Marks & Spencer to axe up to 30 stores

marks and spencer
Marks and Spencer beat forecasts as demand for its clothing range picks up

British retailer Marks & Spencer (LON:MKS) are expected to announce plans this week to shut stores both in Britain and abroad as part of an attempt to revive the group.

Chief executive, Steve Rowe, is expected to announce the store cuts as part of a wide strategic rethink. He is expected to close stores in China as well as smaller British towns, where M&S has found trading tough.

Profits at M&S stores found overseas, which contributes seven percent to the group, slumped 40 percent in the 2015-16 fiscal year.

This latest move comes after the British retailer announced plans to cut 525 London head office jobs as part of Rowe’s attempts to simplify the business and reduce costs.

The food business, which contributes over half of revenue and about a third of profit, is performing better than clothing and outperforming the wider food market. Rowe pledged to revive M&S clothing by improving ranges, cutting prices and reducing promotions.

A collaboration with Alexa Chung won approval from media and younger shoppers, but analysts criticised the celebrity link as another failure to appeal to core customers, who are 50+ years old.

Tony Shiret, analyst at Haitong, said M&S will probably need to close over 30 stores, given the changing nature of shopping and years of poor performance by the retailer’s clothing ranges.

“There are a lot of traditional high street shops that have not had a lot of money spent on them for a long time,” he said, suggesting that M&S should shut 20% of its space, as many as 60 stores. It’s not that easy to close that amount of space and when you do, it puts pressures on your supply chain.”

Shares in Marks & Spencer have fallen 23 percent this year, knocked by the May profit warning and fears a drop in sterling after the UK’s vote to leave the European Union will increase sourcing costs.