Marks & Spencer Group Plc said it may step up store closings as the troubled U.K. retailer reported another decline in sales.
After announcing plans in May to shut about 100 of its large stores selling food and clothing, Chief Executive Officer Steve Rowe said Wednesday that the number is only a “first stage” in the company’s turnaround plan.
“It’s what we see at this stage,” Rowe said in a meeting with analysts. “My gut says that’s not the end.”
The shares fell as much as 4.8 percent as M&S reported declines in comparable sales for each of its main business areas. Food, long a driver of growth at the fixture of the U.K.’s shopping districts, has joined clothing in the doldrums, prompting a reboot spearheaded by Rowe and Chairman Archie Norman. Despite the tumbling sales, profit beat expectations in the first half as a result of the cost cuts.
Additional closings would increase the number of vacancies in U.K. downtowns and shopping malls, as department-store chains like House of Fraser and Debenhams Plc shut outlets or reduced space and specialized retailers like electronics seller Maplin have gone bust. Like other bricks-and-mortar retailers, M&S has struggled with the rise of Amazon.com Inc. and other online sellers.
The continuing decline in sales across M&S’s business makes it even more difficult to successfully transform the company, analysts at Liberum wrote in a note.
“To execute major change when both sides of the business are going backwards exacerbates risk,” they wrote. “The market is likely underestimating the impact on the cash and balance-sheet costs associated with the ongoing reviews.”
M&S has pinned part of its future success to growth in online sales of home goods and clothing. The company plans to make a third of sales online within five years. While it has rolled out improvements to its website and online sales are growing, Rowe said the changes don’t go far enough.
“It doesn’t make us first in class, not by a long way, not in an arena where competitors are incredibly quick,” Rowe said.
The mounting challenges have fueled speculation about more radical steps. M&S considered breaking up into two entities, the Sunday Times reported this month.