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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Marks & Spencer to cut 7,000 jobs; S&P 500 hits record high – as it happened

A Marks and Spencer store in central London.
A Marks and Spencer store in central London. Photograph: Tolga Akmen/AFP/Getty

Closing post

And finally... the London stock market had closed at its lowest point in over a week.

The FTSE 100 index has ended the day down 50 points, or 0.8%, at 6,076 points.

Although housebuilders rallied, following strong results from Persimmon, the rise in the pound hurt some London stocks.

David Madden of CMC Markets sums up the mood:

In a reversal of yesterday’s move, the FTSE 100 is being hurt by the strength of the pound. Sentiment in Europe is weak, but the positive move in sterling, has caused the British equity benchmark to underperform. In terms of index points, some of the biggest fallers are GlaxoSmithKline, AstraZeneca, British American Tobacco and Unilever – they all earn a large chunk of their revenue overseas, so the upward move in the pound works against them.

Tensions between the US and China have heightened again as President Trump has tightened restrictions on Huawei. The US leader wants to limit the Chinese company’s access to US-produced chips. The firm was already under scrutiny from the US government, but the heat has been turned up again.

European stock markets also lost ground, with France’s CAC down 0.7% and Germany’s DAX losing 0.3%.

And what for Marks & Spencer? Investors have given the struggling retailer’s job cuts an early thumbs-down, with M&S shares closing nearly 5% lower at 108p. The news that closing sales (already weak) have tumbled by 305 since stores reopened have reminded traders just how serious the retail crisis has become.

Here’s the main stories of the day:

Goodnight. GW

Figures released earlier today have shown that the US housing market continued to recover last month.

Housing starts increased by 22.6% — far more than expected — to a seasonally adjusted annual rate of 1.496 million units last month, the Commerce Department said on Tuesday. That suggests that the home construction sector is strengthening, after slowing sharply during the lockdown.

Candice Bangsund of asset manager Fiera Capital also credits central banks and politicians for the stunning market rally since late March:

“Global stock markets have made an unprecedented rebound from the depths of the pandemic-induced bear market earlier this year, as investors thrived on the abundance of monetary and fiscal stimulus at hand. Indeed, the timely and assertive response from both central banks and governments proved to be instrumental in alleviating the damage to both the economy and financial markets, and allowed investors to look through the virus-related destruction.

At the same time, policymakers’ unrelenting pledges to guide the economy back to health have been a critical source of support as major economies fire up their engines and as activity resumes, which has emboldened risk appetite and global equity markets alike.”

Frasers Group, the firm behind Sports Direct, has told the City that chairman David Daly accidentally breached the rules by purchasing shares in the company during its ‘closed period’.

Top City executives aren’t allowed to trade equities in their own firms shortly before financial results are due.

Daly, though, seems to have overlooked the rules governing PDMRs (persons discharging managerial responsibilities) and bought 4,000 shares (worth roughly £11,000), a few days before Frasers’ final results due on Thursday.

In an unusual regulatory statement, the retailer says it was an error, quickly rectified, with the profits from the trade going to charity:

Frasers Group was informed on 17th August that David Daly (a Non-Executive Director) of the Company had purchased 3,912 ordinary shares in the Company.

The shares were purchased in error during a closed period. The Company has robust procedures in place before PDMRs can trade in shares which were accidentally not followed in this instance.

The issue was rectified as soon as it came to the Company’s attention and the shares were sold within 15 minutes of their purchase. A small profit was made on the sale which David Daly has donated to charity.

The Company will ensure that PDMRs are reminded of their obligations and the internal procedures relating to dealing in the Company’s shares.

The most obvious threat to the rally is the risk of a second wave of Covid-19 cases this winter.

That would put strain on health services, potentially forcing new lockdowns that would hurt businesses (but save lives).

But investors are shrugging this risk aside, perhaps confident that governments and central bankers will continue to provide stimulus packages and record low borrowing costs.

Adam Vettese, analyst at multi-asset investment platform eToro, reckons that this will support shares.

US stocks have made a remarkable recovery since the big sell-off in mid-March and are continuing to rise despite the unprecedented hit to the global economy.

“There is no doubt that the enormous stimulus packages from the Federal Reserve and the Trump administration have had a major role to play in this and has given investors confidence to stay invested in equities rather than moving into the perceived safety of cash or bonds.

