M&S’s annual profit slumps 88% as COVID crushes clothing sales

British retailer Marks & Spencer on Wednesday reported an 88% slump in full-year profit, reflecting a collapse in clothing sales due to the COVID-19 pandemic and said it was unlikely to pay a dividend for the current year.

M&S, which also sells upmarket food, made a pretax profit before one-off items of 50.3 million pounds ($71.2 million) in the year to April 3 versus analysts’ average forecast of 43 million pounds and down from the 403.1 million pounds made in 2019-20.

The 137-year old group, one of the best known names in British retail, said like-for-like clothing and homeware sales plunged 31.5%, damaged by multiple coronavirus lockdowns which shuttered stores, while food sales on the same basis were up 1.3%. Food stores remained open during the crisis.

As a result it made a statutory loss of 209.4 million pounds versus a profit of 67.2 million pounds in 2019-20.

M&S said overall trading for the first six weeks of the 2021-22 financial year and since all stores reopened from lockdown has been ahead of the comparable period two years ago in 2019-20, and its central expectations.

It forecast underlying pretax profit to recover to 300-350 million pounds in 2021-22.

“As we recover balance sheet metrics consistent with investment grade, we will assess the reintroduction of dividend payments, although as we focus on restoring profitability this is unlikely in the current year,” it said. 

British retailer Marks & Spencer expects online penetration of its clothing and home business to reach up to one half, its boss added.

“The trend online has accelerated,” M&S CEO Steve Rowe told reporters after the group reported 2020-21 results.

“We thought about a third of our sales would be online, its looks more like 40-50% in short order,” he said.

As a result he said M&S was being prudent in examining the size of its store estate.

Photo: A sign displayed on a Marks and Spencer store in London, Britain. EPA-EFE/NEIL HALL