Marks & Spencer Group Plc plans to scrap about 525 head office jobs as the U.K.’s largest clothing retailer embarks on its biggest round of job cutting in seven years.
The changes should reduce domestic costs by about 1 percent, or 30 million pounds ($40 million), a year, the London-based company said Monday. M&S will consult with workers over the downsizing, which would represent about 15 percent of head-office staff.
The cost drive comes as Chief Executive Officer Steve Rowe strives to resurrect sales in the retailer’s clothing business and grapples with the cost of complying with the new national living wage. In addition to cutting staff in its headquarters, the company has also reduced premium pay for non-regular hours worked by its store-based workers to fund an increase in basic pay.
“The necessary restructuring at M&S will be painful," Michelle Wilson, an analyst at Berenberg, said by e-mail. “M&S faces structural issues in its clothing and home business from its over-sized, inflexible store estate."
The proposed cull marks the most drastic staff reduction since the aftermath of the global financial crisis, when M&S announced plans to close 27 stores and eliminate 450 head office roles. This time around, about 260 of the jobs being eliminated will be salaried workers. About 200 contractors will also be axed, while the company won’t replace some staff when they leave.
“M&S has to become a simpler and more effective organization if we are to deliver our plans to recover and grow our business,” Rowe said in the statement. The proposals will allow M&S to make “bolder, pacier decisions, be more profitable and ultimately better serve our customers,” said the CEO, who is scheduled to outline his plans for the retailer’s U.K. store portfolio on Nov. 9.
Customer Priority
Cutting back on head office costs while giving store-based employees an above inflation pay increase demonstrates Rowe’s commitment to prioritizing customers, according to Clive Black, an analyst with Shore Capital.
“He is backing up his words with his actions," Black said by phone. “Recent trading has been quite calamitous and that has to change."
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