Marks & Spencer pulls out of Russia after 17 years

Marks & Spencer says it will fully exit the Russian market following the invasion of Ukraine.

The retail giant stopped shipments to Russia in March but previously said complex franchise deals prevented it from withdrawing completely, with about 50 shops still open.

But the firm said after negotiations it would fully exit its Russian franchise.

It came as M&S reported pre-tax profits of £392m for the year to 2 April – up from a loss of £209m the previous year.

However, M&S said it expected sales growth to slow due to rising costs and increased pressure on customer budgets.

The company said it was facing increased food costs, driven by global supply issues and labour shortages, while factory, transport and freight costs, as well as continued supply issues in China, were putting pressure on its clothing and home business.

Household budgets are being squeezed by rising food, energy and fuel bills, with inflation, the rate at which prices rise, hitting 9% in April – the highest level for 40 years.

M&S, which was criticised for not pulling out of Russia at the start of the war, said it would face a £31m hit from its exit.

The retailer opened its first store in Russia in 2005. Its Russian arm is run by Turkish company FiBA, which operates 48 shops under the M&S banner in the country with 1,200 employees.

Hundreds of international brands including Starbucks, Coca Cola, Levi’s and Apple have left Russia since the invasion of Ukraine in February.

Earlier this month fast food giant McDonald’s announced it was withdrawing from the country after more than 30 years and was selling its restaurants to a local buyer.

M&S, which is turning its business around after several years of decline, posted revenue of £10.8bn in the 12 months to April – up almost 7% on pre-pandemic levels in 2019/20.

It said it had seen strong performance in its clothing and home operation, driven by a 55.6% surge in online sales, although in-store sales fell by 11%.

Meanwhile, its grocery sales were up by 10.1%.

It said the business has had “an encouraging start to the year” but warned that rising inflation would hold profits back in 2022/23.

Julie Palmer, a retail expert at Begbies Traynor, said the typical M&S customer tended to be wealthier and less hard hit by rising costs “but they could still choose to economise” .

“How long cash-strapped shoppers will feel comfortable splashing out on M&S’s upmarket foods remains to be seen,” she added.

Chief executive Steve Rowe is handing over the reins today after 40 years at M&S, starting as a Saturday boy in Croydon.

The business is certainly in better shape now than when he started the top job in 2016.

Reviving the fortunes of this household name is still a work in progress, though.

Although M&S has managed to finally arrest the decline in clothing and home sales, fashion sales in its shops are still 25% below where they were four years ago.

M&S wants fewer and better big stores as we shop more online and has already been making some big changes.

Today it said it was shifting away from town centre shops to more modern edge-of-town sites, taking a swipe at what it calls “failed local authority and government policy”.

This new focus will likely send a shudder through the high streets set to be affected.

The new leadership team at M&S will also have to steer the business through the cost of living crisis with soaring inflation and consumers tightening their belts.

Chief executive Steve Rowe is handing over leadership of the retailer to Stuart Machin and Katie Bickerstaffe after running the company’s turnaround for the past six years.

The cost-cutting programme saw the closure of a number of M&S’s clothing and homeware shops, with others converted into food stores, after disappointing fashion sales.

In 2020 the company also announced thousands of jobs cuts after the business was hit by Covid lockdowns.

The chain said the shift towards online shopping and away from High Street and city centre stores had “increased the imperative” to reduce its clothing and home trading space.

It said it was now relocating some shops from town centres and older multi-floor buildings with poor access and parking.

“As a result, a high proportion, but not all, of our relocations are to the edge of town,” the company said. (BBC)