M&S mulls waving Paris au revoir as stores are hit by Brexit red tape

When Marks & Spencer first decided to pull the plug on its French business, shoppers were sent into mourning. Workers' unions descended into street protests and even the country's then-prime minister, Lionel Jospin, intervened to say the decision to cut ties was too abrupt.

Now - two decades later - the retailer is again considering leaving France, ten years after it relaunched operations in the country under previous boss Marc Bolland.

An exit risks creating despondency among British expatriates and French customers as they are forced to wave goodbye to famed staple goods such as Percy Pig sweets and Luxury Gold teabags. Until a couple of years ago, M&S was one of the largest sandwich sellers in Paris.

But while its previous exit in 2001 was part of a major restructuring - resulting in 3,350 European job losses, the end of its UK home-catalogue unit and a sale of its two US businesses - this time the company claims the decision is down to Brexit.

The London-listed company has been in talks with its French franchise partners after complex border controls delayed lorries and left hundreds of tons of food wasted.

Chairman Archie Norman said on Monday that a retreat would be “a great sadness”. He admitted that the opportunity to keep open its 20 stores, mostly in Paris, has “probably diminished very substantially”.

M&S has been one of the most vocal corporate critics of the Brexit-induced border disruption in Northern Ireland, having struggled to get English goods across the Irish Sea. It has warned about resulting price increases and shortages in the run up to Christmas in the region.

In a letter to Brexit minister Lord David Frost in July, Mr Norman - a former Conservative party MP - said the EU customs arrangements were “totally unsuited and were never designed for a modern fresh food supply chain between closely intertwined trading partners”.

In a bid to make sure shelves are fully stocked the firm has this year been overhauling its supply chain and buying more food from countries within the EU. In the Czech Republic it removed all fresh and chilled foods from stores, replacing them with expanded ranges of products that have a long shelf life in order to fill gaps.

Despite these efforts, however, the France division is still at risk.

“We haven’t made a final decision, and will probably be making decisions shortly,” Mr Norman told LBC. “With the difficulties we have regarding trading in France, we’ve got to reshape that business. We are talking to our French partners about how we do that.”

“We are getting about 80pc of our product through [in the EU], less than that in France because the French, predictably, are draconian and these rules serve no purpose at all. Our food standards are higher than the European Union and they have not changed since we were part of the EU – this is a pointless bureaucratic exercise,” he added.

Last year M&S's international business incurred Brexit-related costs of £6.2m. The hit to its purse strings came as overseas sales were down 17.5pc to £789m, while total sales fell 11.9pc to £9.1bn for the year to April 3.

Richard Lim, chief executive of Retail Economics, said that Britain’s departure from the EU has added another level of complexity to the franchise model - M&S’s modus operandi in France, thus making it “a bit more inefficient”.

“Brexit and the pandemic has almost emboldened the senior management team to make those really difficult decisions, although arguably some should have been made before the pandemic,” he said.

Last year the 137-year-old retailer revealed 7,000 job losses as part of a wider effort to transform the business. Some of its recent changes seemed to be paying off, as demonstrated by a rare profit upgrade from company last month after years of dwindling sales.

Mr Lim, however, warned that customer demand may start to wane. “M&S has been in a position where consumers have migrated towards parts of the sector that benefited them - food sold online, homewares. Whether that momentum starts to slow down, that's a bit of worry for me," he said.

One industry observer suggested that M&S’s retreat from France could also be due to the wider change in strategy. Its main current objective is to drive growth online internationally, as the retail landscape continues to shift digitally, making bricks-and-mortar stores redundant.

In March it launched 46 international websites in new markets, expanding its e-commerce reach to over 100 countries. Last month, meanwhile, it launched its food range on British Corner Shop, a platform for expats wanting their favourite home comforts. The shop only first started selling produce online in 2019, in a tie-up with Ocado.

In recent years the retailer has already shuttered loss-making outlets overseas in markets including China, France and Belgium. In 2018, it sold its stores in Hong Kong and Macau to longstanding franchise partner in the Asian region, Al-Futtaim, as it pushed on with a wide-ranging overhaul of the firm.

Back in France, M&S relaunched its business there almost a decade ago - to much fanfare. It marked its long-awaited comeback with a bang, opening a large flagship store at 100 Avenue des Champs-Élysées and announcing the imminent launch of another three outlets in the capital of Paris. Mr Bolland and supermodel Rosie Huntington-Whiteley cut the ribbon of the three-storey store, with its chief executive boasting of “numerous requests from consumers in France for our food and clothing”.

At the time its bosses hailed the return to France, with former chairman Lord Stuart Rose referring to the previous retreat in 2001 as “tragic”.

And its stores were deemed a success in the years before they shut, successfully promoting the British way of life abroad with celebrities including Princess Grace of Monaco known to shop at the flagship Boulevard Haussmann store when she was in visiting the French capital.

M&S's time in France has been defined by an on-and-off relationship over the years, pulling out only to come back. But this time the decision feels definitive, partly due to the dramatic shift to online, but also - and perhaps most importantly - because of ongoing tensions between the UK and the Continent.