88% Slump In Annual Profits Of M&S Due To Covid-19 Closures

A collapse in clothing sales due to the Covid-19 pandemic was clearly reflected in the full year results of the British retailer Marks & Spencer which reported an 88 per cent year on year slump of its 2020 profits. The retailer added that its financial position is such that it is unlikely to be able to pay any dividend for the current year.

In the one year to April 3, a pretax profit before one-off items of 50.3 million pounds ($71.2 million) was reported by M&S, which also sells upmarket food, which was lower than analysts’ average forecast of 43 million pounds and was also lower than the 403.1 million pounds made by the company in its fiscal year of 2019-20.

There was a 31,5 per cent drop in its like-for-like clothing and homeware sales which was because of multiple coronavirus lockdowns which shuttered stores, said the 137-year old group which is also one of the best known names in British retail. At the same time, the company reported a 1.3 per cent growth in its food sales on the same basis primarily because the government allowed food stores to remain open during the health crisis.

These hits to its revenues resulted in the company reporting a statutory loss of 209.4 million pounds for its recently ended fiscal year compared to a profit of 67.2 million pounds it had reported in the fiscal year of 2019-20.

With respect to the first six weeks of the 2021-22 financial year, the business has been better than the comparable period two years ago in 2019-20 as well as its central expectations because of the reopening of all its clothing stores form lockdowns, M&S said.

The company also forecast that its underlying pretax profits will recover to 300-350 million pounds in 2021-22.

“As we recover balance sheet metrics consistent with investment grade, we will assess the reintroduction of dividend payments, although as we focus on restoring profitability this is unlikely in the current year,” the company said.

At the same time, the retailer also said that it plans to bring down its store estate because of the losses. There are currently more than 250 “full line” sites selling clothing and home as well as food ranges of the company and the company has set a target to cut down the number of stores to about 180. The company said that it would also transform some of its into “food only” ones and others will be moved to new locations.

M&S said at least 30 stores will close.

59 “full line” stores, 16 food stores and eight outlets have already been relocated by it, the retailer said. However the company said that the effect of the pandemic means “we can move faster”.

The retailer is also planning to open 17 new or expanded “full line” stores over the next two years.

“In a year like no other we have delivered a resilient trading performance, thanks in no small part to the extraordinary efforts of our colleagues,” M&S chief executive Steve Rowe said.

“In addition, by going further and faster in our transformation through the Never the Same Again programme, we moved beyond fixing the basics to forge a reshaped M&S.

“With the right team in place to accelerate change in the trading businesses and build a trajectory for future growth, we now have a clear line of sight on the path to make M&S special again. The transformation has moved to the next phase.”

(Adapted from USNews.com & RetailGazette.co.uk)

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