M&S Falls To Historic Loss But Food Unit Performing Well

 Namnews, 4th November 2020

Marks & Spencer has posted its first loss in 94 years as a publicly listed company after the coronavirus crisis decimated sales in its clothing and homeware division.

The retailer made a pre-tax loss of £87.6m in the six months to 26 September, compared to a profit of £158.8m in the same period last year. Group revenue slid 15.8% to £4.09bn.

As previously flagged by the business, the first full lockdown and subsequent social distancing measures took their toll on its Clothing & Home unit which posted a loss of £107.5m. This reflected a sales decline 40.8% over the half-year which comprised of a fall of 61.5% in the first quarter and 21.3% in the second. As well as the impact from store closures, the group also pointed to a drop in demand for formalwear and outerwear as people stayed at home and social gatherings were cancelled.

One of the few bright spots was M&S’ food business which performed relatively well and saw profits climb 19% to £109.7m on the back of cost-cutting efforts. Total UK food sales actually fell 0.3% to £2.84bn due to disruption caused by the shutdown of the hospitality sector, weakness in the food-to-go market, and some franchise closures. However, excluding hospitality, like-for-like sales rose 6.6% on the back of strong performance from its Simply Food stores.

M&S also highlighted the success of its joint venture with Ocado which saw its first-half sales grow 47.9% amid increased demand for online shopping. Julie Palmer, partner at Begbies Traynor, said that M&S “is already reaping the rewards of an excellent partnership with Ocado … Its food business could benefit from the forthcoming national lockdown as consumers look for high-quality meals as an alternative to going out.”

In August M&S announced it was set to cut 7,000 jobs over three months as part of a streamlining plan to help it cope with the changing market in wake of the pandemic.

Chief Executive Steve Rowe said today the firm’s performance had been much more robust than at first seemed possible”, helped partly by recent investment in its online activities both in food and clothing.

He added: “Out of adversity comes opportunity and, through our Never the Same Again programme, we have brought forward three years change in one to become a leaner, faster and more digital business.

“From launching M&S Food online with Ocado to establishing an integrated online business division ‘MS2’ to step-change growth, we are taking the right actions to come through the crisis stronger and set up to win in the new world.”

However, M&S offered no guidance for the rest of the year, warning that there was still “significant uncertainty” as a result of the pandemic and Brexit. Trends seen in the first half have continued over the last four weeks, with food sales up 3% but clothing and home revenue down 21.5%.