“It’s also worth noting that the bulk of the US’s recent stock rally has been driven by California-based tech giants, which have not just survived but thrived throughout the coronavirus pandemic.

“The big question now is: how long can US shares keep rising? While that is impossible to predict with any degree of certainty, the big elephant in the room is a potential second wave.

“However, as long as investors remain assured that the US government is prepared to turn on the stimulus taps if necessary, there is no reason why share prices cannot keep rising in the short-term at least.

The S&P 500’s record high comes as global investors express more optimism about the prospects for the market.

A closely watched survey of fund managers from Bank of America shows that investors are “most bullish” on financial markets since February.

More investors think we’re in a “bull market” (meaning rising prices, with some corrections on the way), rather than a “bear market rally”.

I suspect some will secretly wish they’d though this earlier - back when the S&5 was somewhat cheaper.

As Reuters points out:

World stocks have bounced back by a whopping 51%, adding $24 trillion in value, in five months as investors bet that economic activity would rebound rapidly after record plunges.

Of the 181 survey participants, who manage half-a-trillion dollars in assets, a net 79% expect a stronger economy, the strongest reading since December 2009.

A report issued this morning suggests that the imposition of face coverings in UK supermarkets hit sales, if only temporarily.

My colleague Joanna Partridge has the details:

Supermarket sales have begun to slow in Great Britain since the easing of lockdown restrictions, as the introduction of compulsory face coverings in stores in England and Scotland initially deterred some shoppers.

Take-home grocery sales slowed by 14.4% year-on-year in the three months to 9 August, as more shops and hospitality venues reopened, making consumers less reliant on food retailers, according to the data analysis firm Kantar, which examined shopping trends in England, Scotland and Wales.

Kantar said there were 2 million fewer supermarket visits in the week after the face-covering rule was introduced in England than otherwise have been expected.

“It seems to have been an initial blip for shoppers to get used to the new regulations, and actually the trend suggests that they are now recovering back towards the expected levels,” said Charlotte Scott, the consumer insights director at Kantar.

“[Shopping] trips are now more planned than ever and we have an additional thing to think about and get used to,” Scott said. Just over half of shoppers told Kantar they felt safe when visiting stores.

Traders have predicting for weeks that the S&P 500 would hit a new peak soon.

And having finally done it, the index has now subsided. It’s currently down 6 points today at 3,375 points (having scaled the previous peak of 3,393).

Enterprise software maker Oracle is the top riser on the S&P 500, up 3.5%, following reports that it has joined the crowded race to buy China’s TikTok (not an obvious fit, frankly....).

Amazon has gained 3%, with CRM software-maker Salesforce.com up 2.3%.

The car sector is also solid, with General Motors up 0.5% and Advance Auto Parts rising by 2.2%.

Stocks may be rallying, but the US dollar is not!

The greenback is continuing to slide on the FX markets, driving the pound up to $1.323 for the first time since the start of January.

A strong pound is bad news for Britain’s FTSE 100. The index is now down 50 points, or 0.8%, with multinationals weaker (their dollar earnings are less valuable in sterling terms).

Here’s another handy chart - showing how the US stock market is increasingly dominated by its biggest members:

Chart: How the S&P revived to record highs

The rally in US shares since March is particularly remarkable, given the surge in Covid-19 cases and deaths, and the sharp rise in unemployment.

The rally is, in large parts, down to the central banks, who have convinced investors that they won’t allow asset prices to slump.

After the crash of late-February and early March, they slashed interest rates to record lows and announced huge stimulus programmes -- including pledging to buy corporate debt to prevent a funding crisis.

As you can see, this quickly sparked a revival in the S&P 500, to today’s record high of 3394.82. It contains 500 of America’s largest listed companies, so is a decent measure of the overall market.

The S&P 500 this year
The S&P 500 this year Photograph: Refinitiv

Large companies, such as the tech stocks, are among the big beneficiaries. If interest rates will remain low, then firms with solid cash flow and future earnings look particularly attractive.

Plus, with government bonds providing meagre returns, equities are more attractive (especially in firms who are still paying a dividend).

Also, technology stocks have seen increased demand for their services as the lockdown has accelerated the move towards home-working, collaboration tools, internet shopping and cloud services.

