Marks & Spencer (M&S) will cut 1,230 jobs and close 27 stores after reporting one of its worst Christmas trading performances ever.
M&S’ UK likes-for-like sales fell by 7.1 per cent after an 8.9 per decline in general merchandise over the 13 weeks to December 27, which includes clothing, and a 5.2 per cent drop in food trade.
As a result it will shut 25 of its 355 Simply Food stores and two of its smaller M&S branded stores following the sales decline.
Sir Stuart Rose, chairman of M&S, said: “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.”
More than 56 million customers visited M&S over the festive period which included two one-day “spectaculars” when selected items were reduced by 20 per cent but it could not halt the fall in sales.
M&S said that it had 15% less stock when it began its sale on 27 December than it had the previous year.
In the coming months 780 jobs will be axed at the 27 stores set for closure as well as the 450 staff set to be made redundant at the company's head office.
The group will also cap annual increases in staff’s pensionable pay to one per cent and change early retirement benefits to cut costs.
About 20 per cent of its cost-cutting will come from cutting between £35m and £40m from its annual pension contributions of £300m a year.
M&S only revamped its pension scheme two years ago to deal with a deficit of £704m.
The changes involved the firm committing the rental income from £500m worth of its property portfolio to the scheme.
Rose re-assured staff that there would “almost certainly” be no more store closures and that measures would affect under one per cent of the group’s 70,000 plus staff.
Nick Bubb, analyst at Pali International, said: “The third quarter like-for-like sales are bad, given weak comparatives [from last year], but not quite so bad as we expected, thanks to a late spending surge pre-Christmas.”
Consensus analyst forecasts M&S will register full-year pre-tax profits of £625m.
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