Marks and Spencer profits tumble in full-year results

Marks and Spencer has announced that profit before tax tumbled 20.2% to £67.2m in the full-year ended 28 March 2020. 

It comes as an uplift in food sales failed to offset poor sales in its clothing division. The retailer’s full-year grocery sales improved 1.9%, with an estimated 0.3% lift attributable to the pandemic. 

Operating profit in the food department also rose 11.2%, with overall food performance “outperforming the market” following changes to “range, value, and customer communication”.

However, clothing and home revenue declined 8.3% overall, with like-for-like revenue down 6.2% in the period, including an estimated 2.2% adverse impact from the acceleration of Covid-19 in March.

Clothing trading was also affected by availability and “teething” issues, according to the retailer, though performance in this department was “encouraging” towards the end of the year, prior to the effects of Covid-19.

Overall, the group’s total annual revenues fell 1.9% to £10.18bn in the full-year period.

Whilst the retail giant predicts that the impact of the crisis on sales and stock flow will “last through the year”, it also outlined plans to reduce costs by around £500m this year. 

Non-essential spending has been reduced at all levels, for example, while costs largely related to sales volume are now being managed down. The group has also cancelled its final dividend that will result in a cash saving of around £130m. 

In its full-year update, the retailer also laid out details for its Never the Same Again, which will work as a roadmap for trading during and after the crisis.

The retailer said: “The crisis illustrated how differently we can use technology, run stores, and make decisions fast. In a business with a history of slow cultural change we intend to use these lessons, to ensure that as lockdown eases, we are never the same again in culture, organisation and work habits.”

Steve Rowe, Marks and Spencer CEO said: “Last year’s results reflect a year of substantial progress and change including the transformative investment in Ocado Retail, outperformance in food and some green shoots in clothing in the second half.  

“However, 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.” 

He added: “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.”