As Peter Dixon, Senior Economist at Commerzbank, put it:

One of the primary reasons behind the rally in US markets has been the surge in FAANG stocks, which are perceived to have been one of the winners from the lockdown, and which are up more than 70% from the March lows.

Updated

Here’s CNBC on the remarkable stock market rally over the last few months:

Since hitting an intraday low on March 23, the S&P 500 has skyrocketed more than 54%. Those gains have been largely driven by sharp advances in Big Tech shares.

Facebook, Amazon, Apple, Netflix and Microsoft are all up at least 27% year to date. Google-parent Alphabet has jumped more than 14% in that time period.

S&P 500 hits new record high

Newsflash: America’s S&P 500 share index has just hit a new all-time high.

This means the index has now recovered all the losses since the Covid-10 pandemic began.

Here’s the details from Reuters:

  • S&P 500 TICKS ABOVE 3,393.52 LEVEL, HITS INTRA-DAY RECORD HIGH

That’s an astonishing recovery, given the S&P 500 fell below the 2,200-point mark back in March.

Anyone who held their nerve and bought the index at its lows has seen a roughly 50% gain since.

This is despite many companies suffering large drops in sales and profits during the pandemic, and considerable uncertainty over the future.

As Liz Ann Sonders of Charles Schwab points out, the index is now its most expensive since the dot-com crash, on a price/earnings level....

Updated

Nasdaq opens at new record high

The US stock market has opened, and the Nasdaq index of tech stocks has hit a fresh record high.

The Nasdaq has gained 49 points, or 0.44%, in early trading, pushing it to 11,179 for the first time. That means the index is up 25% this year, driven by the surge of money into technology giants.

The S&P 500 index is also rallying, up 7.4 points to 3,389.41 - very close to its record high (3393.52) set just before the pandemic....

The euro’s rally against the US dollar to a two-year high today may cause alarm at the European Central Bank.

While a strong currency sounds good in theory, in practice the ECB rather likes a weaker euro as it pushed up inflation (which fell to just 0.3% in June, well below target).

Viraj Patel, foreign exchange strategist at Arkera, suspects the ECB may be tempted to talk the currency down....

US dollar on the slide

Back in the markets, the US dollar is weakening against other major currencies.

This has driven the pound up nearly a cent, to $1.3194 -- its highest level since early March.

The euro has hit its highest level in over two years, at $1.194.

The weakness of the dollar is also driving commodity prices higher, with gold back over $2,000 per ounce.

The dollar appears to be suffering from predictions that US monetary policy will remain extremely loose for some time, given the damage caused by Covid-19.

Fawad Razaqzada, market analyst with ThinkMarkets, explains:

The dollar continues to fall with investors expecting the Fed to maintain its expansionary monetary policy for a long time, owing to concerns the persistence of Covid-19 will weigh on economic recovery.

The greenback is also suppressed because of the lack of haven demand for the reserve currency, with investors evidently favouring foreign currencies, gold and bitcoin instead

Lunchtime Summary

An Marks & Spencer store at Oxford Street in London
Marks & Spencer on Oxford Street. Photograph: Henry Nicholls/Reuters

A quick recap

In other news...

Updated

35m Eat Out to Help Out meals claimed

Back in the UK, the government has announced that at least 35 million discounted meals have been devoured during the Eat Out to Help Out scheme’s first fortnight.

Rishi Sunak’s attempt to protect jobs in the hospitality sector, by offering a discount of up to £10 per head on food and soft drink, is proving rather popular.

In the first week, 10.5m meals were claimed back, and the full total claimed has now jumped to 35m (that’s not the total number of meals benefiting from the discount, though, as some businesses may not have claimed back yet).

The Treasury adds that 85,000 restaurants are offering the scheme. It’s received claims from 48,000 outlets, and is urging the rest to get the paperwork in quickly so it can pay them the discount (and add their meals to its running total).

Chancellor of the Exchequer Rishi Sunak said:

“Today’s figures show that Britain is eating out to help out – with at least 35 million meals served up in the first two weeks alone, that is equivalent to over half of the UK taking part and supporting local jobs in the hospitality sector.

“To build back better we must protect as many jobs as possible, that is why I am urging all registered businesses to make the most of this by claiming back today – it’s free, simple and pays out within 5 working days.

