M&S stores to close as firm tries to halt slide in profits

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The Independent Online

Marks & Spencer announced the closure of six of its high street stores yesterday as the struggling retail giant reported another slump in profits and admitted it had "lost sight of some of the basics of retailing".

Marks & Spencer announced the closure of six of its high street stores yesterday as the struggling retail giant reported another slump in profits and admitted it had "lost sight of some of the basics of retailing".

In a frank admission of past mistakes the company said it had tried to make too many changes too quickly leading to problems with product availability, weak ranges and unappealing store environments.

M&S pledged to improve on all these fronts and deliver a turnaround of its fortunes within the next 18 months. Store staff will be given cash bonuses linked to the performance of their branches to provide an incentive in the run-up to Christmas, which accounts for a quarter of M&S's annual sales.

"If we want to hang on to our future we know we have to deliver results soon," said Luc Vandevelde, M&S's chairman.

As part of the shake-up M&S has decided to close its "satellite" stores in Bristol, Bromley, Edinburgh, Leeds, Norwich and Watford. The stores, which duplicate other larger branches in those cities and towns, were all former Littlewoods shops acquired by M&S in 1997. Staff will be transferred to other outlets nearby. The stores in Bath and Derby will be reduced in size.

But there was a hint of further closures with M&S saying it will shut town-centre stores when it opens larger out-of-town outlets nearby. Loss-making branches are also likely to be closed if their performance cannot be improved. "We have not, in the past, been sufficiently disciplined," the company warned.

The scale of M&S's problems was highlighted by the company's latest financial results which revealed a slump in half year profits from £193m to £183m for the six months to September. This included a fresh slump in clothing sales with menswear losing market share and the key lingerie section losing sales due to problems with suppliers. Profits in the core UK retailing business sank from £145m to £126m. However the results were not as bad as had been expected leading to a 10p rise in M&S shares to 195p.

If new store openings are excluded, clothing and footwear sales fell by 17.4 per cent in the five weeks to 4 November. M&S said it had been badly affected by the takeover of Courtaulds Textiles, one of its biggest clothing suppliers, by American company Sara Lee. This led to stock shortages in lingerie, knitwear and other areas.

"These results are not acceptable to me or anyone else in this business," said Luc Vandevelde, who joined M&S as chairman in February. "We have not yet got our core business right."

Mr Vandevelde declined to blame the bad weather or the fuel crisis but said the company had been surprised by the difficulty of the market in recent weeks. He said a further factor had been the soaring sales at C&A since the Dutch company said it would close all UK stores in January. He said C&A sales had risen by a staggering 50 per cent since the closure announcement increasing its share of UK clothing sales from 2 per cent to 3 per cent. M&S's food business has performed better with underlying sales up by 4.6 per cent in current trading.

The company admitted it was still vulnerable to a takeover though City analysts questioned whether anyone will bother. "I don't think they will be bid for. It looks like a long, slow decline," said Nick Bubb, retail analyst at SG Securities.

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