By James Davey
LONDON (Reuters) - Marks & Spencer <MKS.L> will speed up store closures after falling sales and cost pressures dragged first-half profit lower on Wednesday, underlining its struggle to retain the loyalty of British shoppers.
M&S, one of the best known names in UK retail, said finance chief Helen Weir would leave the business when a successor is found after less than three years in the role. She told reporters she wanted a "more diverse portfolio" of jobs.
M&S said it would accelerate store closures, space reduction and relocations for its clothing and homewares business, part of Chief Executive Steve Rowe's five-year turnaround plan which is set to dent short-term profits.
While it still plans to grow a food business focused on convenience and quality, it will slow down openings of 'Simply Food' stores. It flagged more price cuts and product innovation.
It said it would modernise its clothing supply chain to make it faster and lower cost, set a target for a third of its clothing and homeware sales to be made online and plans to substantially cut its cost base.
The 133-year-old M&S is battling to remain relevant after falling out of fashion over the last decade and Rowe's plan is the latest attempt to revive its fading fortunes.
"We've made good progress in addressing the most immediate issues to arrest the decline of M&S. However, we still have structural issues to tackle," Rowe, a company veteran who became chief executive in April last year, told reporters.
Shares in M&S, down 6 percent so far this year, fell as much as 4 percent but were down only 0.3 percent at 1145 GMT, as falls in first half profit and second quarter sales were not as bad as feared.
"M&S is playing catch-up in a difficult mid-market position and pressures in food are unlikely to recede near-term...the shares are unlikely to perform until evidence of sustainable recovery is seen," said Investec analyst Kate Calvert.
Its task is being made harder by a squeeze on consumers' spending power as inflation rises and wage growth falters. Last week UK interest rates also went up for the first time in a decade.
Rowe's initial strategy was focused on reduced prices for basic clothing ranges, cutting back on clearance sales and promotions while improving fit, availability and customer service.
His plan also involved switching some UK shop floor space from clothing to food. M&S said last year it would close, downsize or re-locate 105 stores over five years. Six have closed so far.
"At this stage the numbers that we've given out previously are the minimum numbers we intend to work to. But the key thing is the pace of that change will be quicker than we previously said," said Rowe.
He denied the change of plan reflected the input of M&S' new chairman, the retail veteran Archie Norman, who joined in September. "We’re running this business based on data and based on good understanding of our modelling," said Rowe.
Some believe far more radical thinking is required. Last week Whitman Howard analyst Tony Shiret said the benefits of M&S merging with rival Next <NXT.L> were attractive, though he said it was unlikely to happen.
M&S made a pretax profit before one-off items of 219 million pounds in the 26 weeks to Sept. 30 - ahead of analysts' average forecast of 201 million pounds but a 5.3 percent fall on last year.
Second-quarter clothing/homeware and food like-for-like sales both fell 0.1 percent. Though that represented three straight quarters of decline in both businesses, the outcomes were ahead of analysts' expectations.
Rowe said M&S was "quite pleased with the start to Christmas" (trading).
Recent surveys and data have shown UK retailers have, however, endured a tough October.
(Additional reporting by Sarah Young and Paul Sandle, editing by Keith Weir)