M&S reviews new stores as food business growth slows
New chairman Archie Norman is stamping his authority on Marks & Spencer as the retailer reported a slowdown in the food business that has driven growth in recent years as the clothing unit struggled.
Chief financial officer Helen Weir will leave and M&S will scale back planned food-store openings, the retailer said as it reported a decline in profit.
UK customers, squeezed by stagnant wage growth and Brexit-induced inflation, are being cautious in their spending, the company said.
Its shares fell as much as 3.6% but recovered much of that ground.
“Over the last 15 or 20 years, the business has failed to change in line with the customer and as fast as the competition,” Mr Norman said at an analysts’ meeting.
“The genesis of any turnaround of this scale starts with the recognition of the unvarnished truth.”
The announcements reflect increased urgency at the top since Mr Norman’s arrival two months ago, after some investors saw the initial plans made a year ago by chief executive Steve Rowe, a 28-year company veteran, as too tentative.
Mr Norman gained a reputation as a corporate turnaround specialist after steering grocer Asda away from bankruptcy and eventually selling the chain to Wal-Mart Stores in 1999.
M&S will rein in its plan to open 250 food stores over the next two-and-a-half years, as profits suffer amid rising inflation and intense competition.
Mr Rowe conceded that M&S was also to blame for the weaker performance and that ranges needed to be simplified and availability improved.
“Archie Norman’s appointment is bound to have upped the pressure on Steve Rowe,” Tony Shiret, an analyst at Whitman Howard, said.
“Today’s announcements are more extensive than we had thought likely and maybe point to a more unstable position in the food business than anyone considered likely,” the analyst said.
M&S now expects gross margins in its upmarket food business to decline by between 125 basis points and 75 basis points this year.
Previously the company had expected the decline to be no worse than 75 basis points.
Ms Weir said given the prevailing market uncertainty it would be unwise to plough ahead with new openings as planned.
The retailer would be opening 80 Simply Food stores, 10 fewer than planned, in its current financial year.
M&S has begun a search to replace the 53-year-old Ms Weir, who will continue until it has found a successor.
Bloomberg
