Britain's M&S to close stores, cut back on clothing

M&S, whose shares have fallen 22% so far this year, reported a 19% slump in first-half profit on Tuesday and another decline in quarterly clothing sales

Britain's Marks & Spencer plans to shut more than 80 stores at home and abroad at a cost of up to 550 million pounds ($684 million) as its new boss tries to revive the retailer by shifting its focus more towards food than fashion.

M&S, whose shares have fallen 22% so far this year, reported a 19% slump in first-half profit on Tuesday and another decline in quarterly clothing sales.

Steve Rowe, a company veteran who took over as CEO in April, has the task of reviving a 132-year-old institution that has fallen out of fashion over the last decade after long being the place where many Britons shopped for clothes.

"These are tough decisions, but vital to building a future M&S that is simpler, more relevant, multi-channel and focused on delivering sustainable returns," he said.

M&S has seen its market share eroded by rivals like Next and a push from supermarkets into clothing, while younger shoppers favour Primark and H&M's cheaper prices.

Rowe plans to close about 30 stores selling clothing, homewares and food and convert another 45 into food stores over the next five years. That will mean a reduction of 10% in the floorspace devoted to racks of skirts, jumpers and trousers.

"This is not about the M&S brand disappearing," Rowe told reporters. "In fact with our Simply Food (opening) programme we will be in more locations in the future than we are in today."

The cost of the programme would be 50 million pounds ($62 million) for the next three years, rising to about 100 million pounds in the following two years.

Expansion will focus on M&S's food business, traditionally lower margin, which contributes over half of group revenue and about a third of profit.

M&S said it will also retreat overseas, closing 53 stores in 10 loss-making markets, including France and China, at a cost of 150-200 million pounds over the coming year, concentrating instead on its profitable franchise model.

M&S trades from 468 overseas stores across 58 international markets, with 194 owned stores and 274 franchise stores.

Rowe is undoing some of the overseas expansion overseen by his Dutch predecessor Marc Bolland.

CLOTHING NEEDS REPAIR

Analysts at Liberum, who have a "sell" rating on M&S stock, said they had wanted to see more radical action.

"By transferring 30 or more Clothing & Home stores to Food, M&S looks to play to what has been its strongest suit in recent years as food has outperformed clothing by some distance," they said.

"We believe, though, that the fortunes of M&S will stand or fall by the performance of the core UK clothing business, and the outlook for that remains highly challenged."

Shares in group were down 1.9% at 342 pence at 1031 GMT.

M&S will seek to simplify its clothing ranges by removing the Indigo, Collezione and North Coast labels.

Rowe, who has worked for the company for 26 years, has pledged to revive M&S's clothing by improving ranges and availability, cutting prices and reducing promotions.

However his plan, outlined in May, came with a warning of a short-term dent to sales and profit.

He said on Tuesday there were "early signs of improvement", pointing to a rise in full-price clothing market share in the second quarter.

M&S reported an underlying pretax profit for the six months to Oct 1 of 231 million pounds - better than analysts' consensus forecast of 216 million pounds but down from 284 million pounds a year earlier.

Quarterly clothing and home sales at stores open over a year fell 2.9% better than analysts' average forecast of down 3.9%. That was an improvement on a first quarter slump of 8.9% which was its worst performance for a decade.

Second quarter like-for-like food sales fell 0.9%.