The FTSE 250-listed firm said it has made “substantial plans” ahead of the festive season, including the expansion of the teams to serve online orders by 30% at its Castle Donington distribution centre, an increase in-store picking capacity, a ‘book and shop’ app to avoid queues and product lines which are more suited for smaller gatherings.
It expects a fall in profits in the clothing & home (C&H) division during the upcoming lockdown but is expecting that to be offset by increased online sales and reduced costs supported by furlough income.
The group noted that C&H stock levels are down by over £100mln compared to 2019, meaning less stock hibernated to next Spring than previously envisaged. The retailer is also launching MS2 to create a single integrated online, digital and data team within C&H to compete with other ‘pure play’ e-commerce brands.
The group also said it is reviewing its UK store estate and added that the stores identified as part of the review programme are more likely than not to close, although there is uncertainty around the recoverable amount of assets and the costs it will incur.
In the 26 weeks to September 26, 2020, M&S saw its revenue fall by 16% to £4bn while the group swung to a £87mln loss before tax from last year’s profit £158mln. Net debt at period-end was £3.9bn.
The C&H business saw a 41% decline in revenue with an operating loss of £107mln reflecting the lower sales and clearance of surplus seasonal ranges, partly offset by a reduction in operating costs.
Revenue for its food business, however, was up 3% excluding hospitality, which was largely closed during lockdown, while operating profit jumped by 19% after lower costs offset reduced sales in food-on-the-move and hospitality.
M&S said customer response from making its products available on Ocado Group PLC (LON:OCDO) was “overwhelmingly positive with demand for the new range driving both an increase in the number of products in customer baskets and strong forward demand”.
The delivery joint venture, which generated net profits of £38mln for M&S in the first half, is expected to deliver £15mln of synergies in the current financial year, with 40% additional capacity coming on stream by Autumn 2021.
“Food once again takes the crown at Marks and Spencer, providing cheer in what otherwise has been a set of disappointing results,” analysts at Hargreaves Lansdown commented.
“The pandemic has hit the retailer where it hurts, with clothing and homeware sales at its city centre stores still struggling, even after lockdown ended. However, it could have been worse, with performance buoyed by a hearty appetite for its grocery ranges.”
Shares jumped 5% to 96.98p on Wednesday morning.
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