Marks & Spencer represents a retreat from several countries in the next year and the abandonment of 30 outlets in the U.K. over five years.In another sign that traditional retailers are having difficulty in today's internet-dominated market, Marks & Spencer Group Plc has announced a wave of closings. For the 132-year-old retail giant, it represents a retreat from several foreign countries in the next year and the abandonment of 30 outlets in the U.K. over five years.
The move was announced by the company's Chief Executive Officer, Steve Rowe. Replacing CEO Marc Boland earlier this year, Rowe has had a 27-year career in the company that he now leads. According to statements by the CEO, the shift should make the company simpler, more sustainable and more relevant.
Losses at HomeOut of 304 clothing and home wares stores, U.K. customers will see a tenth of these outlets disappear. Marks & Spencer is also shuttering sub-brands Indigo, Collezione and North Coast. The number of lost jobs is still uncertain, but the closures are estimated to cost the company about 350 million pounds.
It is estimated that 30 M&S stores will simply close. However other clothing and home wares outlets are set for a switchover to the firm's more profitable Simply Food format. Sales in these businesses have risen from 46 percent in 2010 to 52 percent this year.
Losses WorldwideThe closing of 53 stores worldwide affects some 2,100 workers in Europe and China. This move is designed to stem the tide of lost profits from M&S international businesses. While these closures are expected to save in the long run, initial costs are expected to be between 150 and 200 million pounds.
All M&S outlets will close in the Netherlands, Poland, Hungary and Belgium. Seven stores will close in France. In China, ten stores are projected to close. At present, there are 480 M&S stores in 59 countries, covering Asia, Europe and the Middle East.
Last year alone the company lost 31.5 million pounds from its fully owned stores. Franchised businesses, on the other hand, were profiting to the tune of 87.3 million pounds.
Impact on FashionBy closing so many stores and leaning on its upscale food business, the historic firm is coming under criticism from fashion analysts. Some say this move may spell the end of Marks & Spence in the fashion world. Fewer retail opportunities may make their designs less relevant.
There was some irony in the timing of the announcement. It came on the same day that Hennes & Mauritz revealed that they would be opening their first Weekday store in London.
Investment ForecastIf investors are impressed by the M&S decision to cut back its retail space, there's no evidence yet. Shares went down 2.4 percent after the announcement.
However, financial analysts seem more likely to praise the move than to decry it. The cuts should improve the company's long term earnings forecast, and that can't come too soon. M&S had already experienced a 23-percent stock drop, the biggest since 2008. Furthermore, it already downgraded its earnings forecast from a mere .5-to-1 percentage growth to an even slimmer 0.0-to-.5.