M&S reveals £1bn action plan as coronavirus drives latest turnaround

May 20, 2020

Marks and Spencer (M&S) has revealed a £1bn plan of action to help it battle coronavirus crisis challenges following a slump in annual profits.

The retailer, which has struggled to revive its fortunes over many years resulting in relegation from the FTSE 100 last year, said it had embraced a new way of working as COVID-19 struck in a world that would "never be the same again".

It outlined a string of actions to manage cash and save costs as its troubled clothing and home division drove a 21% fall in annual trading profits for the year to 28 March to £403.1m.

M&S revealed a trading hit of almost £52m in March alone and recorded one-off costs of £335.9m for the year, with £212.8m of that sum blamed on costs and stock write downs related to pandemic disruption.

It left profit before tax at £67.2m.

The company said its £1bn of actions included £500m of planned cost reductions and an acceleration in the "re-shaping" of its stores but it did not reveal whether that would include shutting more sites.

The 2019/20 financial year saw M&S begin closing dozens of under-performing stores and invest in digital systems to refocus its customer offering while, latterly, it adapted to new ways of working as the lockdown began in March.

Chief executive Steve Rowe told investors the crisis had accelerated the pace of change in how people shopped - and M&S must adjust too as it prepares to begin its crucial online grocery delivery partnership with Ocado in late summer.

He said: "Last year's results reflect a year of substantial progress and change including the transformative investment in Ocado Retail, out-performance 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.

"Whilst some customer habits will return to normal, others have changed forever, the trend towards digital has been accelerated, and changes to the shape of the high street brought forward.

"Most importantly working habits have been transformed and we have discovered we can work in a faster, leaner, more effective way.

"I am determined to act now to capture this and deliver a renewed, more agile business in a world that will never be the same again."

M&S shares - down 60% in the year to date leaving its market value at £1.7bn - were 10.8% up by the close.

But Julie Palmer, partner at restructuring specialists Begbies Traynor, was unimpressed by the update.

She wrote: "M&S' fall from grace continues as the coronavirus causes chaos for an already fragile high-street.

"The pandemic will do nothing to ease the retailer's woes which has suffered from poor trading for the past few years with the firm's share price plummeting.

"The retailer has failed to adjust accurately to the changing face of the retail landscape, with major established retailers no longer holding the monopoly over the market that they once did."

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