M&S to cut 25 Simply Food stores and 1,230 jobs

Sir Stuart Rose was as ebullient as ever today, insisting that the 25 Simply Food stores Marks & Spencer was closing were the victims of poor location decisions or were too small to be profitable.

But analysts point to a more fundamental malaise in the business. Its position at the premium end in the market has left it particularly exposed to the economic downturn.

Like-for-like food sales in the group were down 5.2 per cent in the 13 weeks to December 27.

Sainsburys, which is the closest of the “big four” supermarkets to M&S in value terms, has emphasised its strategy of making sure consumers can trade-down to cheaper products within the store. While Tesco has reinvented itself as “Britain’s biggest discounter” to head of the nascent threat of the discounters, such as Aldi and Lidl.

As a result, the latest industry data suggests that customers are defecting Simply Food stores to the big supermarkets.

“Simply Food is particularly vulnerable, given the state of the consumer economy. The prices there put it right at the premium end of the market and as soon as consumer expenditure comes under pressure there will be difficulties”, said Sam Hart, an analyst at Charles Stanley.

What is more worrying is that the problems to have beset the Simply Food format are true to a lesser extent for the group has a whole. Sir Stuart drew attention to Tesco’s claim to be “Britain’s biggest discounter” as evidence that M&S was not alone in promotions.

But the two margin-shredding "20 per cent-off" spectaculars that M&S was forced into before Christmas proved Sir Stuart does not have as free a hand in responding to the crisis.

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