Hundreds of Marks & Spencer staff will find out as soon as Monday 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, affecting about 900 jobs, but staff are braced for the axe to fall on another tranche of stores before the announcement of its annual results on Wednesday.
The closures are part of a plan announced 18 months ago to slash the amount of shopfloor 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 move online.
The City is expecting M&S to report a second year of falling profits with analysts pencilling in pretax 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 Archie Norman was installed as chairman. There have been a number of casualties in the boardroom including Andy Adcock, the boss of its upmarket food halls, who has been replaced, and marketing chief Patrick Bousquet-Chavanne.
When the company updated investors six months ago, Norman was frank about the scale of its problems. M&S had been “drifting” for more than 15 years, he said, as he promised to speed up store changes and tackle its misfiring food business.
Rowe has been in charge 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 next week. Relegation would be a symbolic moment for the British institution that has struggled to hang on to shoppers in a digital age.
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. Ocado surged past M&S on Thursday after it struck 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.”
Other UK retailers are also facing tough trading conditions. Last week Mothercare announced plans to shut 50 stores, putting at least 800 jobs at risk. House of Fraser is also planning store closures, and fashion chain New Look is considering shuttering 60 outlets. Rising competition from online retailers such as Amazon also hit Sir Philip Green’s Arcadia retail empire, where sales dropped 5.6% to £1.9bn last year.
