M&S buoyed by food sales but suffers first loss in 94 years

Marks & Spencer has published its half year results for 26 weeks ended 26 September 2020, which shows its first loss in 94 years.

The loss stood at £87.6m as clothing sales slumped, compared with profits of £158.8m in the same period last year.

The Food business has performed strongly despite substantial Covid headwinds during the six-month period achieving 2.7% LFL growth or 6.6% when excluding hospitality, which was largely closed during lockdown.

It adapted rapidly to the change in shape of demand to deliver improving LFL growth across the period. This was despite headwinds which included the exposure to travel and office locations, high dependence on food-to-go and a presence in full line stores in impacted shopping centre locations.

Operating profit before adjusting items increased 19% driven by the strong underlying performance with product mix effects due to the reduced sales in food-on-the-move and hospitality more than offset by lower costs.

In September, a new ambient Food depot opened in Milton Keynes providing capacity for further growth.

The Clothing & Home result was heavily impacted by the full Covid lockdown in the first quarter, ongoing social distancing and the priority to clear stock. As a result total revenue declined 40.8%, comprising a decline of 61.5% in quarter one and 21.3% in quarter two.

Last year’s investment in 50% of Ocado Retail means M&S is well positioned to take advantage of the long-term opportunity created by the step change in online grocery shopping in the UK.

Ocado Retail delivered 47.9% year on year revenue growth for the 26 weeks to 30 August 2020. This has been an exceptional period for Ocado Retail helped by Covid-related increase in demand for online shopping. Higher than normal average basket size, combined with optimisation initiatives, drove efficiencies in customer fulfilment centres (CFCs) and lower delivery costs as a percent of sales.

Including exceptional anticipated insurance receipts, Ocado Retail generated a first full half year contribution to M&S Group adjusted profit before tax of £38.8m.

CEO Steve Rowe said, “In a year when it has become impossible to forecast with any degree of accuracy, our performance has been much more robust than at first seemed possible.

'This reflects the resilience of our business and the incredible efforts of my M&S colleagues who have been quite simply outstanding. But out of adversity comes opportunity and, through our Never the Same Again programme, we have brought forward three years change in one to become a leaner, faster and more digital business.

'From launching M&S Food online with Ocado to establishing an integrated online business division ‘MS2’ to step-change growth, we are taking the right actions to come through the crisis stronger and set up to win in the new world.”