Britain’s M&S expects profits to rebound after 88% drop
British retailer Marks & Spencer (MKS.L) forecast a rebound in profits this year after falling 88% in 2020-2021 which reflected a slump in clothing sales due to the COVID-19 pandemic, but warned investors not to expect a dividend this year.
Chief Executive Steve Rowe said the results masked progress in the group’s latest 137-year-old turnaround plan as trading in the first weeks of its new fiscal year was encouraging.
M&S shares rose 7.3% to 167.4 pence at 9:34 a.m. GMT. They changed hands for 236 pence in May 2019.
Rowe, along with President Archie Norman, focused on transforming company culture, improving clothing and food and value to expand its appeal, while closing stores and investing heavily in technology and e-commerce, including a joint venture with Ocado (OCDO. L).
“Going further and faster in our transformation during this time of disruption … we have now gone beyond laying the groundwork to forge a reshaped M&S that is ready for the next phase,” he told the journalists.
“We now have a clear line of sight on the way to making M&S special again,” he said.
With online penetration of its clothing and home business expected to reach 50%, Rowe said M&S will speed up the overhaul of its store base. Read more
M&S currently has 254 full online stores, selling clothing, household items and food. It is now targeting a fully modernized core of around 180 stores.
The group achieved pre-tax profit before special items of Â£ 50.3 million ($ 71.2 million) in the year to April 3, compared to Â£ 403.1 million in 2019-20.
Like-for-like clothing and home goods sales fell 31.5%, damaged by multiple coronavirus lockdowns that have closed stores. In-store clothing and homewares sales fell 56.2%, partially offset by online growth of 53.9%.
In food, where space remained open during the crisis, sales at constant scope increased by 1.3%.
On a statutory basis, M&S fell to a pre-tax loss of Â£ 209.4million, compared to a profit of Â£ 67.2million in 2019-20.
All UK clothing retailers have been hit hard by the pandemic. Last month, Primark (ABF.L), which does not trade online, reported a 90% drop in annual profit. Next (NXT.L), which has a huge online business, showed greater resilience, but its full-year profit fell another 53%. Read more
M&S said trading in the first six weeks of fiscal 2021-22 was ahead of the comparable period of two years ago and its main expectations.
It predicts that underlying profit before tax will fall to Â£ 300-350million in 2021-2022 and further reduction in net debt.
($ 1 = 0.7065 pounds)
Our standards: Thomson Reuters Trust Principles.