FOR decades Marks and Spencer was a high-street favourite. Selling food and sensible clothing, most famously underwear, at sensible prices to the middle-aged middle class, it seemed unstoppable, both in Britain and abroad. In 1998 it became the first British retailer to make a pre-tax profit of over £1bn ($1.2bn). Since then it has been all downhill. On November 8th the chain announced a new turnaround plan, the latest of several. The proposals were radical, but may still not be enough.
The main problem is its clothes business, which has been draining market share. In Britain M&S has been undercut by shops such as Primark and Next, while young women, particularly, have deserted its dowdy interiors for the brighter lights of Zara and others. The store has also been hit by the trend for consumers to spend their money on entertainment rather than shopping. Its food business, however, does well. Market share is small, at less than 4%, but it has cornered the market in some areas: it sells 22% of all ready meals and 38% of party food bought in Britain, for instance.
So the new strategy, unveiled against a familiar backdrop of flat revenues and shrinking profits, speeds up M&S’s transition from a clothing store with food attached to a food and clothing business, each on an equal footing. In Britain the company is closing 30 “full-line” stores (those selling clothes, food and homeware), about a tenth of the total, and converting a further 45 into food-only outlets. This will take five years. It is also junking fashion brands that have not sold well. At the same time M&S will be opening 200 new food-only shops by the end of 2018/19.
Furthermore, the retailer is giving up its global ambitions. It is only eight years since the first M&S to open in Shanghai was mobbed by shoppers; at one point the doors had to be closed to avoid a crush. Last year a third of M&S’s Shanghai stores were shut down, and now the original one is to go too. Altogether the retailer is closing 53 loss-making shops in ten countries, at the cost of about 2,000 jobs.
The seven to go in France include the flagship store on the Champs-Elysées in Paris. To critics this was the folie de grandeur in the company’s hasty expansion abroad; it never seemed likely that chic Parisiennes would flock to the M&S lingerie department. This leaves wholly-owned stores in only Ireland, Hong Kong and the Czech Republic. To cut management costs, 500-odd jobs are being cut at headquarters and another 400 moved out of London.
The chief executive, Steve Rowe, says that these “tough decisions” will sustain the business into the future. Others are not so sure. The firm’s share price fell by about 6% after he announced his plan, reflecting some analysts’ complaints that he is not going far enough in giving up the clothing business. And it will take time for these changes to have an impact.
On November 9th came another reminder of how competitive the high street has become. Sainsbury’s, Britain’s second-biggest supermarket, released its latest results, showing another decline in sales and a fall in pre-tax profits over the first half of the year, down by 10% compared with the same period a year earlier. The biggest supermarket chain, Tesco, has also struggled of late, announcing its own turnaround plan last year. It will be cold comfort to M&S to know that it is not the only high-street giant in trouble.