How Covid convinced M&S to cut another 7,000 staff

Linda J. Dodson

The pandemic has given Marks & Spencer a much needed kick up the backside. 

While a chunk of its employees were unable to turn up for work as coronavirus spread, it forced some of their colleagues to juggle new tasks simultaneously. Inadvertently, this shook the retailer’s prescriptive approach to jobs — often inflexible, with niche responsibilities — to the core. 

Multi-tasking by staff has given it enough agency to slash around one in 10 roles over the next three months, predominantly in stores. It announced 7,000 cuts on Tuesday.

Yes, the axe would have fallen regardless, as part of its five-year revival plan, but the virus has emboldened the company to cut deeper. As M&S admits, it is poised to deliver “three years of change in one”. 

Beyond the price of producing the goods it sells, staff related expenses are the single biggest cost burden for the 136-year old retailer. Steve Rowe, who took over as chief executive four years ago, has presided over a string of redundancies already. 

They are a necessary evil after several failed reinventions over the past two decades, argues Clive Black, a retail analyst at M&S house broker Shore Capital. 

“[They] improve the chances of sustaining still high employment levels, economic activity and free cash flow generation in time.”

The number of its full-time employees in the UK last year was roughly back to 2008 levels, with revenues up 10pc, and around a tenth lower than the peak under predecessor Marc Bolland in 2014. The company (conveniently) said that a “significant proportion” of the cuts will be voluntary redundancy and early retirement. 

The scale of the cuts was expected, retail analysts Jonathan Pritchard and John Stevenson at Peel Hunt say. They point out there is a big redundancy bill looming — “if we assume £10,000 per employee it would be in the high double digits of millions” — but in time it should save M&S some cash to allow it to flex its online muscle and assist the turnaround.    

The retailer’s biggest challenge remains the dichotomy between its satisfactory food business and the ailing clothing and home arm, operating at two speeds. Sales at its clothing division plunged 30pc; food was up 2.5pc in the eight weeks to August 8.

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