Marks & Spencer cuts over 1,000 jobs
Marks & Spencer is closing 25 Simply Food stores
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Wednesday, 07, Jan 2009 10:00
Marks & Spencer is cutting over 1,000 jobs and closing 27 stores after reporting a sales slump over Christmas.
The retailer is closing 25 Simply Food sites and two small main stores, with the loss of 780 jobs.
A further 450 will be shed from head office, Marks & Spencer added.
Like-for-like sales fell 7.1 per cent over the 13 weeks to December 27th, despite two one-day sales events.
This compares with a fall of 3.3 per cent for rival Debenhams, and a seven per cent fall at Next – although Next did not launch any pre-Christmas sales.
Sir Stuart Rose, chairman, said: "We are aware that the proposed changes set out above will be difficult for those members of staff impacted, but 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."
In addition to the job cuts, Marks & Spencer is making changes to its final salary pension scheme by capping employees' annual increases in pensionable pay to one per cent and changing the early retirement benefits for members who joined the scheme before 1996.
The group will also keep tight control of its costs, with capital expenditure for 2008/09 expected to be no more than £700 million, falling to £400 million in 2009/10.
Marks & Spencer also warned profit margins would be hit by discounting, especially in food, falling by around 1.75 per cent when compared to last year.
However, the retailer did say it had maintained its market share in clothing, doing particularly well in kids' clothes and lingerie.
Shares in Marks & Spencer rose by 1.26 per cent by 08:49 GMT as investors had been expecting a fall in sales after the news was widely reported yesterday.
Nick Raynor, investment adviser at The Share Centre, warned any rise in the Marks & Spencer share price could be seen as an opportunity to sell. comments on why shareholders should be happy with today’s results:
"If its share price rallies at any point on the release of these figures then, as with Next, we’ll be recommending investors take the opportunity to sell up and move on.
"We are also eagerly awaiting Sainsburys’ results following the festive period. We doubt if Sainsburys will be able to increase its market share as competition over the Christmas period has been extremely tough. Therefore, for shareholders who want to invest in this sector, we recommend looking at either Tesco or Morrison’s."
He added; "Looking at the high street as a whole, we advise that only the brave consider investing. We don’t see any immediate turnaround in fortunes and the expected base rate cut later this week isn’t predicted in the shorter-term to make much difference.
"The high street is facing a tough 2009 and shareholders will need to be patient to make any returns."