Marks & Spencer (M&S) has recorded a financial loss for the first time in its 94 years as a public company after the coronavirus pandemic forced it to close stores.
Half-year results to the 26th September released by the retailer has revealed clothing and home sales was struck by the closure of non-essential retail during the first COVID-19 lockdown that began in March.
The company recorded a pre-tax loss of £87.6m despite undergoing the ‘Never the Same Again’ transformation programme, to close under-performing stores, invest in online and deliver groceries for the first time through a partnership with Ocado, It had made profits of almost £160m in the same period in 2019.
M&S said clothing and home sales fell 21.3% in the second quarter, following a first quarter decline of 61.5% as the lockdown hit, leaving them almost 41% down over the six months.
Growth in online sales however limited some of the damage even though total revenue plunged by 16% to £4.1bn.
Nonetheless, there were signs that the start of the Ocado partnership in September was bearing fruit as it contributed £38.8m to net profits on the back of a 48% leap in sales amid strong demand for deliveries from various households.
The wider M&S food operation – exempt from lockdown restrictions – recorded 2.7% growth in comparable sales.
The company updated on its progress amid the continuing Never The Same Again transformation programme that has resulted in 7,000 job losses as the retail chain shifts from its historic focus on stores.
Shares opened flat as it guided that clothing and home sales remained 21.5% down in October with food sales up 3%.
Chief executive, Steve Rowe told investors, “In a year when it has become impossible to forecast with any degree of accuracy, our performance has been much more robust than at first seemed possible.
“This reflects the resilience of our business and the incredible efforts of my M&S colleagues, who have been quite simply outstanding.
“But 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.”
John Moore, a Senior Investment Manager at one of the UK’s leading wealth managers, Brewin Dolphin, said of the update, “Despite the company’s historic loss, there are some encouraging signs.
“The initial success of the Ocado partnership is highly promising and appears to be unlocking the food business’s previously untapped online potential.
“But the elephant in the room remains the company’s £2.5bn of lease obligations, which tie it into the traditional retail world and all its associated challenges.”
Marks & Spencer is a major British multinational retailer with headquarters in London, England, that specialises in selling clothing, home products and food products, mostly of its own label. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index, having previously been in the FTSE 100 Index from its creation until 2019.
