Aug 18, 2020

News | Business | UK Retailer: Marks and Spencer to axe 7,000 jobs over next three months

Jonathan Eley and Sarah Provan 

Marks and Spencer will cut another 7,000 jobs over the next three months as the UK retailer overhauls its business in the latest sign of how the coronavirus pandemic has disrupted Britain’s high streets.
The cuts to the group’s 78,000-strong workforce come as the industry contends with severe ructions caused by the crisis, and follow a reduction of 950 roles announced last month.
Like many of its high street rivals, M&S is looking to cut the numbers of staff that manage and support shops as it scrambles to adjust costs to a reality of much lower sales in stores.
Since the start of the coronavirus crisis, companies such as pharmacy chain Boots, department store Debenhams and tech retailer Dixons Carphone have announced thousands of redundancies. These cuts are in addition to jobs lost through administrations and liquidations, which were more than 20,000 in the first six months of the year, according to the Centre for Retail Research.
M&S said many of the losses, which were communicated to staff this morning along with a video message from chief executive Steve Rowe, would be made through voluntary redundancies and early retirement.
The changes reflect not only current trading patterns, but the increased use of technology and greater devolution of responsibility and accountability to store managers.
The proposals announced on Tuesday are an “important step in becoming a leaner, faster business set up to serve changing customer needs”, Mr Rowe said on Tuesday.
In the eight weeks to August 8, a period during which almost all M&S stores had reopened, clothing and home sales were down 29.9 per cent while food sales were up 2.5 per cent and would have been higher still but for the continued closure of some shops in travel hubs.
The group said some newer out-of-town stores were in recent weeks trading close to last year’s level of sales, but high street outlets were still weak.
Although M&S has 70 stores on retail parks, and is opening more, it has more than twice that number on high streets and in shopping centres, where shopper numbers have been much slower to recover.
Online sales of clothing and home goods rose by about a third, highlighting the rapid shift in consumer behaviour, and now account for two-fifths of the total against about 22 per cent before the pandemic.
But M&S noted that a greater proportion of orders were being delivered to homes rather than collected in stores, which results in a lower margin for the retailer.
The company did not provide financial guidance for the year to March 2021, saying the outlook was still too uncertain. In a sign of expectations that demand would remain depressed, it reiterated that it had booked additional storage space for surplus stock for next year.
Kate Calvert, an analyst at Investec, said she expected pre-tax profit to fall to £232m from £403m last year. Both figures exclude exceptional charges, which are likely to be significant in the current year because of the job losses.
Ms Calvert said that while she still regarded M&S’s transformation plan as “more of a stabilisation strategy”, the business was likely to emerge from the pandemic in better shape, that its finances were robust and that investors appeared to be undervaluing its ability to generate cash.
M&S’s share price rose 1.9 per cent in London trading on Tuesday, but remains down by about 45 per cent since the end of 2019.

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