Retailer sees profits dive as virus causes clothing sales to plummet

MARKS & Spencer saw profits stumble for the past year after taking a £52m hit due to coronavirus.

The retailer revealed that total profits dived by 21% to £403.1m after it was dragged down by its troubled clothing business.

It came as the company told investors it had “hibernated” around £200m of unsold stock in warehouses for spring 2021.

Sales of clothing and home products plummeted after stores were shut following the outbreak.

M&S said it expects a 70% drop in UK clothing and home revenues over the four months to July, before a gradual recovery.

However, it predicted annual revenues for the current year will fall by £1.5bn as a result.

It expects food sales – impacted by lower sales and closures at travel locations – to fall by 20% in the period to July before levelling out, with a £400m impact on annual revenue.

Chief executive Steve Rowe said the company is moving forward with around £1bn of actions – including around £500m of planned cost reductions – to mitigate the impact of the outbreak.

He also hailed the company’s progress ahead of the launch of its joint venture with Ocado in September to deliver products to customers.

He revealed that, alongside its core food products, the company will also sell a range of clothing and home products on the platform.

The retailer said profitability improved in its food business during the year to March but profits dropped by more than a third in its clothing and home arm.

The company said group sales dipped 1.9% to £10.1bn during the year. Like-for-like food revenues increased by 1.9%, while its clothing business saw like-for-like revenues dive 6.2% as it was impacted by availability issues in the first half of the year.

Last month, the retail giant revealed plans for a “never the same again” overhaul as it warned the virus would impact trading for the rest of 2020.

Mr Rowe 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.”