Marks & Spencer is axing 7,000 jobs over the next three months across stores, regional management and at its central support centre blaming a “material shift in trade” due to the Covid-19 pandemic.
While the retailer’s food sales have increased 2.5% in the last 13 weeks, clothing and home revenue slumped 38.5% in the same period with store-based sales down 47.9% in the eight weeks since reopening.
Online and delivery have performed well, however. M&S said it had attracted 1.9m new online clothing and home customers since the start of the year. In the last eight weeks online clothing and home sales were up 39.2% and accounted for 41% of its total clothing and home business.
The proportion of home deliveries has accelerated considerably too with over two thirds (68%) of orders now delivered to home versus 29% the previous year.
Marks & Spencer said it was too early to predict with precision where a new post-Covid sales mix will settle but that it “must act now to reflect this change”.
The retailer added it had also learnt how to work more flexibly and productively during the crisis with more colleagues multi-tasking and transitioning between food and clothing and home departments.
Chief executive Steve Rowe said: “In May we outlined our plans to learn from the crisis, accelerate our transformation and deliver a stronger, more agile business in a world in which some customer habits were changed forever. Three months on and our Never the Same Again programme is progressing; albeit the outlook is uncertain and we remain cautious. As part of our Never The Same Again programme to embed the positive changes in ways of working through the crisis, we are today announcing proposals to further streamline store operations and management structures. These proposals are an important step in becoming a leaner, faster business set up to serve changing customer needs and we are committed to supporting colleagues through this time.”
Richard Lim, CEO, Retail Economics, said: “This is a massive reduction in their workforce and the retailer is desperately attempting to reposition the business towards a new normal emerging in the sector. This painful readjustment period will see a significant reduction in labour costs, cutting back on store numbers and pivoting the business model to become nimbler and more digitally focused.
“Retailers were already battling with the pace of structural change facing the sector but the impact of the pandemic has been a step-change for the industry. Retailers remain in survival mode, preserving cash and hanging on for more sustainable levels of demand to return. But the way we shop has changed on a permanent basis for many parts of the sector almost overnight. The reality is that many more retailers will fail and the number of job losses will ramp up as government support is withdrawn. This is the calm before the storm.”
Retail expert Dr Gordon Fletcher, of the University of Salford Business School, said the announcement of 7,000 job losses at M&S reveals how much Covid-19 has accelerated the long-term change that has been progressing in the large retail sector for years.
“M&S claims that a ‘material shift’ in the way that consumers do their shopping has brought on the cuts. This is not a sudden shift. Only a month ago M&S announced 950 job cuts. In May there was a reduction in shareholder dividends. At the beginning of the lockdown it announced a £100m reduction in clothing orders. In November last year it announced a phased programme of store closures and at the same time dropped out of the FTSE100. This is a ‘material shift’ that has been slowly accruing over a number of years.
“The wider warning for the retail sector and the fallout from lockdown conditions is embedded in the name of M&S’s change programme – ‘Never the Same Again’. Face to face retail may return to a relatively familiar normality in the future. However, many businesses have learned important lessons during lockdown. They can be more flexible in many ways behind the scenes. Some processes do need to be as labour intensive, some are not needed at all. Employees have proven to be capable of being more productive if they are not siloed. And all of this means that many businesses know how to be just as productive with less workers – with a devastating consequence for jobs.”