The store closure programme has produced costs of approximately £222m, with further charges expected. © AFP/Stringer
The store closure programme has produced costs of approximately £222m, with further charges expected. © AFP/Stringer

M&S saves £100m through transformation

Marks & Spencers (M&S) has saved £100m through its transformation programmes, including restructuring of its end-to-end supply chain.

The retail group has been undergoing several transformational projects across all operations, including reorganisation of logistics and the supply chain network. The first phase has enabled cost savings of £100m for 2018-19, with estimated savings of £350m by 2020-21, according to a report of full year results.

The shake-up of operations has also had an impact on revenues, which have fallen 3% fall to £10.4bn. Profits before tax are down 9.9% from last year at £523m after being hit by a combination of a drop in sales, costs associated with store closures (approximately £222m) and investments in infrastructure.

Steve Rowe, CEO at M&S, said: “M&S is changing faster than at any time in my career [with] substantial changes across the business to our processes, ranges and operations, and this has constrained this year’s performance, particularly in Clothing & Home. However, we remain on track with our transformation and are now well on the road to making M&S special again.”

M&S has made progress towards simplifying processes through strategic efforts to modernise the supply chain and transition to a single tier distribution network.

The closure of four distribution centres and warehouses made way for the opening of the national distribution centre in Welham Green, which has continued capacity growth. Also, new technology in distribution centres and logistical areas has enabled increased efficiency and further capabilities. 

However, the investment contributed towards a 104.6% increase in year-on-year supply chain expenditure, from £23.8m to £48.7m.

Meanwhile, UK operating costs for 2018-19 decreased by 1.2%, with savings from store closures and improved efficiencies in logistical operations offsetting other costs.

As the retail group is still within the early stages of improvements “weak processes and a slow supply chain” have contributed towards popular clothing lines selling out "prematurely" due to lack of available stock, according to the report.

Rowe said: “We are deep into the first phase of our transformation programme and continue to make good progress restoring the basics and fixing many of the legacy issues we face. At this stage, we are judging ourselves as much by the pace of change as by the trading outcomes and change will accelerate in the year ahead.”

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