M&S bets on digital revolution as 7,000 jobs go
Marks & Spencer has bet the house on a digital revolution after it laid off 7,000 workers, freeing up vital cash to help build an online retail empire.
The embattled chain slashed jobs across shop floors to save an estimated £100m a year, amid a scramble to boost internet sales as part of the fight to revive its fortunes.
Insiders have said they do not want the company to return to the “old system” pre-coronavirus, where only a fraction of the firm's clothes were sold over the internet and none of its food. Instead, they are seeking radical upheaval as part of a programme dubbed Never the Same Again.
Bosses warned that there has been a lasting change in shoppers’ behaviour since the pandemic hit, with droves of consumers abandoning the high street as fears of Covid linger and internet buying becomes a habit after lockdown.
M&S on Tuesday revealed that even in the eight weeks since re-opening, fashion and home sales in stores were still 48pc lower than a year earlier. However, online sales are up 39.2pc.
The move comes two weeks before M&S launches a tie-up with online grocer Ocado which has been billed as a make-or-break moment for the ailing 136-year-old retailer. It bought a 50pc stake in Ocado's delivery arm for £750m last year and has the option to acquire the rest in the coming years. Bosses are hoping the deal makes them a major force in the fast-growing online grocery market.
M&S is already in the process of shutting more than 100 stores as it fights the high street downturn, with the market braced for even more closures to be announced in coming months.
Richard Chamberlain, a retail analyst at Royal Bank of Canada, said more stores are likely to go once M&S has a clearer picture of how sales will fare for the rest of the year.
The job cuts follow a string of senior hires to bolster the company's e-commerce operations.
In May, M&S raided the senior ranks of Asda’s fashion arm George to hire Stephen Langford as the boss of its online clothing arm. He reports to new broom Richard Price, who will run the whole division. Mr Price joined from Tesco, where he ran the clothing business.
The business added a mezzanine floor last year to its online distribution centre and has created 360 jobs at a new food depot in Milton Keynes.
M&S’s focus on its website mirrors similarly frantic efforts by Waitrose and John Lewis chief Dame Sharon White, who said last month she expects the department store to be a mostly online retailer in the future with 60pc of goods sold over the internet - up from 40pc before Covid struck.
M&S bosses said the cuts will affect store workers, regional managers and employees at its support centres, adding to the jobs pain already felt by the embattled retail industry which has now laid off more than 40,000 workers since the crisis began.
The redundancies will hit women particularly hard. Three-quarters of the M&S workforce is female.
Sophie Walker, the chief executive of Young Women’s Trust, called on ministers to force businesses such as M&S to break down redundancies by sex, ethnicity and disability so the true impact can be seen.
The company expects some of the job cuts to occur through voluntary departures and early retirement.
It follows plans to cut about 950 jobs from its total of 78,000 which were announced just last month.
Chief executive Steve Rowe said the cuts are an important step towards M&S becoming a leaner, faster business.
The company - which fell out of the FTSE 100 in September last year, and has suffered a 78pc fall in its share price since 2015 - said its outlook remains uncertain and trading overseas has been volatile as local lockdowns and closures are re-introduced.
Richard Lim, chief executive of Retail Economics, said: "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.
"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."
Shares climbed 1.5pc to 115.3p in early trading. The stock was trading above 200p at the beginning of the year.
