothing and food shops amid falling sales and profits. It has already closed 20 stores, but staff are braced for further closures before the announcement of its annual results tomorrow.
The closures are part of a plan announced 18 months ago to reduce store space devoted to its ailing clothing ranges. Initially, just 30 out of a group of 105 underperforming stores were to shut but Rowe has decided on a more aggressive closure plan as sales migrate online.
The City is expecting M&S to report a second year of falling profits with analysts pencilling in pre-tax profits of £573m, down from £614m in 2017. Clothing and home like-for-like sales are forecast to be down 1.1%, with food sales dropping by 0.2%.
After several years of disappointing financial results, the restructuring at M&S has entered a more radical phase since retail veteran Archie Norman was installed as chairman.
When the company updated investors six months ago, Norman was clear about the scale of its problems. He said that M&S had been “drifting for 15 years”, as he promised to speed up store changes and tackle its misfiring food business.
Rowe has been at the helm for two years but, with no green shoots to celebrate and a backdrop of weak consumer spending, M&S’s share price has fallen by nearly a quarter over the past year.
The decline means the 134-year-old retailer’s place in the prestigious FTSE 100 could now be in jeopardy. M&S has been a member of the blue chip index since its inception in 1984 but could be relegated to the FTSE 250 in a stock exchange reshuffle this week. Relegation would be a symbolic moment for the British institution that has struggled to hang on to shoppers in a digital age.
RPA Perspective In a sign of the times, Ocado, the online grocer, and Asos, the fashion website, are now worth more than M&S in market value terms in a sign of the sea change in shopping habits, with Ocado signing a major deal with US supermarket chain Kroger.
Rowe will flag price cuts this week in the food and clothing aisles as M&S attempts to fight back against the growth of value chains such as Primark, Aldi and Lidl. He will also announce investment in the warehousing needed to support the growth of its website.
Shore Capital analyst Clive Black predicted an improving trend in clothing sales but felt that the food business had fared less well. “It’s the perpetual conundrum of M&S,” he said. “Can it get the stars aligned and both businesses growing at the same time? Not yet.”
