Marks & Spencer pays pounds 193m for Littlewoods' prime stores
Friday 18 July 1997
Announcing the deal to shareholders at the company's annual meeting in central London yesterday, M&S's chairman, Sir Richard Greenbury, said it was "an outstanding opportunity" which underlined the company's continued confidence in the future of the high street.
"We expect to start fitting out the stores next February and we'll be ready to open them progressively through the year," he said. He added that the stores were "all in places where we have been seeking extra footage for years". The extra 600,000 sq ft of space would be in addition to the 1.4 million sq ft expansion already planned over the next three years, Sir Richard said.
The deal will be completed next February and the stores will be re-branded under the Marks & Spencer name. The 19 branches are some of Littlewoods largest, meaning some will be refurbished to take a full M&S offer. Others will be converted to food halls, home furnishings stores or outlets specialising in menswear or womenswear.
Up to 1,800 Littlewoods jobs will be affected though 80 per cent of these are part time. The redundancies will be Littlewoods' responsibility, with analysts expecting a cost of around pounds 10m excluding stock write-offs. However, M&S said it would create an unspecified number of jobs as a result as the deal.
M&S put in a bid to Littlewoods right at the beginning of the sale process in March and beat off rival offers from Boots and Kingfisher. Sean Eddie of NatWest Securities said: "It's a good deal, but fully priced."
The sale of the stores is part of a revised Littlewoods strategy by the group's chairman, James Ross, after plans to sell the entire high street chain fell through. Though the company was clearly pleased at the price the sites had fetched, analysts said the company had sold its best stores, leaving the prospects for the remainder uncertain.
Mr Ross shrugged off such criticisms yesterday, saying: "The sale of these stores realises significant value from a small group of our larger properties. The board of Littlewoods was always clear that it would not sell the stores business if it could realise greater value from revitalising the businesses and reconfiguring the property portfolio."
The 19 stores are scattered across the country in locations such as Bath, Belfast, Cardiff, Derby and Chester. The flagship store at London's Marble Arch is also included.
Littlewoods is expected to sell another four or five stores and close several others leaving it with a portfolio of around 100. These will be re-launched with a new format focusing more on womenswear and the Berkertex brand. In time, all the Littlewoods stores may be rebranded under the Berkertex name.
The announcement from M&S was combined with an update on current trading. This showed that clothing sales in the UK had increased by nearly 10 per cent in the first quarter led by strong sales of womenswear. Home furnishing sales were 16 per cent ahead. In food, sales in June and July are running at 3.5 per cent above last year.
At the shareholders meeting Sir Richard was forced to defend the appointment of David Sieff as a non-executive director of the company. Mr Sieff is the son of former M&S chairman, Lord Sieff. He stepped down from an executive role in April but was appointed as a non-executive.
Sir Richard denied the move was contrary to guidelines on corporate governance. "I don't accept the Cadbury recommendations in respect of the very special circumstances associated with David Sieff." He added: "The name Sieff in Marks & Spencer means a great deal."
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