Meltdown at M&S: Extra shops dealing with the axe as chain information lowest revenue for 3 a long time with subsequent yr’s divi cancelled too
Marks & Spencer has warned it might shut extra retailers to outlive within the post-pandemic world, because it grapples with a rising mountain of unsold garments.
The 136-year-old chain revealed it had been compelled to put in writing off £145million on garments it has been unable to promote throughout the lockdown, with income collapsing to a three-decade low.
The scenario has turn out to be so determined throughout the lockdown that the retailer introduced it might be ‘hibernating’ £200million of inventory within the hope it is going to be in a position to promote it subsequent yr.
M&S chief exec Steve Rowe mentioned the disaster has ‘given us the possibility to chop again more durable’
Clothes gross sales fell by three-quarters within the six weeks to Could 9, as robust on-line gross sales didn’t offset the collapse in enterprise at its bodily shops.
Non-essential retailers needed to shut down from March 23, which means M&S has solely saved its meals shops open.
However even meals gross sales have been down 8.Eight per cent, as its cafes have closed and demand fell at shops in airports and railways.
M&S clothes gross sales fell by three quarters within the six weeks to Could 9
The retailer is already closing as much as 120 of its 1,035 shops however the coronavirus has compelled bosses to rethink the way forward for dozens extra areas, elevating fears about 1000’s of jobs.
Chief government Steve Rowe mentioned the disaster has ‘given us the possibility to chop again more durable’, including: ‘The world won’t ever be the identical once more. The place we have not obtained viable shops, that may result in closures.’
Annual income earlier than tax slumped by a fifth to £67.2million – on gross sales of greater than £10billion – after being hammered by £213million of prices and inventory writedowns associated to the pandemic.
Excluding these ‘distinctive objects’, income have been nonetheless down 21.2 per cent to £403.1million within the yr to the tip of March – the retailer’s lowest stage in three a long time, and effectively under the £1.1billion it made in 2008.
M&S has over £1billion of inventory and orders on its books, which means £200million of garments can be resold subsequent yr.
However some may even must be discounted to shift it, and the corporate took a £145million cost to account for this.
M&S’s 300,000 non-public traders have been dealt one more blow as bosses mentioned they don’t intend to pay £340million in dividends within the yr to March 2021, simply weeks after the £130million year-end dividend for 2019/20 was cancelled.
The group, which was preventing for relevance even earlier than coronavirus struck, has been hit arduous by the lockdown.
Its grocery store enterprise has grown within the ‘excessive single-digits’, with progress robust at shops with automobile parks. However metropolis centre areas, which often promote sandwiches and prepared meals to employees, are struggling.
Some 27,000 workers are on furlough, saving £50million, and on the peak of the virus there have been 16,000 workers at house sick or self-isolating.
M&S can be benefiting from £172million of enterprise charges reduction.
However, regardless of cancelling the dividend and taking taxpayers’ cash to prop up his enterprise, chief government Steve Rowe will nonetheless take his £810,000 wage plus bonuses this yr.
The corporate has set a goal of doubling the scale of its meals enterprise in a partnership with Ocado, which can begin delivering M&S meals to properties in September.
Prospects will be capable of order 1,600 objects of clothes by way of its web site, and 6,000 meals objects.
Rowe is bringing ahead plans to spend money on metropolis centre shops and streamline ranges. Head workplace roles can also be lower. The shares rose 10.Eight per cent, or 9.24p, to 95.04p.