M&S warns retail will 'never be the same again'

The "trauma" of the Coronavirus outbreak has meant that shopping may “never be the same again”, Marks & Spencer chief executive Steve Rowe has said, as he announced an expected £2.1 billion hit on clothing, home, food and international sales.

In a trading update for the 52 weeks up to 28 March, he announced that profit before tax had slumped 21 per cent to £403 million, including an adverse profit impact of around £52 million in March, which was largely attributed to the impact of COVID-19.

The retailer has launched a programme called “Never the Same Again”, aimed at driving the transformation of M&S business model, with lessons learned from the crisis and plans for the future in a “changed consumer environment” in which the change towards digital and online shopping had been accelerated.

Clothing sales were down 6.2 per cent, as shoppers abandoned fashion in favour of spending on lockdown-related activities and stores were forced to close, leading to a “mounting backlog of unsold stock” in warehouses.

In the six weeks to 9 May, clothing and homeware sales were down by 75 per cent.

However, food sales were up 1.9 per cent as food stores remained open. The retailer also said that it had seen in a jump in website visits as shoppers began to work from home.

In a statement, Rowe said that the anticipated launch of M&S online food deliveries via a £750 million tie up with Ocado Retail in September this year would “transform the growth potential of M&S food”.

M&S acquired 50 per cent of Ocado Retail last year after the online grocer announced an end to its existing deal with Waitrose. Ocado, which has struggled to cope with unprecedented demand for deliveries during the lockdown, delivered 40.4 per cent revenue growth for the nine weeks to 3 May.

Plans to switchover and integrate with Ocado’s delivery infrastructure were reported as being on track.

Rowe said that last year’s results before March showed “substantial progress and change, with outperformance in food and “green shoots” for its clothing division after years of falling sales. However, he said the pre-Coronavirus picture “now seems like ancient history as the trauma of the COVID crisis has galvanised our colleagues to secure the future of the business”.

He explained: “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," Rowe added. "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.”

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