UK department store Marks & Spencer will have closed one in three of its clothing and home stores by 2022 as part of a radical transformation plan designed to overhaul its business.
The move comes as department stores around the world, including in Australia, contend with expensive legacy store networks and the rising opportunity of e-commerce as a bricks-and-mortar alternative.
More than 100 stores will close under the plan by the end of 2022, including 21 that have already wound down and 14 already earmarked for closure in 2018/19.
More than 600 jobs will be impacted in 2018/19 by the move, compounding the more than 900 employees who have already been caught up in the consolidation program, designed to tackle several years of declining sales and profit.
M&S’ like-for-like sales declined by 1.4 per cent in the third quarter to 30 December, while its half-year adjusted profit before tax was down 5.3 per cent.
M&S had already said it was targeting around 30 store closures, but rumours began spreading in the UK earlier this week that those plans were about to be scaled up.
M&S chief executive Steve Rowe is hoping that slashing the retailer’s floor space will free up resources for investment in its businesses without severely impacting top line sales.
It is hoped that online sales will become at least a third of the business in the coming years and that closing stores strategically will strengthen remaining locations.
M&S retail, operations and property director Sacha Berendji said in a statement on Tuesday that good progress had been made on reshaping the M&S portfolio, but that more closures were required.
“Closing stores isn’t easy but it is vital for the future of M&S,” he said. “Where we have closed stores, we are seeing an encouraging number of customers moving to nearby stores and enjoying shopping with us in a better environment, which is why we’re continuing to transform our estate with pace.”
Remaining stores are slated to be larger in the future and will benefit from investment in new digital technologies under the transformation plan.
M&S to sacrifice status as top clothing retailer
GlobaData anaysts said that the transformation plan would see M&S lose its decades long status as the number one clothing retailer in the UK to competitor Primark.
“Marks & Spencer has dominated the UK clothing market for decades, but its lead as number one is perilously close to being lost to Primark this year,” GlobalData group retail research director Maureen Hinton said.
“The closure of yet more stores will hasten the decline unless it can shift the lost sales to its online channel and transfer to its other stores.”
Marks & Spencer has seen its clothing market share halve to 7.6 per cent over the last 20 years as competitors have gradually inched in on its territory, GlobalData said.
M&S is also relatively heavily invested in bricks-and-mortar compared to competitors like John Lewis, who generate comparable non-food revenue with around half the retail space.
“In order to make its space more productive M&S has to produce a compelling offer showcased in an inspiring environment,” Hinton said. “Closing stores will make its space more productive and help to improve profitability, but it still has not solved its fundamental problem – top line growth.’’
