Following on from the 950 job cuts it announced just last month, Marks & Spencer has revealed today (18 August) it will make a further 7,000 as it once again attempts to transform the business. The news pushed the retailer’s share price down over 2% this morning to 111.20 pence. Analysts believe the decision by M&S was a necessary one but that the retailer now has a tough road ahead to catch up with its rivals.
Kate Ormrod, principal retail analyst at GlobalData
”Having strived to turn around the business for so long, Covid and its resultant shopping habits have forced M&S’s hand to make more drastic changes, with headlines today focusing on the retailer’s history-making 7,000 job cuts over the next three months as it battles with the shift to online. A revenue performance ahead of its scenario plans is somewhat encouraging however given the trading turbulence experienced on the high street caution is rightly the overriding mind-set at M&S, especially given the hard work that lies ahead.
“It is no surprise that clothing and home remains a drag on the business, as consumer desire for clothing in particular remains subdued by a sparse social calendar, with sales halving over the 19-week period, though the decline softened to 29.9% for the last eight weeks. The contrast between stores and the online channel remains stark with clothing and home sales falling 47.9% in those eight weeks, versus online growth of 39.2%, resulting in online accounting for 41% of sales. This digital penetration still remains behind rival Next however, and M&S undoubtedly has a harder road ahead to meet heightened shopper expectations when it comes to delivery, as it plays catch up. Though M&S has reported an extra 1.9m clothing and home online customers in 2020, there are many more to entice online, particularly older shoppers, to repair its overall trading performance.
Richard Lim, CEO Retail Economics
“This is a massive reduction in their workforce and the retailer is desperately attempting to reposition the business towards a new normal emerging in the sector. This painful readjustment period will see a significant reduction in labour costs, cutting back on store numbers and pivoting the business model to become nimbler and more digitally focused.
“Retailers were already battling with the pace of structural change facing the sector but the impact of the pandemic has been a step-change for the industry. Retailers remain in survival mode, preserving cash and hanging on for more sustainable levels of demand to return. But the way we shop has changed on a permanent basis for many parts of the sector almost overnight. The reality is that many more retailers will fail and the number of job losses will ramp up as government support is withdrawn. This is the calm before the storm.”
Darren Shirley and Clive Black, Shore Capital
“The current challenges of the UK rag-trade are well-known and documented with Debenhams fighting off liquidation, restructuring at New Look and downsizing at M&Co in the last week alone. In these respects, we continue to see M&S, Next and Primark as survivors and, maybe in time, winners on the high street. Whilst this is so, a British public that is in some cases reserved about going out, uncomfortable with face masks and concerned about personal finances and employment prospects, is eschewing the high street and shopping centres in notable numbers.
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By GlobalData“Within this context of current market conditions and uncertainty, M&S is pressing on with the necessary long-term transformation of the group. Management sets out the notable adjustments to the market with the weaker performance in clothing and home in-store and the shift online needing an active response to the change programme.
“Technology deployment and flexible working, taking down years of demarcation between employees engaged in food and nonfood activities, is liberalising the labour process, making it more productive and so permitting further delayering of management. Accordingly, with more pace and decisiveness in the group, M&S has taken the very tough decision to place c7,000 people on notice of consultation from across the business, but most notably in-store. The group is guiding to a largely cash exceptional item, which will be revealed at the FY2021 interim results in November 2020, to cover the cost of this development. Whilst we cannot be certain, we would expect a charge of cGBP75-100m to cover these specific redundancy costs and so forth, operating cost that will be non-recurring in future years.”
