M&S to cut 7,000 jobs as Covid-19 hammers retail sales

Marks & Spencer said it was cutting 7,000 jobs in the next three months as it responded to plunging retail sales caused by the coronavirus pandemic and ensuing shuttering of its stores during lockdown.

The High Street food and fashion retailer on Tuesday said it was in a “multi-level consultation programme” to axe roles in its central support centre, regional management, and in UK stores, “reflecting the fact that the change has been felt throughout the business”.

M&S last month announced it would axe 950 jobs in a reorganisation of store management.

In-stores sales for the last eight weeks were down 47.9% year on year, with online sales strongly higher, up 39.2%, leaving total sales 29.9% lower and total revenues 10% lower in the last two months.

“We expect a significant proportion will be through voluntary departures and early retirement,” the company said.

“The cost of the programme including redundancies will be reflected in a significant adjusting item to be included in the group's half-year results. The streamlining programme is an important step in delivering on our cost savings programme and ensuring we emerge from the crisis with a lower cost base and a stronger more resilient business.”

M&S said online clothing & home sales representing 41% of total revenue within the unit as it added 1.9m new customers.

“There has been a substantial change in delivery mix, with around 68% of orders delivered to home, compared with 29% the previous year. Growth has been enabled by a robust performance from our Castle Donington distribution centre, where the group has invested in substantial additional capacity."

Hargreaves Lansdown analyst Sophie Lund-Yeates said the company had realised it needed to act if it wanted to secure the longevity of the business.

"Coronavirus has exacerbated existing fault lines – namely that shopping habits have changed and M&S has been slow off the mark meeting those shifting demand patterns. An added blow from the current crisis is that the type of clothes we’re after has changed too, and not in M&S’ favour. Consumers are more interested in leggings than a new office outfit these days," she said.

"It stands to reason that having colleagues that are able to switch between the clothing floor and food halls will be good news for efficiency. This isn’t the group’s first attempt at a strategic turnaround though, and the pressure’s on to make sure this time around the restructuring provides some long-term energy to both the top and bottom line."

House broker Shore Capital said M&S was "pressing on with difficult decisions around demonstrably necessary change, to make it a survivor of this crisis, one with a better culture, streamlined structures, better capabilities in-store and online and so the grounds to be more confident of earnings rebuild from the 2021 nadir".

"Indeed, we see more responsibility in seeking to guide the shape of pre-tax profit and earnings per share from full year 2022-25 than the fog of 2021. In these respects, therefore, such difficult decisions from M&S are necessary and improve the chances of sustaining still high employment levels, economic activity, positive operational gearing and free cash flow generation in time.