Marks & Spencer has announced a £1bn battle plan to counter a 37% drop in clothing and home operating profits for the year to 28 March amid the coronavirus crisis.
Overall profits tumbled 21% to £403.1m year on year, and the retailer reported an adverse profit impact of £52m in March from the Covid-19 crisis.
Like-for-like clothing and home sales declined 6.2% in the year with an estimated 2.2% adverse impact from Covid-19 in March.
The retailer’s fashion and home business was adversely affected by womenswear availability in the first half and “teething issues” as it shifted to a more contemporary style and fit in menswear.
Revenue declined 8.3%.
M&S had one-off costs of £335.9m, £212.8m of which were costs and stock writedowns related to the ongoing crisis.
Group revenue dropped 1.9% to £10.1bn for the period compared with the previous year.
To deal with excess stock levels, the retailer cancelled £100m of late summer stock, and will “hibernate around £200m of unsold seasonal stock until spring 21”.
Chief executive Steve Rowe said the results reflected some “green shoots in clothing in the second half”, but added: “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.”
The retailer has introduced a £1bn action plan to mitigate the impacts of coronavirus. This includes around £500m of cost reductions.
It believes Covid-19’s affect on sales and stock will last through the year, and that subsequent demand will be depressed.
It predicts a 70% decline in revenue in clothing and home in the UK for the four months to July, and only a gradual return to original budgeted levels by February 2021. It estimates a £1.5bn hit on annual revenue.
However, the retailer noted that sales and cash have outperformed in the first six weeks of the new year.
It has secured liquidity with the removal or substantial relaxation of covenants on its £1.1bn revolving credit facility, and been allocated £300m from the UK government’s Covid Corporate Financing Facility.