Marks & Spencer (M&S) has reported group revenue down 8.4% to £2.8bn during the third quarter due to the various Covid-19 restrictions, which had a particularly adverse effect on the clothing and home business.
Shares in the high street chain fell 2.1% this morning following the stock exchange announcement.
Clothing and home revenue was down 25.1%, reflecting an in-store sales decline of 46.5%, partly offset by online sales growth of 47.5%.
The sales mix remained heavily biased to pandemic-influenced product such as sleepwear and leisurewear.
M&S said its online business performed well, with fulfilment from both Castle Donington and ship from store system BOSS helping to increase volume and release the pressure on store stock.
Food like-for-like sales increased 2.6%. On a comparative basis, this performance was even stronger given reduced food-on-the-move sales and lower footfall in town and city centres.
During the four-week lead up to Christmas, like-for-like sales ex-hospitality and franchise grew by 8.7%, with large retail park and Simply Food stores outperforming.
Ocado Retail sustained its recent positive performance with the participation of M&S products remaining strong.
International revenue decreased 10.4%, impacted by changing restrictions across the globe. The trading update noted that near-term franchise performance continues to be impacted by the changes in partner stock requirements as a result of the pandemic.
During the period, M&S issue a £300m bond, maturing in 2026, and repurchased £136m of bonds expiring in December 2021, in order to strengthen the group’s debt and liquidity profile.
“The free trade agreement with the EU means we will not incur tariffs on our core UK sales,” read the update.
“However potential tariffs on part of our range exported to the EU, together with very complex administrative processes, will significantly impact our businesses in Ireland, the Czech Republic and our franchise business in France which we are actively working to mitigate.”
Chief executive Steve Rowe commented: “Given the on-off restrictions and distortions in demand patterns our trading was robust over the Christmas period.
“More importantly, beneath the Covid clouds we saw a very strong performance from the food business, including Ocado Retail, and a further acceleration of clothing and home online.
“Near term trading remains very challenging but we are continuing to accelerate change under our Never the Same Again programme to ensure the business emerges from the pandemic in very different shape,” he added.
Commenting on the results, Third Bridge retail sector analyst Ross Hindle said that the potential acquisition of Jaeger hints at the potential for a more aggressive shift into the multi-brand space.
“M&S has numerous large stores which could be filled with non-M&S merchandise in order to drive their top-line – although the risk here is whether such brands might cannibalise M&S branded products.
“Part of M&S’s recovery is dependent on an effective vaccine rollout and a return to the business-as-usual some say may come from Autumn onwards.
“However long-term success will be dependent on the company fixing the structural problems it faces around a bloated product range, high stock keeping unit count, and high street store portfolio.”