Shares in Walmart have rallied sharply in premarket trading, up more than 5% to record levels, as investors cheer its forecast-beating results.

Here’s CNBC’s take:

Walmart said Tuesday second-quarter earnings got a boost as shoppers rushed in to spend their stimulus checks, while its online business continued to surge during the pandemic.

Walmart’s e-commerce sales in the US shot up by 97% as customers had packages shipped their homes and used kerbside pick-up. The retailer’s US same-store sales grew by 9.3% in the second quarter, fuelled by purchases of food and general merchandise.

Shares were up nearly 6% in premarket trading.

Updated

Walmart smashes forecasts

The US retail giant Walmart has also smashed forecasts, as it rode out the pandemic.

Walmart grew its sales by 9.3% in the last quarter, led by “strength in general merchandise and food”. Its eCommerce sales surged by 97%, as more consumers ordered online.

Walmart says:

The company’s net sales and operating results were significantly affected by a continuation of the global health crisis. Increased demand for products across multiple categories led to strong top-line and gross margin results.

While revenues were slightly ahead of estimates, earnings smashed forecasts – at $1.56 a share, versus $1.25 expected.

Updated

Sticking with the US, retailer Home Depot has posted a surge in sales during the lockdown.

Like-for-like sales surged by 23.4% in the May-July quarter, as Americans turned to DIY tasks, snapping up new paint and tools. That’s more than double analyst estimates.

Updated

M&S’s struggles are a sharp contrast to the huge success of Amazon, which is hiring more people, in the US.

The Wall Street Journal has the details:

Amazon.com is expanding its physical offices in six US cities and adding thousands of corporate jobs in those areas, an indication the tech giant is making long-term plans around office work even as other companies embrace lasting remote employment.

Amazon is preparing to add 3,500 corporate jobs across hubs in New York, Phoenix, San Diego, Denver, Detroit and Dallas, the company said Tuesday. The plans include 2,000 jobs at the historic building in Manhattan that once housed the Lord & Taylor flagship department store.

Updated

Sophie Walker, CEO of the Young Women’s Trust, points out that women will be disproportionately hit by M&S’s job cuts, as they make up 70% of the workforce (details here).

Unions are also urging the government to act to protect high street jobs.

The Union of Shop, Distributive and Allied Workers (Usdaw), the UK’s fifth-largest trades union, has called for urgent talks between the company, the government and unions.

Dave Gill, Usdaw National Officer, says the UK also needs an effective industrial strategy:

This job loss announcement is yet another devastating blow for M&S staff and yet another bombshell for our high streets. The government has a clear choice; do they want to see the high street go to the wall, or do they want to help save it?

What the retail sector needs now is a tripartite approach of the government, unions and employers working together to develop a much-needed retail recovery plan. We have long called for an industrial strategy for retail to help a sector that was already struggling before the coronavirus emergency. Now the situation is much worse.

Here’s Usdaw’s plan to help the high street:

  • Fundamental reform of business rates. The government committed to a review of business rates earlier this year, but assurance is needed that this will not be delayed further.
  • An immediate and comprehensive review of rental values and lease arrangements. In the short term measures are needed to prevent commercial landlords taking legal action for rental defaults during the lockdown period. In the medium term, a rebalancing of the relationship between landlords and tenants is required.
  • Reform of UK tax law to ensure that companies pay their fair share of tax through tackling tax avoidance and the use of offshore havens, with the aim of creating a level playing field between online and high street retailers.
  • Funding for local authorities so they can invest in their local economy, transport networks and high streets. We cannot revive our high streets if core services continue to be undermined
  • Investment in skills for retail workers, including through union learning and high-quality apprenticeships. This should include an in-depth assessment of emerging trends and potential skills shortages/gaps within the sector.
  • A new deal for retail, distribution and home delivery workers based around a real living wage and guaranteed hours.

Updated

Labour: Government must act to save high street jobs

The Labour party has blamed government ‘incompetence’ for the job cuts at M&S and other retailers.

Lucy Powell MP, Labour’s shadow minister for business and consumers, says the restructuring shows the need for targeted support for sectors worst hit by the pandemic:

These job losses are devastating for the workers involved yet they also tell a much bigger story about the threat to our high streets. The scale of job losses was not inevitable but the incompetence of this government means we’re now seeing wave after wave of redundancies, and store closures.

