Wednesday January 7, 12:43 PM
Marks & Spencer says will axe 1,230 jobs and close 27 stores
LONDON (AFP) - British clothing-to-food retailer Marks & Spencer (LSE: MKS.L - news) said Wednesday it would cut as many as 1,230 jobs and shut 27 stores as the group struggled with falling sales and a looming recession.
The news, contained in a Christmas trading update, added fresh gloom to the retail sector as a sharp economic downturn starts to bite, and comes one day after the shutdown of general retailer Woolworths (Munich: 886853 - news) .
Like-for-like sales -- stripping out the effect of new floor space -- dived by 7.1 percent in 13 weeks to December 27, 2008, compared with the same period of the previous financial year, M&S said.
The group added that 25 of the 27 store closures would target the company's "Simply Food" outlets specialising exclusively in food products, notably those that are small and under-performing. The move would mean the loss of 780 jobs.
In addition, Marks & Spencer said it planned to eliminate as many as 450 posts in administrative services and would reduce retirement benefits.
The measures are expected to save 175-200 million pounds (193-220 million euros, 261-298 million dollars) in the company's next fiscal year, which begins April 1.
"We are aware that the proposed changes... will be difficult for those members of staff impacted, but given that we expect challenging economic conditions to continue for at least the next 12 months we believe we are taking the right action to maintain the strength of our business," said chairman Stuart Rose in the update.
The British retail sector, buckling under the weight of a looming recession, has already witnessed the collapse of retailers including Woolworths, furniture group MFI and entertainment retailer Zavvi.
In the run-up to Christmas, M&S held two one-day sales when it slashed prices by 20 percent in an attempt to attract more festive shoppers.
M&S had revealed in November that first-half net profit sank 43 percent as cash-strapped consumers tightened their belts.
Rose added Wednesday that the company was forced to slim down with a lean start to the year in prospect.
"I think January, February, March is going to be a testing time for us all and that is why we have regretfully today taken the action we have taken to prepare ourselves for what we do believe will be a difficult year," he told the BBC.
"I'm confident we will come out of it in one piece, I am confident we will be able to look forward, but I think it will be tough."
In London trading at 1145 GMT, M&S saw its shares gain 4.71 percent to 250 pence on the FTSE 100 index of leading shares, which was down 1.28 percent at 4,579.69 points
"The third quarter like-for-like sales are bad... but not quite so bad as we expected, thanks to a late spending surge pre-Christmas," said Nick Bubb, retail analyst at Pali International.
Howard Wheeldon, of BGC Partners, said the results were "pretty dire."
"It seems that M&S may at last have accepted that the Simply Food chain has reached its limits in the UK or that given the difficult times we are all now living in the whole business model needs to be rethought."
M&S's competitor in the clothing sector, chain store Debenhams (LSE: DEB.L - news) , saw its shares surge by more than 20 percent on Tuesday after announcing a 3.3-percent drop in like-for-like sales in the final 12 weeks of 2008.
The demise of Woolworths, which had 807 stores dotted across Britain, left 27,000 people out of work.
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