Marks & Spencer to Cut 7,000 Jobs in New Hit to U.K. Workers
Marks & Spencer Group plans to cut about 7,000 jobs because of the Coronavirus impact on its business.
(Bloomberg) -- Marks & Spencer Group Plc plans to cut about 7,000 jobs after its clothing business was hit hard by the coronavirus lockdown, adding to the toll of lost employment in the U.K. retail industry.
The move to eliminate about one-tenth of the store chain’s workforce follows a 39% plunge in the clothing and home arm’s sales in the latest 13 weeks. A 2.5% gain in food sales failed to offset the impact, and uncertainty over the course of the pandemic clouds future prospects, M&S said in a statement.
After a rise in early London trading the shares fell as much as 4.9% amid concerns about M&S’s troubled clothing and home division. They’ve lost almost half their value this year.
The benefits of cost-cutting won’t outweigh the negatives for investors until there’s a genuine improvement in the retailer’s clothing and home unit, Peel Hunt analyst Jonathan Pritchard said in a note.
The mainstay of the U.K.’s downtown shopping districts was already suffering from competition with online retailers and a shift toward fast fashion, and it has embarked on a series of restructurings in the past decade.
The U.K. suffered the biggest contraction of any major economy during the lockdown, with a 20.4% decline in output during the second quarter. Despite a rebound in June, consumer sentiment remains fragile and retailers have been paring jobs at a growing rate.
Since the pandemic began, U.K. retailers have announced more than 35,000 job cuts. They include Debenhams Plc, Walgreens Boots Alliance Inc.’s drugstores and John Lewis Partnership Plc, owner of the grocer Waitrose.
Thousands of additional workers have been furloughed, but the government is under pressure to phase out support despite concerns about the near-term economic effect.
Online Boost
M&S said it expects some of the job cuts to occur through attrition and early retirement and also plans to add an unspecified number of new positions. The largest portion of the reductions will be in the head office. As with other retailers, the company’s online operations have gotten a boost since the lockdowns began.
The retailer said in July that it planned to cut about 950 jobs from a total of 78,000. The new reductions will come on top of those. M&S has previously detailed plans to close about 100 stores by the end of this year and has already shut 56, but Tuesday’s update included no further news on those measures.
“Importantly, these redundancies are not being driven by a new round of store closures (though we would not be surprised if that, too, were announced in due course), but by reducing staffing levels in the existing store footprint,” Morgan Stanley analysts said in a note. They expect the job cuts to generate annual costs savings of as much as 100 million pounds ($131 million) but say there could be a similarly sized exceptional charge this year to fund the restructuring.
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