Retail

M&S echoes calls for flexible trading after reporting its first half-year loss


Marks and Spencer plans to keep most of its stores trading during England’s coming lockdown after reporting the first half-year loss in its 136-year history.

Steve Rowe, chief executive of the high street chain, on Wednesday also echoed calls by other retailers for Sunday trading rules to be relaxed to help meet Christmas demand while keeping shoppers safe.

During the national lockdown that started in March, most M&S stores remained open for food sales but did not sell clothing or homewares. This time, the company “will follow government guidelines but the stores will remain fully open”, said Mr Rowe.

M&S later clarified his comments, saying that “where we have a combined store with multiple tiers, the upper tiers will close so that we operate in the spirit of the guidance”.

Where food and general merchandise are co-located on a single floor, clothing and homeware sales may continue from that floor, the company added. All in-store cafés will close, along with outlet stores.

Finance director Eoin Tonge added that M&S “was in a very different place” going into the latest lockdown, which begins in England on Thursday, with less surplus inventory and social-distancing measures already implemented.

Mr Rowe said M&S had increased its online distribution capacity. “There will be more online demand [at Christmas] but we are set up to deal with that,” he added.

Since the end of September, food sales are up roughly 3 per cent while clothing sales are down a fifth.

The company plans to accelerate its online transformation by creating what it terms “MS2” within its clothing business. Mr Rowe said this would entail “thinking differently about ranges, promotions, the supply chain and marketing” and would include “curated third-party brands” in addition to everyday items from M&S.

The comments came as the company reported a smaller-than-expected underlying first-half loss after a strong showing from its food business helped offset a weaker performance in clothing.

Overall, M&S reported an adjusted pre-tax loss of £17.4m for the six months to September 26 against a profit of £176m last year. The average of analysts’ forecasts calculated by CapitalIQ was for a loss of £78m.

The chain’s first-half sales were £4.1bn, also ahead of forecasts and company expectations, but still £700m less than the same period last year.

M&S’s food business benefited from cost-cutting and the enforced closure of pubs and restaurants in the lockdown. Profits were 19 per cent higher at £109m, even though sales were flat.

There was a £38m contribution from the company’s joint venture with Ocado, although about a third of this was attributable to an insurance claim following a fire at one of Ocado’s distribution centres.

Ocado this week announced it had upgraded its full-year forecasts again and Mr Rowe said he was “delighted” with the venture’s progress since M&S began supplying it with own-label ranges at the start of September. “Reaction from customers has been ahead of what either of us expected.”

M&S shares were up as much as 4 per cent in morning trading on Wednesday. Investec analyst Kate Calvert said that while the outlook was uncertain, the Ocado contribution was more material than expected and that the company remained well financed.

The clothing business at M&S went from a first-half profit of £109m last year to a loss of £107m, as the first lockdown hit sales. Sales remained sharply lower in some city-centre locations even once it ended, although online sales were up 34 per cent.

M&S also sold more of its spring and summer ranges than it expected, allowing an inventory provision taken earlier this year to be largely reversed.

However, the company incurred a £92m charge relating to the cost of cutting more than 7,000 jobs and said it would book another £120m of charges relating to the reshaping of its store estate in the years ahead.



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