M&S to cut 1,230 jobs and close 27 stores

Rose says 'no regrets' about discounts as he reveals cost-cutting plan

Marks & Spencer unveiled tumbling third-quarter underlying sales and a massive cost-cutting programme yesterday, but its chairman, Sir Stuart Rose, came out fighting and said he had no regrets about launching the store's huge discounts before Christmas.

The retail giant said that its UK like-for-like sales tumbled by 7.1 per cent for the 13 weeks to 27 December, with its clothing-dominated general merchandise sales down by 8.9 per cent and a 5.2 per cent fall in food sales, which was a slight improvement on its first half.

City analysts were relieved that the figures were not quite as bad as expected, but cautioned that M&S is underperforming a number of its key rivals and again raised questions that its final dividend may have to be trimmed.

Sir Stuart said that M&S had maintained its market share in clothing, citing good performances in children's and lingerie. "Do you know, we sold enough Magic Knickers to take a quarter of a million inches off the waistlines of British women?" Sir Stuart said.

But Tony Shiret, the Credit Suisse analyst, said: "I believe they are losing market share in clothing and food."

On Tuesday, Next, the UK's second biggest retailer of clothing behind M&S, delivered like-for-like sales down by 7 per cent for the period from 29 July to 24 December. Debenhams posted underlying sales down by 3.3 per cent for the 12 weeks to 3 January.

Sir Stuart said that M&S was not alone among retailers in seeing traffic "drop away enormously" in October and November, and decided to respond with a huge one-day sale, which it followed with another. "Once we had done that, the traffic started coming through and Christmas arrived, as we wanted it to," said Sir Stuart.

However, M&S said its full-year UK retail gross margin will be 175 basis points lower as a result of increased promotional activity, especially in food. The 5.2 per cent fall in food for the third quarter was marginally better than the 5.3 per cent decline in the first half, but is still a long way behind the positive like-for-like sales delivered by all the big four grocers before Christmas.

However, M&S said it planned to close 25 of its underperforming Simply Food stores and two general stores with the loss of 780 jobs. A further 450 jobs are to be axed at its head office. The high street bellwether also rev-ealed it is to cap employees' annual increase in pensionable pay to 1 per cent, which applies to the 21,000 members of its final-salary pension scheme, as well as change the early retirement benefits for members who joined the scheme before 1996. It plans to slash its UK operating costs by between £175m and £200m next year.

KBC Peel Hunt's John Stevenson has forecast a pre-tax profit of £595m for its current financial year, but said this could fall by up to a further 30 per cent to £421m for the year to March 2010. If his forecast for next year holds true, M&S would find it difficult to maintain its final dividend next year.

Shares in M&S rose by 5.25p to 244p yesterday. Elsewhere in the retail sector, Thorntons, the chocolate retailer, said underlying sales for the 12 weeks to 27 December declined by 2.3 per cent. Blacks Leisure, the retailer of outdoor fashion, said a dire performance from its boardwear division dragged its like-for-like sales down by 3.9 per cent for the 18 weeks to 3 January.

Separately, Viyella, the 107-store and concession womenswear retailer, became the latest chain to collapse into administration yesterday, putting at risk 645 jobs if a buyer is not found.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent