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What do you do faced with mounting losses, a retail sector in turmoil and a crisis on Britain’s high streets? You go shopping. Now is a prime opportunity to snap up bargains on the high street, according to Marks & Spencer (MKS). Although we’re not talking cut-price shoes, sofas or lipstick here. Marks & Spencer has its eye on prime sites from which it can set out its stall, and emerge post-pandemic and post-major transformation, as a key retail player.
Announcing its plans today, M&S said: “There has rarely been a better time to acquire new replacement stores on good terms.” It aims to eventually have around 100 stores in prime retail markets, compared to the 80 it has now, along with a further 15 in what it calls core markets, taking the current 65 up to 80 stores. That leaves a hefty 110 of its current locations, at least 30 of which will close, which will be converted to food-only outlets or subsumed into larger stores nearby.
It’s a bold proposition, especially coming as it does hand in hand with news that the company has made a breath-taking £200 million-plus loss over the past 12 months.
But it says something of the impact of the pandemic and the lightening speed at which it has hastened moves that arguably should have been made years ago, but that, were it not for the pandemic, probably wouldn’t have happened for many more years to come.
The past 18 months has shown all companies, and especially those in the retail sector, that positive change needs to be seismic and it needs to happen just as dramatically quickly.
Marks and Spencer, which was already mid-turnaround, before the pandemic struck, today said these turnaround plans are about to get super-charged. It has already closed or relocated 59 large stores, leading to 7,000 job losses across the group. Now, the retail giant has said it could potentially take on multiple sites vacated by the collapse of the Debenhams chain of department stores, plus relocate or close stores across more than a hundred other locations.
Chief executive Steve Rowe said the likelihood was that in five years’ time, M&S will have a greater number of stores than it has today, but more of them would be food only and more would be located in out-of-town areas.
So the message is loud and clear. M&S isn’t dead. Long live M&S.
And that is a message it will hope resonates for longer and far louder than its current position. After all the past year, while one that is not just an M&S problem but a wider retail problem, has been a painful time for the 137-year-old retail stalwart.
While the business saw a profit of £41.6 million once you take out one-off restructuring costs, it actually made a loss of £201.2 million in the 52 weeks to 27 March, down from a £67.2 million profit the previous year. M&S said clothing and homeware sales had fallen by 31.5% over the period under review, reflecting the "heavy impact" of lockdowns on stores.
Suffering clothing and homeware sales did not help; and they haven’t for a while, not just since the pandemic, which has hastened the decline, but for some time now. Such is the situation that of the 54 full-line stores it currently operates, it is now something of an open secret that too many of them are in long-term decline and cannot justify future investment.
Its one saving grace and the one part of the transformation that could not have been timed better if it had tried, was the tie-up with online grocery retailer Ocado just as online shopping became the thing everyone was forced to do.
A quarter of each and every Ocado order is made up of M&S products, and the partnership contributed £78 million in profits. Because of this, food delivered "strong underlying like-for-like growth" just shy of 7%, even after adjusting for the closure of hospitality and the adverse impact on franchise sales.
"In a year like no other, we have delivered a resilient trading performance," said chief executive Steve Rowe.
It has been a year like no other for a number of reasons for M&S and its directors, employees and shareholders alike, will no doubt all hope the next year will be far less ‘Debenhams’ and turn out to be much more like the M&S of old.
More on M&S
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