Financial Collapse RSS

Jan 7, 2009

Marks & Spencer to cut 1,200 jobs

Marks & Spencer Group on Wednesday became the latest British retailer to announce job cuts and store closures as the sector grappled with the results of the country's worst economic downturn in more than 17 years.

The iconic British retailer, which sells clothes, food and furniture, reported a smaller drop in third-quarter sales figures than analysts had expected but said that it planned to close 27 stores and cut 1,230 jobs to prepare for what it predicted would be at least another year of economic woes.

"Given that we expect challenging economic conditions to continue for at least the next 12 months, we believe we are taking the right action to maintain the strength of our business," the Marks & Spencer chairman, Stuart Rose, said in a statement.

Rising unemployment and falling house prices are weighing on consumer spending, requiring retailers to offer bigger-than-usual price discounts to lure shoppers. The harsh economic conditions have already caused some prominent companies, including Waterford Wedgwood and Woolworths, to go into administration.

Marks & Spencer traces its origins to 1884, when Russian-born Michael Marks started to sell nails, screws and soap at a British market stall.

Over the next 10 years, the business grew into 12 stores, at which point Marks teamed up with bookkeeper Thomas Spencer to further expand the company.

As Britain entered a recession last year, Marks & Spencer started to offer discounts on clothing and food more than a month before Christmas and extended its opening hours to attract customers. The company continues to sell half-price furniture and "meal deals" that include two main courses, two desserts and a bottle of wine for £10, or $15. That helped to attract shoppers but hurt margins and prompted some analysts to question its strategy.

Marks & Spencer focused on offering more expensive, better quality meals but the current economic downturn required the chain to increasingly compete with less-expensive supermarkets like Tesco and Wal-Mart Stores' Asda unit, which also sell clothes.

To reduce costs, Marks & Spencer said it would eliminate 450 jobs at its head office. Closing 25 Simply Food markets will result in another 780 job cuts. Marks & Spencer opened its first Simply Food store eight years ago and now has 355. Two other stores will also be closed.

The company also said it would cap employees' annual increases in pay and make changes to the early retirement benefits for some members of the plan.

Marks & Spencer's shares rose 5 pence, or 2 percent, to 244 pence Wednesday on optimism that the moves would help the company. The shares fell 62 percent in 2008. Sales at stores open at least a year fell 7.1 percent in the third quarter, with clothing and furniture declining 8.9 percent and food sales down by 5.2 percent.

Source : International Herald Tribune
[tags : ]


Related Posts with Thumbnails