Labour has called for a Hospitality and High Streets Fightback Fund to support businesses in distress and to save jobs now. Ministers must change course.

Updated

Employees at other high street retailers will be watching events at M&S nervously.

Although every chain is different, they all face the consequences of the accelerated move towards online shopping and away from store visits - especially during the ongoing pandemic.

Freddy Khalastchi, business recovery partner at accountancy firm Menzies LLP, predicts more ‘radical restructuring’ from rival retailers (on top of the cuts already announced):

“Consumer shopping habits have transformed during the pandemic. As a result, many bricks and mortar retailers have been forced to take drastic action to rightsize their business models by stripping away superfluous layers of management and back office support services.

Coming on top of 950 job losses announced last month by the retailer, this development is a significant step that may well encourage others to bring forward radical restructuring plans in the next few months.”

It’s been a choppy morning’s trading in the City of London.

The FTSE 100 index of blue-chip shares fell initially, but has now recovered its losses to sit unchanged at 6126 points. The French, German, Spanish and Italian markets are all slightly higher, though.

Housebuilder Persimmon is the top riser in London, up 5% after reporting a strong pick-up in demand since the pandemic eased.

But M&S is still struggling after announcing sweeping job cuts, down 4% towards the bottom of the FTSE 250 leaderboard of smaller listed companies. The worst performer is outsourcing group Capita, which have plunged almost 10% after reporting a £28.5 loss due to the pandemic.

Capita warned:

COVID-19 impact has come in a pivotal year for Capita when we expected to see revenue growth.

Profit has been significantly affected and the delay in the return to growth means we will not generate sustainable cash flow for 1-2 years

Marks & Spencer’s future prospects depend heavily on the success of its new tie-up with Ocado.

That partnership starts next month, and will let people order M&S food for home delivery through Ocado (supplanting Waitrose).

Russ Mould of stockbrokers AJ Bell says M&S needs the Ocado deal to work, fast:

“The company should thank its lucky stars that it has a successful food arm, as that has helped to prop up trading during a very difficult time. Its clothing and home interests have struggled in the face of serious headwinds as demand fell off a cliff for office dressing and formal wear.

“The next big test for Marks & Spencer will be the imminent launch of its supply deal with Ocado for UK online food orders. A lot is riding on this joint venture being a success and further accelerating growth in Marks & Spencer’s food sales.

“This is the retailer’s chance to play catch-up with the online channel and failure to meet expectations could be disastrous for both management and the company’s already fragile share price.

“Marks & Spencer has been in turnaround mode for a long time and a lot of its effort has been spent trying to fix things rather than come up with new ideas. The Ocado deal is different as it is new territory for the group. Getting this venture off to a strong start could fuel optimism that the retailer is still capable of moving with the times rather than sinking into quicksand.”

Updated

Lenswood Vineyard, Adelaide Hills

Speaking of Australia.... the country’s wine industry is facing the threat of new tariffs on sales to the fast-growing Chinese market.

China has begun an anti-dumping probe into imports of Australian wine in a move that will likely worsen tensions between the two countries. It sent shares in Australian winemakers sharply lower today.

The probe was prompted by complaints from the Chinese Alcoholic Drinks Association that Australian wine producers had cut their prices unfairly low, hurting domestic producers. More here:

In the mining sector, BHP Billiton has pledged to sell its thermal coalmines within two years.

It’s part of the global mining giant’s push for a low-carbon future, following heavy pressure from investors to clean up its business.

From Australia, my colleague Ben Butler reports:

Announcing a full-year profit of US$7.95bn on Tuesday, BHP chief executive Mike Henry also left the door open to supporting a resolution from activist shareholders that would require BHP to stop mining that would destroy Aboriginal cultural heritage sites in Australia until laws are changed to strengthen their protection.

Henry said BHP agreed with the intent of the resolution, which was to prevent “another Juukan Gorge” – a reference to rival miner Rio Tinto’s decision to blow up 46,000-year-old-caves in the Pilbara to get access to higher quality iron ore.

While retailers struggle, housebuilders are hopeful that conditions in their sector are improving.

Persimmon, the UK’s biggest home builder, restored its dividend this morning after reporting that business has picked up strongly this summer.

