M&S to revamp childrenswear in joint venture with Desmond

Marks & Spencer is to overhaul its childrenswear operations in a radical move which will see its children's ranges designed and produced by a separate joint-venture company. The move will result in 60 job losses at M&S.

Marks & Spencer is to overhaul its childrenswear operations in a radical move which will see its children's ranges designed and produced by a separate joint-venture company. The move will result in 60 job losses at M&S.

The retailer is forming a joint venture with Desmond & Sons, a Northern Ireland manufacturer which has been supplying M&S for 60 years. Under the terms of the deal, the new venture will take sole control for the design and supply of all M&S's childrenswear, which accounts for 10 per cent of the retailer's clothing sales.

At the moment, M&S has its own children's department which generates its own designs. These functions are duplicated in its suppliers who compete for tenders.

The new system will reduce overlaps and enable the struggling UK retailer to get products to market quicker. It may also reduce the prices of children's clothing at M&S which has historically been viewed as expensive. Though M&S remains the market leader, rivals such as George at Asda, Tesco and Matalan, have been catching up.

The new company will employ around 220 staff of which 120 will be based in Northern Ireland with 80 at a new head office in London. The rest will be located outside the UK.

M&S will inject £4.5m into the new subsidiary company while Desmonds will invest £1.5m.

Roger Holmes, managing director of UK Retail at M&S, said: "Childrenswear is a complex, fast-moving marketplace that demands an innovative approach. By joining forces with Desmond & Sons, we are pulling together the skills and talents of a retailer and supplier into a single organisation to deliver more fashionable and high-quality clothes."

However, the company denied it would prove the model for other parts of the business. M&S has already signed up George Davies to produce a new fashion range for the group which will start appearing in stores in the next few weeks.

Analysts welcomed the move. John Baillie at SG Securities, said: "It's another way of breaking the culture of M&S. It will be a standalone business, separate from the main company"

Mr Baillie said M&S were copying the approach of nimbler rivals such as Zara, the Spanish retailer. "In a way, it is catching up with the best in the market," Mr Baillie said.

M&S said the first ranges devised under the new venture should be in stores in June 2002. The company has boosted sales this year by cutting the prices of some "Back to School" ranges by 10 to 20 per cent.

M&S shares fell 1p yesterday to close at 267p.