M&S to extend the time it takes to pay its suppliers
The nation’s biggest clothing retailer has reported eight straight quarters of declining underlying sales in its general merchandise division, consisting of clothing, footwear and homewares, and has pinned its hopes for a revival on new autumn/winter ranges which hit stores in July.
A spokeswoman for M&S said yesterday its 500 general merchandise suppliers, around 50 of which are based in Britain, had been informed of the payment changes.
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Hide AdFreight-on-board (FOB) suppliers have seen their payment terms extended from 60 days to 75 days, while full-service-vendors (FSV), who transport, store and deliver goods for M&S, will see their payment delayed from five weeks to seven weeks. The changes, which will boost Marks & Spencer’s cash flow, could anger suppliers.
M&S’s major suppliers were upset in October 2011 when the firm asked them to make a one-off contribution of 1.25 per cent of their annual turnover with the retailer to its store revamp programme and associated advertising.
“Like any company, we are always looking at ways to ensure we are running our business efficiently and that it is well set up for the future. As part of this, we are extending our GM supplier payment terms to bring us in line with industry standards,” said the M&S spokeswoman.
In 2010, shortly after he took over from Sir Stuart Rose, current chief executive Marc Bolland doubled the payment period from 30 to 60 days for FOB suppliers, which refers to the arrangement under which a company takes ownership of stock as soon as it is loaded on to container ships.
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Hide AdM&S suppliers will now have to wait up to a month longer for payment than those of rivals such as Gap and Levi’s, and 45 days longer than suppliers to Next.
However, Tesco, Zara and Monsoon take 90 days to deliver payment, while Debenhams takes 120 days, according to information circulated by M&S to its supplier base this week.
The supplier payment changes come as M&S continues to grapple with problems at a vast new distribution warehouse in Castle Donington, Leicestershire.