Marks & Spencer profits tumble as coronavirus hits bottom line

For the 52 weeks ending March 28, 2020 M&S reported that profit before tax fell by 21.2% down to £403.1m, while group revenues slipped 1.9% to £10.1bn.

The retailer said the virus directly affected profits by £52m in March and added £212.8m in costs and write downs.

In terms of categories, M&S reported a strong performance for its food business during the period, with sales up 1.9% on a like for like basis and operating profits up 11.2%.

However, its embattled clothing arm continued to drag, with sales down 6.2% while operating profits slumped 37% impacted by poor availabilities in the first half of the financial year and “teething issues” in its new menswear lines.

M&S flagged that in during the period it had acquired 50% of Ocado Retail, its online grocery delivery partnership, and said the new tie-up delivered 40.4% sales growth for the nine weeks to May 3.

International revenue also took a hit, down 2.5% while operating profit slid 15.2% to £110.7m.

M&S said it had plunged over £1bn into offsetting the costs and managing the cash issues that the coronavirus had presented it with.

The retailer said the virus began to have an effect on the business in the first week of March, with reductions in clothing and home. When lockdown was implemented, clothing sales dropped 16% year on year.

In its results it set out its coronavirus scenario, which flagged that sales and stock flow will likely be “depressed” for the rest of 2020 and is likely to suffer from “very substantial” reduction in clothing sales and “volatile” food trading.

M&S said it had stress tested for clothing and home sales to plummet 70% in the four months to July, with only gradual returns to budget by February 2021 at a cost of more than £1.5bn in sales and a 20% decline in food sales.

Chief executive Steve Rowe lamented the effects of coronavirus on the business, following a year of “substantial progress and change”.

“Last year’s results reflect a year of substantial progress and change including the transformative investment in Ocado Retail, outperformance in Food and some green shoots in Clothing in the second half. However, they now seem like ancient history as the trauma of the Covid crisis has galvanised our colleagues to secure the future of the business.

“The way our people have rallied to support our customers and communities has been awe-inspiring. From the outset we recognised that we were facing a crisis whose effects and aftershocks will endure for the coming year and beyond: whilst some customer habits will return to normal others have changed forever, the trend towards digital has been accelerated, and changes to the shape of the high street brought forward.

“Most importantly working habits have been transformed and we have discovered we can work in a faster, leaner, more effective way. I am determined to act now to capture this and deliver a renewed, more agile business in a world that will never be the same again.”