British Retailer M&S eyes overseas growth as home sales wilt
Friday, 4 April 2014 00:00
Aims to expand overseas profits by 40% over three years
To open 250 stores including 20 food outlets in Paris
Around 60% of new outlets will be run as franchises
PARIS (Reuters): Britain’s biggest clothing retailer Marks & Spencer Plc, hit at home by dwindling sales, plans to expand its international stores by more than a half as part of a strategy to rebuild the 130-year-old institution.
M&S, which sparked staff and customer protests when it backtracked from a previous overseas growth plan and withdrew from mainland Europe in 2001, said it planned to expand its overseas profits by 40 percent over three years with the opening of 250 stores, including 20 food outlets in Paris.
The international expansion follows Chief Executive Marc Bolland’s three-year, 2.3 billion pounds ($3.8 billion) turnaround plan designed to transform M&S into a global, “multi-channel” retailer reaching customers through stores, the Internet and mobile devices.
“We need to build a brand internationally and be dot-com ready. That’s where our future is,” Bolland told an investor seminar in Paris.
International expansion is far from risk-free and a number of British retailers have hit problems when trying to move outside their home market. Tesco Plc for instance last year had to take a 1 billion pound writedown as it sold its problematic U.S. chain Fresh & Easy.
But with M&S having posted 10 straight quarters of declining underlying sales in general merchandise, which includes clothing, Bolland is looking overseas to provide some relief.
The group, which Bolland has led for almost four years, is forecast by analysts to report an 11th straight fall in quarterly sales on April 10 when it updates on recent trading.
With the British market making up around 90% of group revenue, M&S said it would seek to learn from the past when it rolls out its new overseas stores.
It will adopt a “bricks and clicks” strategy of opening flagship stores in key cities, supported by smaller food stores and an online service. It will also target a handful of countries, rather than taking the scattergun approach of the past that proved too expensive.
In total M&S plans to open 250 stores to add to the 455 already in operation. Around 60 percent of the new outlets will be run as franchise outlets.
In the priority markets of Russia, China, India and the Middle East it will open mostly clothing stores to tap into demand for what it believes is a love of British goods.
It expects to have around 100 stores in India by 2016 and will seek a local partner in China to further expand after establishing 15 wholly owned flagship stores there. It also hopes to have 10 lingerie and beauty stores in Saudi Arabia in the next two years, having seen the success of two outlets already open there.
In western Europe, M&S plans to open flagship stores selling food and clothes in Brussels and Amsterdam, to add to flagship outlets already open in Paris and the Hague, helping to take sales from the region to an estimated 250 million pounds by the financial year through March 2017.
In the year to the end of March 2013, M&S’s total international revenue was 1.1 billion pounds.
The drive to grow abroad compliments the group’s push to reshape its operations at home. M&S has spent heavily on revamping its clothing operation, redesigning stores and overhauling logistics and IT to complement a new web platform that went live in February.
M&S shares, which fell on Monday to their lowest in nearly three months, closed up 1.8% at 458.8 pence. By comparison the blue-chip FTSE 100 index was up 0.8%.