M&S to review all operations as profits slide

M&S to review all operations as profits slide

Marks and Spencer has said it will review its business model and look to reinvent itself in light of the Covid-19 disruption and a 21% drop in annual profit.

It said the fallout effects from the pandemic will indelibly change its business.

Pre-Covid, the retailer was in the middle of a cost-cutting and store closure turnaround plan. It intends to accelerate that and significantly enhance its online approach to core lines like clothing, houseware and food.

The company warned that life “will never be the same again”.

The company said it will continue replacing ageing stores and accelerate a shift in its relationship with landlords.

M&S has 18 stores in the Republic, but did not comment on any specific plans for its operations here.

"Like any major retailer, we review our business on a continuous basis to ensure we are serving customers in the best possible way," a company spokesperson said.

Pre-tax profit for the year to the end of March fell by 21.2% to £403.1m (€451m) and group revenue was down by nearly 2% at £10.2bn.

However, in the last three weeks online sales grew 20% year-on-year. Also, in the first six weeks of its new financial year M&S has outperformed its initial Covid-19 assumption of a 70% clothing and homeware decline and a 20% hit to food sales through to July.

However, it expects a Covid-19 impact to remain for the duration of its current financial year, up to the end of next March.

M&S’s partnership with online supermarket Ocado, which will see it launch an online food service for the first time in September, provided an opportunity to “turbocharge” the group’s digital capability, M&S’ CEO Steve Rowe said.

“Marks and Spencer did not have its troubles to seek prior to the outbreak of Covid-19, and the crisis has only made matters worse,” said Brewin Dolphin analyst Alasdair Ronald.

“Management appears to acknowledge the seismic changes it now faces, implementing a substantial cost-cutting programme and re-balancing the overall business.

"These moves, combined with greater liquidity headroom, may help stabilise Marks and Spencer through one of the most challenging periods in its history, but there are likely to be more bumps in the road ahead,” he said.

“The better news is in food, where the early indications are that the deal with Ocado Retail is already bearing fruit; albeit, this is tempered by expectations of a £400m fall in revenue," he said.

On a wider note, expectations for second- and third-quarter corporate profits are deteriorating further across Europe, despite a gradual easing across the continent of lockdowns aimed at curbing the coronavirus pandemic.

Companies listed on the pan-European Stoxx-600 are now expected to report a decline of 48.4% in second-quarter earnings, down from a drop of 46.7% forecast the week before.

Additional reporting Reuters

More on this topic

Aldi announces plans to open new store in CorkAldi announces plans to open new store in Cork

UK retail ‘deeply depressed’ amid Covid-19 shutdown, survey findsUK retail ‘deeply depressed’ amid Covid-19 shutdown, survey finds

Government urged to intervene to save Debenhams workers jobsGovernment urged to intervene to save Debenhams workers jobs

Burberry boss says it will ‘take time to heal’ after virus hammers salesBurberry boss says it will ‘take time to heal’ after virus hammers sales


More in this Section

Coronavirus: Ibec demands faster reopening of the economy and reduction of two-metre ruleCoronavirus: Ibec demands faster reopening of the economy and reduction of two-metre rule

Diane Dodds – Furlough changes incredibly difficult for some firms in NIDiane Dodds – Furlough changes incredibly difficult for some firms in NI

Businesses in UK told to start paying furlough bill from AugustBusinesses in UK told to start paying furlough bill from August

Amazon in talks for new 750-worker Dublin office despite virusAmazon in talks for new 750-worker Dublin office despite virus


Lifestyle

Are any of these items on your wish list?Wish List: A new twist on nautical stripes, smart storage and a very vintage tea set

We've teamed up with the Crawford Art Gallery and are asking our readers to try their hand at colouring in a painting from the Crawford collection. You can print off and colour the painting below.Unleash the artist in you - Colour with Crawford Art Gallery

Beyond the outdoorsy appeal of the clothes, they tellingly portray the pervasive anxiety of our times.Paul McLauchlan's menswear: Why outdoor clothes are here to stay

A mum is campaigning to extend maternity leave to protect her baby, says Sharon Ní ChonchúirStaying safe: Cork-based mum is campaigning to extend maternity leave to protect her baby

More From The Irish Examiner