Marks and Spencer plans to step up its store closure programme after finding that a high proportion of customers tend to shop at alternative branches rather than abandoning the brand altogether when their local store shuts. It now says that "over 100" stores will close by 2022 in the UK , from an earlier target of 60.
The group, which reports full-year results on Wednesday, has already shut 21 stores. It will also open 15 fewer Simply Food stores this year, after a slowdown in the growth rate of these food-only shops.
Programme
“Closing stores isn’t easy but it is vital for the future of M&S,” said Sacha Berendji, retail, operations and property director at M&S. “Where we have closed stores, we are seeing an encouraging number of customers moving to nearby stores.”
“We’ve seen a much better retention rate than we expected,” M&S said. “That has given us the confidence to press ahead.” It also wants a third of sales to be generated online by 2022.
The store closure programme was announced by chief executive Steve Rowe in late 2016. The original plan was to close up to 75 of its 300 main stores — those that sell both food and general merchandise — over five years. But this was to be partly offset by as many as 15 new main stores and up to 200 more Simply Food outlets.
Since turnround specialist Archie Norman was named M&S chairman last year, however, the pace of restructuring has increased. Now, there will be at least 100 outright closures while the number of new main store openings is almost certain to be less than 15 and fewer Simply Food outlets are planned. More than 600 employees are affected. M&S said they would be offered redeployment before redundancy was considered.
Units
The stores being closed are a mixture of freehold and leasehold. M&S is able to close stores quicker than rivals because of the high proportion of freeholds in its estate. Debenhams, which has mostly leasehold stores, has sought to reduce space by dividing or subletting parts of stores, while House of Fraser is contemplating a deal with creditors to either close underperforming stores or significantly reduce rents.
Stockton, Darlington, Newmarket, Northampton and Walsall are among the towns that will lose their M&S. Diane Wehrle, insights director at Springboard, said M&S was a key presence on many high streets. “When such a store ceases to trade, our evidence demonstrates that it can lead to an initial reduction in footfall of 15 to 20 per cent.”
James Watson, head of retail capital markets at Colliers International, said there would be few takers for the vacated units. B&M and Sports Direct are among the few retailers in the market for more space. "Otherwise, they are likely to go for conversion to residential or office use," he said.
Alex Cunningham, the MP for Stockton North, said the decision to close the M&S in the town was a “huge blow.”
Impact
“Yet again, we are seeing the impact of out of town complexes which have been the death knell for so many towns.”
M&S shares were down 3 per cent in afternoon trade. Andrew Hughes, an analyst at UBS, said the changes had been signalled and only partly reversed the expansion of selling space under previous chief executives Stuart Rose and Marc Bolland. But he added that if the company could maintain a similar level of sales with fewer shops, profits should ultimately improve.
Copyright The Financial Times Limited 2018
