British retailer Marks & Spencer outlined its commitment to its Irish operation on Tuesday and reversed a £4.2 million (€4.7 million) impairment charge on five Irish stores, as it said it would close 53 stores globally amid plummeting profits.
The retailer’s chief executive , Steve Rowe, is seeking to cut costs as part of a revival plan that will reduce its UK clothing space and switch the business more towards food.
The retailer, which owns its 17 stores across Ireland, said it would continue to operate these shops, which are “profitable with strong brand awareness, established store estates and loyal customers”. Alison Grainger, head of region, Republic of Ireland, said: “Marks & Spencer will continue to operate its profitable business in the Republic. Customers can continue to shop with us at our 17 Irish stores and via our Irish website.”
M&S also revealed on Tuesday that it reversed a £4.2 million impairment charge which it had previously taken in relation to five stores in Ireland.
“The reversal of the impairment charge reflects an updated view of the future cashflows from these stores, primarily due to reductions in cost of goods following the significant appreciation of the euro relative to sterling during the period,” the retailer said.
However, one-off impairment charges of £7.5 million were incurred in the international division, primarily in Asia and western Europe, as “ current and anticipated future performance will not support their carrying value”.
In 2015/16, the group’s international business delivered a loss of £31.5 million and in total international operating profits were down 39.6 per cent to £55.8 million.
“This is not sustainable and we have undertaken a comprehensive review of our international business,” the retailer said.
M&S will now exit its loss-making owned business across 10 international markets, at a cost of £150 million-£200 million over the coming 12-month period, thereby eliminating annual losses of £45 million, leaving it with franchised stores.
Ten stores in China will close, seven will go in France, as well as all of its stores in Belgium, Estonia, Hungary, Lithuania, the Netherlands, Poland, Romania and Slovakia.
Expansion
The retailer, whose shares have fallen 22 per cent so far this year, reported an 18.6 per cent slump in first-half profit and another fall in quarterly clothing sales.
Mr Rowe, a 26-year company veteran, took over as chief executive in April and has the tough task of reviving a 132-year-old British institution that has fallen out of fashion over the last decade.
So far, his priority has been trying to turn around M&S’s underperforming clothing and homewares business. He said M&S would reposition about 25 per cent of its UK clothing and home space, closing about 30 full-line UK stores and changing around 45 stores to only sell food. Other stores would be relocated.
The cost of the programme would be £50 million for the next three years, rising to about £100 million in years four and five.
In terms of expansion, the focus will be on the M&S food business, which contributes over half of group revenue and about a third of profit. In May, Mr Rowe said M&S would add an additional 200 food shops by 2019.
M&S reported an underlying pretax profit for its first half to October 1st of £231.1 million along with a 2.9 per cent fall in second-quarter underlying clothing sales. Like-for-like food sales were down 0.9 per cent. (Additional reporting: Reuters)