CEO Dave Jenkinson told the City that weekly sales were nearly 50% higher since the construction sector ended its lockdown, with Persimmon’s order book also swelling.

The Group has had an excellent start to the second half with a c. 49% year on year increase in average weekly private sales rates per site since the start of July and a current forward order book of c. £2.5bn, a 21% increase on last year.

The pandemic has been costly, with Persimmon’s pre-tax profits for the first six months of 2020 down 43%, from £509m to £292m.

Shares in Marks & Spencer have fallen by almost 4% in morning trading, down 4.4p to 109.2p.

That suggests investors are underwhelmed by M&S’s latest attempt to transform the business.

M&S’s share have almost halved in value so far this year (the broader market is down almost 20%).

Marks & Spencer’s share price in 2020
Marks & Spencer’s share price in 2020 Photograph: Refinitiv

Julie Palmer, partner and restructuring expert at Begbies Traynor, says M&S’s job cuts highlight the ‘huge structural change’ in UK spending habits.

With more people shopping online - retailers need fewer people in the stores, and more people shipping goods to customers’ homes.

“This is a huge transformation for the brand.

And one that is needed because consumers have become used to the convenience of shopping during lockdown. The movement of shop floor jobs to warehouse jobs, stronger emphasis on logistics and a greater wealth of talent that can support the online offering will be where the jobs in retail start to appear. The increase in technology in the workplace to streamline organisations will also become more commonplace as retail moves towards its future structure.

Clothing has been the weak side of M&S’s business for many years, with food sales consistently stronger.

Covid-19 appears to have accelerated that trend, leading to this morning’s job cuts.

As John Moore, senior investment manager at Brewin Dolphin, says:

“Today’s announcement, while difficult for the staff involved at M&S, has been a long time in the making. The company’s fall from established FTSE 100 constituent to mid-cap has reflected past strategic errors; but, more recently, the business had been going through significant changes even prior to the Covid-19 pandemic.

Indeed, the measures taken today underline the degree to which the economic impact of the virus has super-accelerated many of the trends that were already sweeping through retail and other sectors. The hope will be that M&S, one of the UK’s most iconic brands, emerges from this process a stronger, more future-proof business on the other side – but the next few months will be tough for the company and its staff.”

Retail analyst Nick Bubb says:

M&S Food sales are doing quite well, but M&S Clothing & Home sales are very weak and so it is no surprise to see the business set out big cost-cutting plans, dressed up as “streamlining”…

Updated

UK's job cuts misery

M&S’s job cuts look to be the most severe announced by a UK company since the pandemic drove the economy into its worst recession in decades.

But many other retailers have also made sweeping redundancies and store closures.

For example:

Other companies slashing jobs include:

Updated

Full story: M&S to shed 7,000 jobs in latest blow to UK retail

If you’re just tuning in, here’s the details of M&S’s major job cuts plan, announced at 7am.

Marks & Spencer is to cut around 7,000 jobs over the next three months, in the latest round of redundancies at the retailer as it cuts costs and changes the business following the pandemic.

The job cuts will be in its central support centre, regional management, and its UK stores, adding to the swathe of job cuts announced by UK companies during the Covid-19 crisis.

M&S said it expects a “significant proportion” of the job losses will be made through voluntary redundancies or early retirement, and has begun consultations with staff.

The clothing, food and homeware retailer said what it called a “streamlining programme” was a important step in reducing its costs, and allowing it to emerge from the coronavirus crisis with a lower cost base and more resilient business.

Marks & Spencer’s chief executive Steve Rowe said the job cuts were part of its previously-announced plans to “learn from the crisis, accelerate our transformation and deliver a stronger, more agile business in a world in which some customer habits were changed forever plans”.

“The outlook is uncertain and we remain cautious,” Rowe said, “these proposals are an important step in becoming a leaner, faster business set up to serve changing customer needs and we are committed to supporting colleagues through this time.”

Expert: More jobs at risk as furlough scheme ends

Marks & Spencer is ‘desperately’ trying to adjust to the new Covid-19 world by slashing 7,000 jobs across its business, says Richard Lim, CEO of Retail Economics.

