By Kristy Dorsey

Marks & Spencer plans to further reduce its retail footprint, with 30 per cent fewer stores within the next decade.

Speaking after the retailer posted a pre-tax loss of £201.1 million for the year to March 28, chief executive Steve Rowe said the company is stepping up plans to close outdated stores to create a chain of 180 clothing and homeware sites across the UK, down from 254 at present. About 30 stores will gradually close over the next decade, while another 80 will be moved to better locations or merged with nearby shops.

The group will open 17 new or expanded main stores in the next two years, including at least six at locations previously occupied by former rival Debenhams, which went into liquidation in December of last year.

M&S has already closed or relocated 59 of its main stores, as well as cutting 7,000 jobs across the group.

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“We are committed to stores and believe they can be a true source of competitive advantage, but they have to be the right stores in the right location with the right services,” Mr Rowe said.

Like many retailers, M&S has suffered under the enforced closure of shops to prevent the spread of the coronavirus. Its clothing and homeware sales slid by almost a third during the high street lockdowns, with a 54 per cent increase in online sales failing to offset the 56% slump across its bricks and mortar portfolio.

Collectively, clothing and homeware sales were down by 31.5%, accounting for most of the year’s losses. However, that has improved since non-essential stores started opening across the UK, with overall trading in the six weeks since April 3 ahead of the same period two years ago, prior to the pandemic.

Excluding nearly £117m of restructuring costs and £95m on store closures, the business made a profit of £41.6m. M&S received £175m in business rates relief during the year, and £131.5m in furlough payments.

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Food sales rose by 1.3% at established stores, a lower pace than many rivals, though this improved as its online tie-up with specialist delivery service Ocado took effect from September. The company plans to increase its capacity to sell groceries online by 50% within the next 18 months as its products now make up more than a quarter of the average order on Ocado.

It also intends to invest in its food stores by creating 40 larger sites that appeal to families, up from 15 at the present.

“In a year like no other we have delivered a resilient trading performance, thanks in no small part to the extraordinary efforts of our colleagues,” Mr Rowe said. “In addition, by going further and faster in our transformation through the Never Same Again programme, we moved beyond fixing the basics to forge a reshaped M&S.

“With the right team in place to accelerate change in the trading business and build a trajectory for future growth, we now have a clear line of sight on the path to make M&S special again. The transformation has moved to the next phase.”

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Though the signs are “encouraging”, the company added that it remains unclear how the economic recovery will develop, and whether consumer activity will be sustained.

M&S said it also continues work to mitigate “the ongoing disruption and material costs of Brexit”, which it said has so far cost £16m. It is currently looking at how to reconfigure its business in Europe, and has already stopped selling chilled foods in the Czech Republic because of additional administrative and tariff costs.

The group does not expect to pay a dividend this year as it continues to invest in its online business and store improvements. Underlying profits are expected to be at least £300m, up from this year’s £41.6m but down on the £403m in the year prior to the pandemic.

Shares in M&S closed yesterday’s trading more than 8% higher, up 13.25p at 169.2p.