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This morning M&S has announced the closure of 27 ‘Simply Food’ stores with the loss of around 780 jobs in retail and 450 at its head office.

The problems stem from the worst Christmas trading figures on record for the company, Overall sales at the retailer are down around 7% which is a massive amount of money for a company that turns over in excess of £1Billion per year.  International sales are the company rose by over 25% however these are not direct sales as around 80% of M&S international business is franchised.

So will the company now face administration? Not a chance, What M&S have done today which other retailer have failed to do is proactively make corrections to protect the future of the business.  The closure of 27 stores, are the only 27 stores in the business which are not returning a profit, In fairness they are stores that should never have been opened in the first place and are putting a financial strain on the profitability of the group.

The London stock market has responded well to the plans with share up 3%, however the share are still only trading at roughly £2.20 – £2.50 per share, A big fall from 2006 when they were tracking at over £6.50

Take Over Bid

I think that in late 2009 and early 2010 M&S will fight its 3rd battle to hang on to its business and someone will try to take advantage of a below value stock price and buy the business from under the boards noses.

Sir Phillip Green tried to take over M&S in 2004/5 when the shares dipped to £3.50 – part of his business plan was to appoint Sir Stuart Rose as MD and give him a % of the business for his trouble, Stuart Rose heard him out and liked the business plan so brought it to the board, the board also liked the plan but rather than letting the ruthless retailer Green take over a British Institution they appointed Sir Rose to MD with a fantastic salary, signing bonus and yearly bonus.  Sir Phillip was less than happy and actually punched Stuart outside M&S Baker St head office but he said he would be back to fight the battle again and would someday add M&S to his portfolio.

So in short, job losses are regretable but the future of M&S is bright, futher revenue losses will be made in 2009 however the business will remain profitable and trading.