M&S to close dozens of stores as half-year profits tumble by 88%

Marks & Spencer (Other OTC: MAKSF - news) has said it is to cut the number of its UK clothing and home stores by 60, as it reported an 88% fall in half-year profits.

The changes will mean the closure of 30 "full-line" stores offering all M&S ranges and the "downsizing or replacing" of a further 45 to Simply Food stores, over the next five years.

Other stores will be relocated while some new full-line stores will be opened in underserved areas, M&S said.

Details of the changes confirm a story first reported last week by Sky News.

It follows a review launched by new M&S boss Steve Rowe earlier this year.

Mr Rowe said: "These are tough decisions, but vital to building a future M&S that is simpler, more relevant, multi-channel and focused on delivering sustainable returns."

He said M&S did not have a full list of outlets closing, saying it would look at the overhaul on a "store-by-store basis".

The group was tight-lipped on the number of UK staff affected by the plans but said where possible it would keep "job continuity" for affected employees.

:: Rowe has work cut out to make M&S great again

M&S reported a fall in profits to £25m for the six months to 1 October, compared to £216m for the same period a year ago.

The slump largely related to pension charges but underlying profits were also down, by 19%, thanks to lower clothing and home sales. Shares (Berlin: DI6.BE - news) were down nearly 2%.

M&S currently has 304 "full-line" stores selling both its food and clothing and home ranges. They account for two-thirds of its UK selling space.

But clothing sales have struggled, and were down 5.9% on a like-for-like basis for the first half, including a huge 8.9% slump in the first quarter.

Food sales have fared better, but were still down 0.9% over the six-month period.

The company said: "As customer shopping patterns change and customers migrate online, we need to manage our estate proactively to ensure that our clothing and home space is relevant for our customers and profitable for our shareholders."

Meanwhile, M&S is expanding its Simply Food store network, opening 200 new sites by the end of 2018/19.

"In total, M&S expects to have more stores, in more convenient locations for our customers, offering greater employment opportunities for employees," it said.

Elsewhere, M&S is taking action over loss-making foreign markets with plans to close 53 stores in China, France, Belgium, Estonia, Hungary, Lithuania, the Netherlands, Poland, Romania and Slovakia and slash 2,100 jobs.

Laith Khalaf, senior analyst at Hargreaves Lansdown (LSE: HL.L - news) stockbrokers, said the shake-up was a "bold" first step by Mr Rowe.

He added: "M&S is cutting its cloth to meet the changing shopping habits of its customers.

"The retailer is shifting away from clothes towards food, focusing on the bit of the business which has been most successful in recent times."

Mr Rowe's move comes two months after he announced more than 500 head office jobs were to be axed.