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For the first time in 94 years, iconic department store chain Marks & Spencer reports a loss: profits in the past six months have been below zero. Yet there are also signs of recovery.
Clothing sales completely down
In the half-year to 26 September Marks & Spencer recorded a loss of 87.6 million pounds (97.3 million euro) compared with a profit of 158.8 million pound (176.3 million euro) in the same period last year. This is the first time in 94 years that M&S has ended up in the red, mainly due to the collapse of clothing sales. Total sales for the period fell by 15.8% to 4.09 billion pound.
Sales of clothing and other non-food items have long been a headache for the British department store chain, but the corona pandemic and associated lockdowns are now causing a complete crash in those categories. For example, between July and September, sales of clothing in inner-city stores fell by 53%.
On top of that, there were high one-off costs, due to the announced closure of some 110 department shops and the dismissal of almost 8,000 employees. Restructuring costs of 92 million pound (102 million euro) have already been incurred in the past half year and it is estimated that up to 120 million pound (around 133 million euro) of restructuring costs will be incurred in the future.
“Never the same world again”
Nevertheless, there is a striking sense of optimism among both management and stock market investors. Today’s loss is the ashes from which the management hopes that a new, slimmed-down and digital-savvy M&S will emerge, according to the BBC. After all, top executive Steve Rowe says that the performance was “much more robust than at first seemed possible”. Online sales were stronger than ever, thanks in part to food partner Ocado. That online platform has been supplying food and basic M&S products since the beginning of September, resulting in a sales increase of no less than 47.9%. Profitability would also have improved.
The pandemic has forced Marks & Spencer to work together to make three years of changes in one year, says Steve Rowe. “We know the challenges we’re facing will continue,” says the top executive, but during this second lockdown, the department store chain says it is already “in a much better position” to build a “more digital brand in a world that will never be the same again”. Investors seem to believe it, as the share price rose by 4% after the announcement.
