The M&S share price has fallen by over 3% today after the upmarket groceries and ready-made food retailer announced it is to cut 7000 jobs in the UK. The wave of redundancies is the single biggest in the company’s 136-year history.
Driving sales of Marks & Spencer’s clothing and homeware divisions seems to have been an almost constant battle for the company over recent years. And the lack of a strong online offer means this year sales across the divisions have gone from a challenge to a drag on performance.
The scale of job cuts now impending are a direct consequence of sales from clothing and homeware plunging to “well below last year”. That’s a particular problem when those sales levels were anyway far from ideal. Over the past 13 weeks, M&S’s clothing sales have been down 38.5%.
The company put the emphasis on the impact of the Covid-19 pandemic. While there is no argument the pandemic and country-wide lockdown count as unforeseeable and mitigating circumstances, M&S’s failure to develop a strong online presence over the past decade, was anyway a glaring strategical mistake. It has left the company in the worst possible position to maintain sales over the pandemic. While lockdown accelerated the shift towards online retail, it was already a strong pattern that the company had failed to respond to adequately.
M&S’s statement to accompany the job cuts announcement smacked of a company in denial of pre-existing failings accentuated by the pandemic:
“It is clear that there has been a material shift in trade and whilst it is too early to predict with precision where a new post Covid sales mix will settle, we must act now to reflect this change.”
Marks & Spencer is, however, far from the only British high street retailer to announce swinging job cuts over the past few months. John Lewis is cutting 1300 positions, Debenhams 6500, Boots 4000 and Dixons Carphone 3700.
John Moore, senior investment manager at investment management firm Brewin Dolphin, is quoted in The Times as highlighting the long-term strategic failings of M&S that have culminated in the particularly heavy impact of the Covid-19 pandemic:
“The company’s fall from established FTSE 100 constituent to mid-cap has reflected past strategic errors; but, more recently, the business had been going through significant changes even prior to the Covid-19 pandemic. Indeed, the measures taken today underline the degree to which the economic impact of the virus has super-accelerated many of the trends that were already sweeping through retail and other sectors.”
M&S hopes a majority of job losses will come through voluntary redundancies and early retirements. The company also tried to soften the blow by saying it will also create new jobs as it invests in its online offering and 350 positions will be opened at a new warehouse in Milton Keynes. The company recently entered a partnership with online groceries specialist Ocado, which will stock M&S products to replace those of Waitrose, with whom its long standing tie-up recently ended. The partnership commences from September 1st.
Marks & Spencer chief executive Steve Rowe told investors the business would:
“Learn from the crisis, accelerate our transformation and deliver a stronger, more agile business in a world in which some customer habits were changed forever”.
“These proposals are an important step in becoming a leaner, faster business set up to serve changing customer needs and we are committed to supporting colleagues through this time.”
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.