Marks & Spencer Cutting 1,230 Jobs, Closing 27 Stores Across England

LONDON — British retail industry stalwart Marks & Spencer Group PLC said Wednesday it will cut 1,230 jobs and close 27 of its stores in a drive to reduce costs as the retail sector continues to struggle.

Chairman Stuart Rose said in a statement the company _ Britain's largest clothing retailer _ had its biggest trading day ever Dec. 23, selling more than 50 million pounds ($74 million) of goods.

But that didn't prevent the company from suffering its worst quarterly revenue drop in a decade, with sales falling by 7.1 percent in the quarter ending Dec. 27.

Rose said he expected "challenging" economic conditions to continue for at least the next 12 months. He said the job cuts and closures, along with pension-plan changes, will help the company reduce costs by as much as 200 million pounds ($297 million) in 2009-2010 and help "maintain the strength of our business."

The company warned that its British gross profit margin for the year to March 31 would be 1.75 percentage points lower than last year because of discounting _ worse than its previous guidance for a fall of around 1 percentage point. Full-year earnings are scheduled to be announced in mid-May.

Rose told the British Broadcasting Corp. that 56 million customers walked into Marks & Spencer stores 10 days leading up to Christmas.

He said they sold greater volumes than last year, but "we're just finding that customers individually didn't have as much to spend."

The job cuts include 450 head office employees, about 15 percent of that work force. Another 780 staff in 25 "underperforming" food-only shops and two of the retailer's smaller department stores will also face redundancies.

The company has about 70,000 employees and more than 600 stores in Britain. There are nearly 300 international locations in 40 different countries.

Analysts praised the retailer for taking action, saying that Marks & Spencer highlighted "challenging but not disaster conditions" in the retail sector and the company's stock rose 5 percent to 250.5 pence in a relief rally.

However, Keith Bowman, an equities analyst at Hargreaves Lansdown Stockbrokers added that difficulties facing the company could not be ignored.

"Consumers globally are in retreat, the dividend payment is still under review and the group's expansion into small food outlets is now in tatters," he said. "Competition will remain intense over the near term and the decline in the pound will be raising the cost of its imported products."

Britain's retail sector has been hard hit by the global economic slowdown and credit squeeze. Several high profile names, including Woolworths and tea merchant Whittards, have filed for bankruptcy protection and cut thousands of jobs as consumers reign in spending.

Comments

[markstl3828]

As a visitor to the UK, I noticed that there are quite a lot of the Marks and Spencer stores around, and I wondered back then how all of them stayed viable. As would be the same case to me with the H&M stores on every corner in England and Scotland as well. Now I guess I know...

[PennLawyer]

I shopped in one of their Dublin stores in early December - Christmas decorations were 50% discounted BEFORE Christmas, and there were very deep discounts on a lot of their other merchandise as well. I would have purchased more, but had limited space in my luggage for my trip home. On the whole, clothing/bedding/housewares seemed very high priced considering the Celtic Tiger is in hibernation.

[frantaylor]

M&S does a lot of business with US companies that will undoubtedly be hurt by this.