British retail chain Marks & Spencer is closing dozens of stores as the United Kingdom’s commerce sector sees M&A activity heat up.
M&S will shutter 32 legacy stores after already closing 68 full-line stores, and opening or relocating 13.
“While there is much more to do, the business has moved beyond proving its relevance and has the opportunity for substantial future growth,” outgoing CEO Steve Rowe, who steps down Wednesday but will remain employed through July 5 said as the company reported financial results.
M&S has “a lot of opportunity to reduce single picking, improve capacity, reduce costs and improve store operations” in the clothing and home categories, where “store sales are running more than 25 percent below four years ago,” the company said. It has “delivered less than a 10 percent reduction in space since then, so the imperative [is] both to reduce space and to rotate to newer, better stores remains.”
M&S said apparel and home now focus on contemporary style, accessible product while reducing discounts and blanket promotions.
“The pricing architecture is clearer, offering value on entry price points in products such as women’s jeggings, men’s denim and the recently introduced ‘Remarksable Value’ label in our Home ranges. As we have shifted to a trusted value approach, we have seen an improvement in value perception, which is now market-leading,” M&S said.
Denim, knitwear and casual tops powered the women’s category, while the Goodmove activewear brand has grown to more than 65 million pounds ($81.2 million) in two years. Menswear slumped during the pandemic, but M&S has seen growth in jersey, knitwear and underwear. Kidswear grew as daywear sales combined with growth in schoolwear, while home range pricing realigned to market trends in bed linens, lighting and curtains. In the past year, M&S also piloted 40 apparel brand partnerships and owned or invested brands, including the purchase and relaunch of Jaeger.
Sales for the first six weeks of the new financial year have been “ahead of the comparable period” a year ago, with particularly strong performance in apparel and home, the company said.
Revenue for the year ended April 2 rose 19 percent to 10.89 billion pounds ($13.6 billion) from 9.17 billion pounds ($11.45 billion).
Apparel and home sales rose 3.8 percent, with online growth soaring 55.6 percent. Online sales reached 34 percent from 18 percent. However, store sales were down 11.2 percent.
M&S swung back to the black as after-tax profits were 309.0 million pounds ($386.1 million), or 15.7 pence ($0.20), against a loss of 201.2 million pounds ($251.4 million), or 10.1 pence ($0.13), a year ago.
UK retail sales
On Friday, the first estimate of retail sales in Great Britain for April indicated that non-food store sales rose 1.4 percent for the month, following a fall of 1.2 percent in March—revised from the prior estimate of down 1.4 percent—that was impacted by a rise in gas prices. For the three months to April 2022, sales volumes fell by 0.3 percent versus the previous three months, continuing the downward trend since summer 2021.
Sales at non-store retail sales, mostly online-only retailers, rose 3.7 percent in April, led by stronger apparel sales. Retail sales volume fell by 0.6 percent due to declines in other nonfood stores and household goods stores. Data showed that department stores and apparel chains posted a monthly increase of 1.3 percent in sales, thanks to the burgeoning return of social events and travel.
“Retail sales are being squeezed by a combination of low demand, high inflation and rising costs. The fall in demand comes as consumers reign in their discretionary spending following a significant reduction to real incomes for households across the U.K.,” Helen Dickinson, British Retail Consortium’s chief executive, said..
Until “inflation is brought to heel, and consumer confidence returns, retailers could be in for some difficult times ahead, with lower demand and reduced margins,” she added.
On Monday, Ted Baker said it chose a “preferred” bidder from a number of interested parties and is hashing out a firm deal.
“This process is likely to take several weeks,” it said. “There can be no certainty that an offer will be made, nor as to the terms on which any offer will be made.”
Ted Baker confirmed that the U.K. arm of Sycamore is no longer wooing the British fashion label, a notable development considering the private equity firm’s interest kicked off the sale frenzy in March.
The following month, Ted Baker officially put itself up for sale. It has since received interest from a number of possible bidders, including brand management firm Authentic Brands Group, which is said to be working with deep-pocketed private-equity backers that include Leonard Green & Partners, Lion Capital and General Atlantic.
Meanwhile, fast-fashion retailer FatFace is said to have hired Rothschild as its financial advisor to explore strategic options.
FatFace’s lenders and Goldman Sachs took over the company in mid-2020 from Bridgepoint, a private equity firm, in a debt-for-equity swap.
The British lifestyle apparel chain started out as a small business selling T-shirts and sweatshirts in a camper van in the Alps in 1988. Company founders Jules Leaver and Tim Slade opened their first store in Fulham in 1992, which was followed by their first catalog a year later. In 1997, they expanded their store offerings to include apparel for women and kids. A U.S. website launched in 2015, followed by its first U.S. store a year later.
At Missguided, restructuring expert Teneo is still looking at strategic options for the women’s fast-fashion e-retailer. The advisor is focused on securing a strategic partner with the infrastructure and platform necessary for a successful turnaround.
Missguided founding CEO Nitin Passi stepped down in April, leading to speculation that JD Sports could bid for the fast-fashion nameplate targeting Gen Z women ages 16 and 24. Asda, Asos, Boohoo, Shein and Frasers Group could complement the e-tailer’s offering.