Retail

Marks & Spencer falls to first loss as Covid crisis hits clothing sales


Marks & Spencer has crashed to its first-ever loss after clothing sales collapsed during the first coronavirus lockdown, with more pain to come as English stores face strict new restrictions.

The retailer reported an overall pre-tax loss of £87.6m in the six months to September – its first in 94 years as a publicly listed company – ahead of an England-wide lockdown for non-essential retail on Thursday.

The M&S chief executive, Steve Rowe, said the majority of the chain’s shops would stay open as its food halls mean it is classified as an essential retailer, although its cafes and its clothing-dominated upper floors would close.

Trading had begun to recover from the dramatic shock of the first lockdown, Rowe said, but new measures in England created “significant uncertainty” and “made it impossible to forecast” its financial performance over the crucial Christmas period.

“We have traded through this before and delivered for our customers by being agile,” said Rowe. “We can and will do it again.”

M&S’s clothing sales dropped 60% during the original three-month UK wide lockdown but the company was in a much better position as England entered a second one, it said, with less stock in its stores and warehouses.

In common with other retailers M&S is pushing for the government to relax Sunday trading laws in December, to enable retailers to safely manage pent up demand ahead of Christmas. It has already extended the opening hours of its food halls, as a lockdown for non-essential retail is introduced in England on Thursday.

“We are lobbying quite hard with the rest of the industry for the extension and deregulation of some Sunday hours, particularly as we get close to Christmas,” Rowe said.

M&S, which can still sell clothing online and offer click-and-collect in its stores, is better placed than clothing rivals such as Primark to weather the current storm. Primark, which does not have a website, expects to lose £375m in sales during the English lockdown which is due to run until 2 December.

The original lockdown necessitated the closure of about half of M&S’s clothing selling space, a situation that reduced sales by more than £600m in the six months to 26 September. The disruption resulted in the clothing arm turning over £917m, compared with £1.55bn this time last year, and making a £107m loss.

The retailer’s food halls fared better with sales flat at £2.8bn and the division making an operating profit of £110m, which helped to keep the overall pre-tax loss to £87.6m. The loss also included one-off costs such as the £92m bill for a major reorganisation announced in August that resulted in 7,000 job cuts.

The Covid drag on stores in city centres and transport hubs – where trade has been hit by the shift to working from home – was offset by brisker sales in suburban branches with car parks. The food business has also been buoyed by its recent tie-up with the online grocer Ocado.

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While trading in the retailer’s shops was affected by coronavirus measures, shoppers flocked to its website, where sales surged 34% as Britons bought new working from home wardrobes. Sales of women’s pyjamas and gym gear jumped 175% and 200% respectively while men’s knitwear sales were up 81%. The online boost, however, was not enough to offset the impact of the lockdown on its large store network.

Jonathan Pritchard, an analyst at stockbroker Peel Hunt, said the performance looked like a “car crash” but was actually better than the City had expected given the difficult circumstances, with food sales up 3% in October while clothing was down by only 21%. The shares closed up 5% at 96.5p.

“That’s not a disaster at all, there are plenty of retailers that will be showing worse than -21% for October but lockdown will have an ugly impact,” said Pritchard. “It is only four weeks but we fear that footfall will also be weak into the key Christmas weeks for non-food.”

“Management is not doing anything wrong in terms of its response to Covid-19, and costs had to be reduced, but we still can’t quite see the breakthrough moment coming in clothing and home any time soon.”



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