Coronavirus: Marks & Spencer warns on profits, considers store closures

Marks & Spencer has said it expects its clothing, home and international businesses to be “severely impacted” by the Covid-19 pandemic which continues to disrupt the global retail industry.

The British retail giant said it is seeing “substantial sales declines” in its clothing and home department, and warned profits could fall below expectations of 440 to 460 million pounds.

It has also dropped its future guidance and said it expects a “prolonged downturn” in demand for clothing and home items.

The company said it is now considering closing stores and deferring product supply in response to the current situation.

The firm said: “There will be a substantial impact on clothing and home revenue at the very least in the first 3-4 months of the next financial year. Although it is possible that this may ease as we get into summer trading, margins are likely to be severely impacted by the surplus of unsold seasonal stock and probable clearance activity in the marketplace.

“We are therefore taking all possible steps to defer supply. However, a very large part of our core business is less seasonal year-round essential product and this should provide some scope for carrying forward stock. At this stage we are not assuming a return to normal trading in the Autumn.”

Marks & Spencer outlines costcutting strategy

Actions the company said it is taking to protect itself in the longer-term include postponing capital spending; managing cost base by redeploying colleagues from its clothing and home department into its food department and deferring all pay increases; deferring or cancelling discretionary spend by reducing non-essential spending, freezing non-essential recruitment, and reducing marketing spend; and reducing the supply pipeline by over 100 million pounds and holding overstock.

Marks & Spencer also said it would be using the opportunity to focus on its online platform and increase its online penetration.

The company welcomed the UK’s decision earlier this week to extend the business rates holiday to all retailers in the UK during the coronavirus pandemic. Last year, Marks & Spencer paid around 180 million pounds in Great Britain in business rates on stores.

Photo credit: Marks & Spencer