He also fears many more jobs will go, as the government’s furlough scheme winds up this autumn:

“This is a massive reduction in their workforce and the retailer is desperately attempting to reposition the business towards a new normal emerging in the sector. This painful readjustment period will see a significant reduction in labour costs, cutting back on store numbers and pivoting the business model to become nimbler and more digitally focused.

“Retailers were already battling with the pace of structural change facing the sector but the impact of the pandemic has been a step-change for the industry. Retailers remain in survival mode, preserving cash and hanging on for more sustainable levels of demand to return. But the way we shop has changed on a permanent basis for many parts of the sector almost overnight.

The reality is that many more retailers will fail and the number of job losses will ramp up as government support is withdrawn. This is the calm before the storm.”

Here’s more reaction, from Graham Hiscott of the Daily Mirror:

The BBC’s Sally Bundock tweets:

M&S clothing sales slump

The scale of the slump in M&S’s clothing and homeware business is quite stunning -- down almost 30% since stores reopened in mid-June.

Over the last eight weeks, in-stores sales are down 47.9% compared with a year ago.

Online sales are strongly higher, up 39.2%, but that still leaves total sales 29.9% lower.

So even though food revenues are up, total revenues are 10% lower over the last eight weeks:

Marks & Spencer’s results
Marks & Spencer’s results Photograph: Marks & Spencer

M&S says demand for smarter clothes has tailed off dramatically this year (with so few people going to the office or attending parties and weddings).

The performance of store sales has varied widely across the estate with some of the newer out of town stores trading close to last year’s level of sales overall in recent weeks but legacy town centre stores and some shopping centres still heavily impacted by social distancing and reduced footfall.

Furthermore, with the closure of many workplaces and lack of social gatherings, the clothing sales mix has seen a substantial shift from office dressing and formal wear into casual clothing and leisure wear.

Marks & Spencer’s CEO Steve Rowe is blaming the ‘uncertain outlook’ for today’s huge job cuts.

In this morning’s statement, he tells shareholders:

“In May we outlined our plans to learn from the crisis, accelerate our transformation and deliver a stronger, more agile business in a world in which some customer habits were changed forever. Three months on and our Never the Same Again programme is progressing; albeit the outlook is uncertain and we remain cautious. As part of our Never The Same Again programme to embed the positive changes in ways of working through the crisis, we are today announcing proposals to further streamline store operations and management structures.

These proposals are an important step in becoming a leaner, faster business set up to serve changing customer needs and we are committed to supporting colleagues through this time.”

M&S says it’s also planning to create some new jobs as part of this streamlining plan, but there’s no details of how many.

It says:

Concurrently we expect to create a number of new jobs as we invest in online fulfilment and the new ambient food warehouse and reshape our store portfolio over the course of the year.

Introduction: M&S to cut 7,000 jobs

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Some grim breaking news to start the morning - Marks & Spencer is preparing to cut almost 7,000 jobs.

The high street chain has just announced it is starting a “multi-level consultation programme”, after being badly hit by the slump in retail spending during the Covid-19 pandemic.

The job cuts will hit workers at M&S’s stores across the UK, as well as at its central support centre and in regional management. It will add to the tens of thousands of jobs already lost, or at risk, across the UK economy.

In a statement to the City, M&S warns that sales of clothes and homeware are sharply lower than a year ago - meaning it must shake up its business.

It says:

As previously outlined Clothing & Home trading in the stores remains well below last year, with online and home delivery strong. It is clear that there has been a material shift in trade and whilst it is too early to predict with precision where a new post Covid sales mix will settle, we must act now to reflect this change.

We have also learnt that we can work more flexibly and productively with more colleagues multi-tasking and transitioning between Food and Clothing & Home. The deployment of our leading store technology package developed in partnership with Microsoft has also enabled us to reduce layers of management and overheads in the support office.

M&S hopes that “a significant proportion will be through voluntary departures and early retirement”, adding:

In line with our longstanding value of treating our people well, we will now begin an extensive programme of communication with colleagues.

More details and reaction to follow....

Also coming up

It’s a busy day for US retailers, with Walmart, Kohl’s & Home Depot all posting results. That’ll show whether sales have picked up since the lockdown eased.

We also get a healthcheck on the US property market, with the latest figures for building permits and new home construction.

The agenda

  • 1.30pm BST: US building permits and housing starts data for July

Updated

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