UK clothing, home and food retailer Marks & Spencer is to make 7,000 job cuts across management and stores over the next three months as it looks to address the material shift in trade caused by the Covid-19 pandemic.
The retail group said today (18 August) it is embarking on a multi-level consultation programme for the redundancies, for which it expects a significant proportion to comprise voluntary and early retirement. The cuts will be felt across M&S’ central support centre, regional management and UK stores.
The news comes as the company revealed clothing and home sales in stores remain well below last year.
Total revenue for the division was down 38.5% in the last 13 weeks. In the eight weeks since stores re-opened, sales have dropped 29.9%, with trends steadily improving. In those eight weeks, store sales were down 47.9%.
Online has performed better, with sales strong since the start of the year thanks to an additional 1.9m new customers. In the last eight weeks, online sales were up 39.2%, representing 41% of M&S’ total clothing and home sales.
The retailer said operating during the pandemic has proved it can “work more flexibly and productively” with more colleagues multi-tasking and transitioning between food and clothing, and home.
The deployment of M&S’ store technology package has also enabled it to reduce layers of management and overheads in the support office, the retailer said. However, it expects to create new jobs over the course of the year as it invests in online fulfilment and a new food warehouse.
Chief executive Steve Rowe said the proposals are an important step in becoming “a leaner, faster business”, set up to serve changing customer needs.
“In May we outlined our plans to learn from the crisis, accelerate our transformation and deliver a stronger, more agile business in a world in which some customer habits were changed forever. Three months on and our Never the Same Again programme is progressing; albeit the outlook is uncertain and we remain cautious.”
M&S announced GBP1bn of actions in May, including GBP500m of cost reductions and other actions to manage cash, in addition to drawing up its Never the Same Again agenda to accelerate transformation and invest further in digital.
The latest job cuts add to the 950 it announced in July across its central support functions to try and accelerate the restructuring of its business.
M&S said there remains “substantial uncertainty” about market conditions and the duration of social distancing measures, and is therefore retaining a cautious approach to planning for the balance of the year.
International sales have performed ahead of the Covid-19 scenario, primarily driven by strong online sales and an improvement in franchise shipments in recent weeks, but the retailer said it is too early to know if this will be sustained.
Trading in a number of markets has been volatile with the re-imposition of local lockdowns and closures affecting trade, it added.
Analysts believe the decision by M&S to cut 7,000 jobs was a necessary one but note the retailer now has a tough road ahead to catch up with its rivals.