Marks & Spencer to speed up closures and online after year in the red

The year ended better than expected for Marks & Spencer, but the British department store chain slipped into the red and more stores will be closing. Online sales will continue to account for 40 per cent of sales, M&S predicts.

Online does not compensate

The turnover of the British department store icon fell by 10 per cent to 8.9 billion pounds (10.3 billion euros) in the financial year up to 27 March. Non-food sales, in particular, took a hit, with sales in the clothing and homeware categories falling by a third. Online sales, however, rose by almost 54 per cent, but that was not enough to compensate for the 56 per cent drop in physical stores.

Food sales rose by a mere 1 per cent, as M&S was only able to capitalise on the success of joint venture partner Ocado in September, and Brits were no longer able to pop in for a quick lunch or snack due to working from home. Thus, pre-tax profits came to almost 202 million pounds below zero, compared with a positive operating result of 67 million pounds a year ago.

Covid crisis leads the way

Nevertheless, Marks & Spencer sees hopeful signs: the first six weeks of the new financial year – that is, April and early May – were even better than the same period in 2019. The department store chain is noticing a cautious return to normal, with food retail, in particular, picking up strongly while Clothing & Home sales are also growing. Online sales, too, remain robust.

Chief Executive Steve Rowe is drawing lessons from the crisis: according to him, the pandemic has made it clear which direction the retailer needs to take. In the near future, he expects that about 40 per cent of non-food sales will continue to come from the store, which is 20 per cent more than before. Consequently, Rowe decided to close even more stores: today, there are 254 stores, but this should become 180.

In addition, more than 45 premises will get transformed into food-only stores, and 35 relocations are on the agenda. Some of the closed stores will be converted into homes or used for other purposes, says The Guardian, which should generate at least 200 million pounds to invest in new or improved stores. Thus, 17 more new or expanded branches will be added in the next two years, about six of which will be in locations where the recently bankrupt competitor Debenhams housed.