Sale of 27 stores in Hong Kong and Macau to Al-Futtaim comes as it closes UK outlets under turnaround plan

Marks & Spencer is selling its stores in Hong Kong and Macau as the retailer pushes on with a wide-ranging overhaul.

The clothing and food chain has sold one of its key non-UK operations to its longstanding franchise partner in the Asian region, Al-Futtaim, for an undisclosed sum. Marks & Spencer is selling 27 stores that will keep the M&S name under a franchise arrangement, which leaves Dubai-based Al-Futtaim with 72 outlets under the brand across Asia and the Middle East.

The move comes less than two months after M&S spared its Hong Kong operation in a reshaping of its business. It announced the closure of 30 UK stores and is converting 45 more into food-only outlets as it cut back on floor space devoted to its clothing ranges.

The turnaround plan unveiled by the chief executive, Steve Rowe, included the shuttering of 53 loss-making outlets overseas in markets including China, France and Belgium, but company-owned stores in Hong Kong, where M&S has operated since 1988, were among those spared.

“We have substantially reshaped our international business, which has improved profitability and positioned us for growth,” said Marks & Spencer’s international director, Paul Friston. “As one of the world’s leading retail operators, with strong logistics capabilities and local expertise, Al-Futtaim is the ideal partner for us to develop and grow our business in Hong Kong and Macau.”

Rowe’s strategic review indicated a retreat from overseas markets after he concluded that the non-UK business was too small and the company knew too little about its customers in certain markets. The retailer’s foreign business lost £43m last year.

China and the surrounding region was once seen as a prime growth opportunity for M&S. The company moved from Hong Kong into mainland China in 2008 and initially planned to open up to 50 stores.

But in November 2016, M&S announced plans to close its 10 remaining stores in mainland China having closed five the previous year.

In the wake of the Al-Futtaim deal, the last remaining M&S-owned stores outside the UK are in Ireland and the Czech Republic.

Tony Shiret, a retail analyst at Whitman Howard Research, said M&S’s move towards franchise rather than owned stores in Hong Kong was in tune with new chairman Archie Norman’s focus on reviving the UK business.

Norman, who joined M&S in September last year and is highly regarded for turnarounds at Asda and ITV during his career, has accused the struggling store chain of “drifting” for more than 15 years and pledged to lead a radical shake-up of M&S.

“Even if they knocked the ball out of the court in Hong Kong it wouldn’t really make a difference to the main business. They have got plenty of other things to focus on in repositioning the food business, continuing issues with clothing and right-sizing their real estate,” Shiret said.

M&S will reveal how it fared over the crucial Christmas trading period next week. The chain is expected to have had a tough time in terms of sales as it held off on discounting while many rivals got out the red banners in November and December, as they tried to clear stocks of knitwear and coats after a warm autumn. Rowe has said he is determined to sell more goods profitably at full price.

Last year, Rowe’s strategy of reducing promotions and investing in lower prices paid off, helping the chain post its first rise in underlying sales over Christmas for six years.

Although inflation will boost sales this year, analysts at Jefferies do not expect a second positive run of festive trading. They predict a 3% fall in sales of clothing and homewares at M&S’s established stores and a 1% fall in food.

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