Rowe remains bullish as M&S falls to first loss
Cutting its cloth: M&S eyeing savings
Marks & Spencer CEO Steve Rowe remained bullish about the chain’s long term prospects despite confirming its first ever loss.
The company posted a half-year pre-tax loss of £87.6m against a £158.8m profit last time as the pandemic hammered clothing sales.
Food revenue rose 3%, while clothing and home was revenue down 21.5% and International up 7.4%.
Mr Rowe said performance has been “much more robust than at first seemed possible”.
He added: “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.”
John Colley, associate dean of Warwick Business School and a former managing director of a FTSE100 company, said: “The current losses merely emphasise the difficulties M&S’s fashion business continues to face.
“Moving online is slow even with the pandemic and still leaves the legacy store burden, which is expensive to close in view of the sizeable redundancy costs. Many of the stores the firm owns are in progressively less trafficked parts of towns.
“It is really not clear what long term future the fashion business has other than progressive decline. On the other hand, the food business has held up well and the Ocado business seems to be doing well although clearly Ocado will be taking a substantial cut. They would not have jettisoned Waitrose without a much bigger reward in sight.”
John Moore, senior investment manager at Brewin Dolphin, said: “Despite the company’s historic loss, there are some encouraging signs in Marks & Spencer’s update.
“The initial success of the Ocado partnership is highly promising and appears to be unlocking the food business’s previously untapped online potential. Debt reduction and improving cashflow also provide some comfort, although the former remains high for a business in transition.
“The bigger question in recent years has been over the performance of the clothing and home division – while the results are not as bad as expected, strategic action has been required for some time to prevent these businesses becoming a millstone around Marks and Spencer’s neck.
“There are some positive noises in today’s update that suggest a direction of travel, but the elephant in the room remains the company’s £2.5bn of lease obligations, which tie it into the traditional retail world and all its associated challenges.”