Marks & Spencer extends pay period for clothing suppliers

LONDON, England - British retailer Marks & Spencer said it was extending the time it takes to pay its general merchandise suppliers, seeking to keep a lid on costs as it attempts to turn around the fortunes of its clothing business.

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 on Friday its 500 general merchandise suppliers, around 50 of which are based in Britain, had been informed of the payment changes.

Freight-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 percent 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.

Shares in M&S, which have risen 35 percent over the last year, hit an over five-year high on Thursday on hopes the new ranges will deliver, as well as an improving economic outlook for the UK.

The stock was up 1.2 percent at 501 pence at 12.39 GMT, valuing the business at about 7.8 billion pounds ($12.2 billion).

© Thomson Reuters 2014 All rights reserved.