British Marks & Spencer seems unable to steady the ship: when the company revealed its six-month results, it became clear it would dial back its food stores’ expansion plan.
Slower expansion
Marks & Spencer has been focusing on its restructuring efforts for quite some time: the chain had already discarded its European expansion plans and turned its attention to the British market. It also decreased a store’s space for clothing and wanted to open more Simply Food stores. However, in its press release the company that it will speed up its process to downsize the clothing and Home product sections in its stores and rewrite its Simply Food plan. One thing that is clear is that it will slow down its expansion, because of the weak British pound.
The weak pound led to a strong surge in costs, but huge competition in the food industry meant Marks & Spencer was not able to charge the customer for those increased costs. Over the past few months, prices were even lowered. Food turnover did grow 4.4 % in the first six months of the fiscal year, but that was mainly because of new store openings. Lower prices and higher inflation led to smaller margins.
On the other side, clothing sales are beginning to pick up again. Turnover grew 5.3 % in the first six months, because it did not discount as much. The company’s total turnover grew 2.6 % to 5.13 billion pounds (5.8 billion euro), but its EBITDA did drop 5.3 % to 219.1 million pounds (250 million euro).
“We have made good progress in remedying the immediate and burning issues at M&S I outlined last year. We recognise now that we face stronger headwinds in Food which will be addressed in the year ahead”, CEO Steve Rowe said.
