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Aug 18, 2020
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M&S to cut 7,000 jobs as clothing sales struggle, but online soars

Published
Aug 18, 2020

M&S delivered a fairly devastating update on Tuesday and although it contained good news as well as bad, the headline story was that it will be cutting 7,000 roles in the next three months.

 

M&S is cutting more jobs - Photo: Sandra Halliday



It piles more misery onto a UK retail jobs market that’s already been hit by thousands of losses and is likely to see still more.

It said that it’s aiming to “further streamline the business both at stores and management level,” partly because Clothing & Home trading in the stores remains “well below last year,” even though online and home delivery are “strong”.

“It is clear that there has been a material shift in trade and whilst it is too early to predict with precision where a new post-Covid sales mix will settle, we must act now to reflect this change,” it explained.

The job losses are also part of its drive to “work more flexibly and productively with more colleagues multi-tasking and transitioning between Food and Clothing & Home”. Meanwhile, “the deployment of our leading store technology package developed in partnership with Microsoft has also enabled us to reduce layers of management and overheads in the support office”.

The job losses will happen in its central support centre, in regional management, and in its UK stores, some of them through voluntary departures and early retirement.

So where was the good news? It expects “to create a number of new jobs as we invest in online fulfilment and the new ambient food warehouse and reshape our store portfolio over the course of the year,” it said.

And as far as the trading update was concerned, it said that “overall the group year-to-date has performed ahead of the scenario announced at the year-end in revenue and cash”. The Food business is showing “good” year-on-year growth and Clothing & Home is “significantly down but improving”.

Looking at the group’s Clothing & Home ops as a whole, it’s seen a total revenue drop of 38.5% in the last 13 weeks. In the eight weeks since store reopening, total sales have been down 29.9% “with trends steadily improving”. 

In those eight weeks, Clothing & Home store sales were down 47.9% and online has continued to perform strongly, up 39.2% on last year. The performance of store sales has varied widely across the estate with some of the newer out-of-town stores trading close to last year's level of sales overall in recent weeks. But legacy town centre stores and some shopping centres are still “heavily impacted” by social distancing and reduced footfall. 

It added that with the closure of many workplaces and lack of social gatherings, “the clothing sales mix has seen a substantial shift from office dressing and formalwear into casual clothing and leisurewear”.

Has this left it with a problem surplus? Yes and no. “Through upweighted promotional activity we have made good progress in clearing surplus stock,” it said. And it has booked additional storage space to hibernate surplus good stock for next year.

As mentioned, digital is a key focus and it said online Clothing & Home sales have performed strongly since the start of the year with an additional 1.9m new customers. In the last eight weeks, online sales have represented 41% of its total Clothing & Home sales. There’s also been a “substantial change in delivery mix”, with 68% of orders delivered to home, compared with 29% the previous year.

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