Marks & Spencer sells retail business franchise in HK and Macau

Marks & Spencer has sold its retail business in Hong Kong and Macau to its long-established franchise partner Al-Futtaim amid overhaul plan, the clothing and food chain confirmed on Tuesday.

The sale, which completed on 30 December for an undisclosed sum, sees Al-Futtaim become the new sole franchisee for the 27 M&S stores in Hong Kong and Macau.

Al-Futtaim has worked in partnership with M&S since 1998 when it opened Dubai’s first M&S store. The purchase means that the Dubai-based trading business house now operates 72 Marks & Spencer stores across 11 markets in Asia and the Middle East.

The sale follows the brand's strategic review of its International business in November 2016, where M&S proposed to have a greater focus on its established franchise and joint venture partnerships and operate with fewer wholly-owned markets.

The company then laid out plans to shut more than 80 stores in Britain and abroad, as well as pull out from ten direct markets, including China, France, Belgium and Hungary. Company-owned stores in Hong Kong, Ireland, and the Czech Republic were spared at that time.

Paul Friston, Marks & Spencer’s International director, said the company has substantially reshaped its International business, which has improved profitability and positioned it for growth.

"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," he added.

What to pay a close eye on?

OC&C Strategy Consultants's partner Pascal Martin, said that with this deal, M&S now has a simple homogeneous international business, i.e. all wholesale to local partners, except M&S’s India JV with Reliance.

As for Al Futtaim, Martin said the group may be able to exert more control on M&S Asia logistics network to achieve better integration across Singapore, Malaysia, Hong Kong and Macau. "Al Futtaim will likely have increased negotiation power with M&S on product, store format, pricing and more," he suggested.

"Following the deal, it will be interesting to see how M&S and Al Futtaim will cooperate in the development of the M&S E-Commerce platform, alongside the offline store expansion, as E-Commerce gradually becomes a bigger component of retail in Asian markets operated by Al Futtaim," Martin suggested.

On the other hand, the deal does not seem to cover mainland China, and Martin said the market might be where M&S continues to operate an online business through a T-Mall store.