Sales are slipping at a steady pace at Marks&Spencer. According to chief executive Steve Rowe, it is a situation the British chain simply has to sit out: he does not rule out the possibility of closing more stores.
Turnover drops even further
Marks&Spencer keep suffering from a downward spiral. During the first half year (April to September), turnover in stores open longer than a year fell by 2.2 %. The full turnover even fell by 3.1 % to 4.96 billion pounds (5.7 billion euros). In particular, food sales declined (-2.9 %), clothing and home furnishings saw their turnover drop by 1.1 %. On the positive side, however, pre-tax profit rose 2 % to 223.5 million pounds (255 million euro).
It is impossible to achieve economic regeneration in 2018, Rowe admits: the CEO does not beat about the bush and predicts a challenging situation for the British chain in the remainder of the year, with still a lot of work to be done before the figures rise again.
More stores likely to close
“Slow, hierarchical and much like silos” is what Rowe calls his own company in the semi-annual report. He indeed wants to do everything he can to protect the “magic” of Marks&Spencer, but there are bitter pills to swallow. In May, M&S announced for 100 stores to be closed by 2022. At this moment, it seems like more closures cannot be ruled out. The next step then is to re-evaluate and update the buildings annually, Rowe said to the BBC. Closing more stores immediately is not possible right now, since Marks&Spencer has ongoing leases with a duration of 20 years for most properties. To break these contracts would be extremely expensive.
Marks&Spencer now has to save up to 350 million pounds thanks to a better online selection (online sales should grow to make up a third of the turnover), strict management and company structures and fewer but bigger stores. Rowe may sound harsh, but proves himself to be a consistent leader: this financial year, the management will not receive any bonuses due to the disappointing results.
Separate branches
Every year there are 32 million people who visit the M&S stores. Hence, the retailer has “a wide range of customers”, the CEO still declares. According to Rowe, the retail chain must therefore also offer a wide range of products that meet everyone’s standards, but not all of them in the same stores, though. What he’s thinking of is less, but bigger stores for the clothes and household items. The retailer points out that these categories currently have an “outdated customer database, a very wide range of products, a weak supply chain and an obsolete retail portfolio”.
For Marks&Spencer Food, Rowe opts for lower prices and separate stores. The retailer wants to lower prices, remove confusing promotions and modernise with the right stores in the right locations. The price of hundreds of foods have already been reduced, but this overhaul has not yet produced the expected results. “We are leaving no stone unturned in the company, to ensure that Marks & Spencer gets fit for the future. That means there is a lot of work going on in every area. We have to complete this next stage before we can notice any improvement in the figures”, Rowe declares.
