M&S swings to first ever loss as Covid hammers clothing sales
UK retailer Marks & Spencer swung to tan historic half-year loss as coronavirus lockdowns hit its clothing division and warned that new restrictions to be introduced on Thursday would be a further blow to profits.
The company on Wednesday posted a pre-tax loss of £87.6m from a profit of £159m a year earlier. It is the first loss since it went public 94 years ago. Revenue fell to £4.09bn from £4.86bn and no dividend was declared.
“There remains significant uncertainty regarding the near-term outlook in relation to both Covid and Brexit. Trading in the first four weeks of the second half has continued at similar rates to the end of the second quarter, with food revenue up 3%, clothing and home revenue down 21.5% and international revenue up 7.4% due to the timing of shipments,” the company said.
Clothing and home sales fell 60% during lockdown as stores shut. The company said demand for formalwear and outerwear, traditionally a quarter of clothing and home sales, also plunged the lockdown saw weddings and other events cancelled.
Marks & Spencer’s clothing and home division lost £107.5m over the six months to the end of September, while sales were down 40% across the period. The retailer announced the creation of a new digital division called ''MS2''.
The food business saw sales growth of 2.7% as stores were allowed to stay open during the lockdown imposed in March, driven by out of town stores which offset weaker sales in cities where workers were forced to stay home.
There was also an indication of how its new partnership with Ocado was faring. It replaced Waitrose to become Ocado’s main grocery supplier in September and is poised to benefit from high demand for online orders in the second lockdown and the run up to Christmas.
“The customer response to switchover was overwhelmingly positive with demand for the new range driving both an increase in the number of products in customer baskets and strong forward demand.”
Hargreaves Lansdown analyst Susannah Streeter said the Ocado partnership, while costly to set up "finally means M&S can compete on home deliveries, which should bode well during lockdown mark 2".
"Clothing rebrands have been and gone at the retailer before, and bosses will have to work very hard to ensure this time around the new styles really do stand out from the fashion pack."