Dozens of Marks & Spencer (M&S) stores across Europe are earmarked for closure as the London-based retail group reorganises its business in the face of plunging profits.
M&S reported on Tuesday that first-half pre-tax profit declined 88% to £25 mln (€28 mln) from £216 mln in the same period last year. The factors eating into the result included pension costs, falling sales and an increase in the cost of imports due to the decline in the value of the pound.
To stem the tide, the retailer has unveiled a turnaround plan that involves increasing the focus on food stores. As a result 30 clothing and homewear outlets in the UK will close, and as many again will be converted into Simply Food convenience stores. M&S said it will open a total of 200 new Simply Food stores in the UK over the next few years. The retailer will have 60 fewer clothing and homeware stores in its home market within five years.
M&S said it will close 53 of its international stores. This total includes 10 in China, half its stores in France, as well as all its premises in Belgium, Estonia, Hungary, Lithuania, the Netherlands, Poland and Slovakia.
This marks the second time that M&S has entered continental Europe and then scaled back. The retailer entered the French market in 1975 before expanding to other markets. The European strategy came to an end in2001 as the group retrenched from the Continent. The second European move began in 2011.
UK retail property body Revo said the M&S retrenchment raised concerns of damaging high streets. 'Although M&S continues to look actively for Simply Food expansion opportunities, its fashion-led branches in so-called "weaker" high streets are expected to be the focus of store closures and this will be of concern in those places, given the role retail plays in supporting successful local economies and communities.
'We call on local authorities to intervene and partner with the private sector to regenerate and enhance retail places – to attract customers, boost the shopping and leisure experience and increase value for consumers. This will enhance the vitality and vibrancy of towns, cities and other urban areas as they too evolve and reposition to meet changing consumer needs.
'Further, M&S and other retailers continue to be subject to a business rates regime which hampers property investment and occupation. Therefore, we continue to urge the government to urgently reduce the tax liabilities arising from this punitive tax and address the opaque appeals system.'
