Marks & Spencer to close both locations, discontinue business in Estonia (1)

Grand opening of Marks & Spencer at Tallinn's. May 7, 2009. Pictured: UK Ambassador to Estonia Peter Carter (left) and Marks & Spencer Eastern European Division director Dusan Mrozek (right). (Mihkel Maripuu/Postimees/Scanpix)
11/8/2016 3:43 PM
Source: BNS
Category: Business

British retailer Marks & Spencer announced on Tuesday that it has initiated negotiations with employees over a plan to close its two stores in Estonia, which are located at the Kristine and Rocca al Mare shopping centers in Tallinn.

On Tuesday, Marks & Spencers' (M&S) board of directors announced proposals to close 53 wholly-owned locations in ten markets, including ten in China and seven in France, as well as all of the retail group's stores in Belgium, Estonia, Hungary, Lithuania, the Netherlands, Poland, Romania and Slovakia.

These proposals were developed by M&S following a comprehensive review of its 466 international stores in order to build a clear picture of its business today and what is driving results, the group said.

M&S is initiating consultations with its 55 employees in Estonia. The British retail company noted that it is fully committed to complying with all local employment legislation in Estonia, including engaging with the European Works Council and employees in advance of commencing a consultation process about these proposals.

Jonathan Glenister, the company's regional director for Europe, Greater Chin and India, said, "The proposals we have announced today in Estonia are part of a comprehensive review of our international busines. Our review has shown that over th last five years, we have struggled to break even in Estonia and that there was limited growth on the market. We recognize the impact these proposed changes may have on our people and we will now consult with our colleagues in Estonia and listen carefully to their feedback on our proposals."

In 2015/2016, M&S-owned international businesses delivered a total loss of 31.5 million pounds sterling, or approximately 35.3 million euros, and the group's international operating profits were down 39.6 percent in total to 55.8 million pounds, or approximately 62.6 million euros. "This is not sustainable and we have undertaken a comprehensive review of our international business," said the company's board of directors.

"In the future, we propose to operate with fewer wholly-owned markets and have a greater focus on our established joint ventures and franchise partnerships," they continued. "We will use our local market customer insights to build a more sustainable international business by focusing on improving our customers' experience and driving profitability.

The group reported that last year, their owned businesses in ten other markets made a loss of 45 million pounds on revenues of 171 million pounds and those same markets had now been reporting losses for at least five years. "Our review has found that this is due to a number of factors including our fragmented owned-store portfolio and lack of scale," it continued.

"Additionally, there is limited opportunity for future growth in these markets," noted M&S. "We are proposing closing all of our 53 wholle-owned stores in these ten markets, including ten in China and seven in France as well as all of our stores in Belgium, Estonia, Hungary, Lithuania, the Netherlands, Poland, Romania and Slovakia. Therefore we are starting consultation with approximately 2,100 empoyees regarding our proposals."

At the group level, if, following the outcome of the consultation, M&S decides to still go ahead with these proposals, it will incur non-underlying costs in the range of 150-200 million pounds, of which the vast majority will be cash, largely driven by property- and layoff-related costs.

Going forward, M&S proposes operating with fewer wholly-owned markets and increase focus on its established joint ventures and franchise partnerships. The group will use its local market customer insights to build a more sustainable international business by focusing on improving customers' experience and driving profitability.

M&S had a total of 268 franchise stores in 34 markets, as well as established joint ventures in Greece and India.

Editor: Aili Vahtla

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