Marks & Spencer has reported a 75% slump in clothing sales during the UK lockdown, with the retailer taking a £145m hit on the unsold stock piled up in its warehouses.
Last week the retailer launched a half-price “rainbow sale” in an attempt to clear its mountain of unsold spring and summer fashion. The forced closure of non-essential stores at the end of March has in effect wiped out an entire season for fashion retailers. The M&S chief executive, Steve Rowe, said one of the biggest challenges arising from the crisis was a “mounting backlog of unsold stock”.
M&S is sitting on £500m of spring and summer fashions and had ordered another £560m worth for the autumn/winter season.
“As the lockdown eases a large proportion of current season stock will remain unsold and demand for many categories is likely to be weak,” Rowe said. The retailer had acted quickly to improve this position, he said, and had cancelled £100m of late-summer stock.
M&S said about £400m worth was clothing basics – such as T-shirts and office wear – that could be held for next year. It could also store £200m of unsold seasonal items for spring 2021. However, it was taking a one-off charge of £145m for the handling, clearance, hibernation and write-off of the stock bulge, Rowe said.
“From the outset we recognised that we were facing a crisis whose effects and aftershocks will endure for the coming year and beyond. While some customer habits will return to normal, others have changed for ever; the trend towards digital has been accelerated and changes to the shape of the high street brought forward.”
In the six weeks to 9 May, clothing and home sales dropped 75%, while sales in Marks & Spencer’s food halls, excluding its restaurants, were down 4.6%.
The company said even though its website had continued to operate, demand for clothing in the initial weeks was very low, although it had begun to improve. Over the last three weeks online sales were 20% higher than last year.
Publishing its annual results for the year to 31 March, M&S made a pre-tax profit of only £67.2m, compared with £84.2m last year, after £336m of one-off costs. About £213m of that figure was costs and stock writedowns related to the pandemic. The company has scrapped its final dividend and told shareholders not to expect payouts in 2021 either.