Company of the week: Marks and Spencer

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The Independent Online
MARKS AND SPENCER, Britain's largest clothing retailer, said it will axe 31 of its top 125 managers - including three board members - in a reorganisation that will result in an exceptional charge of pounds 10m in fiscal 1999.

Derek Hayes, European director, Chris Littmoden, American director, and John Sacher, who heads the company's information-technology and logistics division, will take early retirement on 31 May, the company said.

The move comes as part of a wider reorganisation by the company led by its new chief executive, Peter Salsbury, to revive slumping profits. The removal of Mr Hayes and Mr Littmoden raises questions over the future of M&S overseas operations, including its US chain, Brooks Brothers.

"The main thrust of this is that they need to clear up the UK business first and won't want too many distractions outside the UK," said William Cullum, an analyst at Paribas, who currently rates the shares a "sell".

The company's shares, which dropped to a five-year low last month after M&S warned that fiscal 1999 profits will fall almost 50 per cent, rose 11 per cent on the week as investors saw the move as the company attempting to break with its past and the previously staid culture.

M&S, whose earnings growth was once regarded as reliable as the clothes it sells, forecast the drop in profits after Christmas sales fell short of expectations. The company has struggled outside the UK.

The announced changes "will enable us to be better focused and thus move strongly forward again," said chairman Sir Richard Greenbury. Mr Salsbury took over as chief executive on 1 February after Sir Richard resigned from the day-to-day management role. In his first attempt to address the company's problems, Mr Salsbury said last month M&S would eliminate two senior executive positions and create three units to oversee UK retailing, overseas retailing and financial services.