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Investors positive

M&S shares up despite store closures and £201m loss

Marks & Spencer

More stores to close while some will have reduced product lines

Marks & Spencer is to close more stores after reporting a huge loss, but its shares rose as investors bought into its revival strategy.

The group currently has 254 stores selling food and clothing, but it plans to reduce this to around 180 over the next 10 years, with some of these being replaced by food-only or purely clothing and home sites.

It has reported a statutory full-year loss of £201m (2020: £67.2m profit) after lockdowns saw store sales plummet.

Profit before tax and adjusting items for the 52 weeks to 27 March came in at £41.6m (2020: £403.1m).

Clothing and home revenue plunged by 31.5%.  Online growth rose 53.9% partly offsetting a 56.2% fall in store sales.

Food Like-for-like revenue rose 1.3%.

Shares surged by 8.5%, or 13.25p, to 169.2p, almost double the price a year ago in spite of the losses and the board ditching the dividend and warning there would be no payout this year. 

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Investors focused on positive reports suggesting the business had become stronger, underpinned by its distribution deal with Ocado. It expects two-fifths of sales to be online within three years.

Chairman Archie Norman said the firm was emerging from the pandemic ‘a reshaped business’. He added: “I think for the first time for three-and-a-half years there is a lot to feel confident about. There are enough green shoots and points of light to believe that M&S is on the verge of becoming a growing business again.”

M&S said overall trading for the first six weeks of the financial year and since reopening had been ahead of the comparable period two years ago in 2019/20.

The company said: “At this early stage our central case is that we will generate profit before tax and adjusting items between £300m-350m and as capital expenditure recovers towards pre-pandemic levels, our ambition is for a further reduction in net debt.”

Steve Rowe, CEO, added: “In a year like no other we have delivered a resilient trading performance.

“We moved beyond fixing the basics to forge a reshaped M&S. With the right team in place to accelerate change in the trading businesses and build a trajectory for future growth, we now have a clear line of sight on the path to make M&S special again. The transformation has moved to the next phase.”

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “The food business fared well, and the underlying picture suggests the offering is holding its own among the bigger players.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “The food business fared well, and the underlying picture suggests the offering is holding its own among the bigger players.

“This has been helped by the joint venture with Ocado, which means M&S can ride the wave of increased online grocery shopping, which is something it would have previously been forced to watch from the side-lines.” 

James Andrews at money.co.uk said: “Over the past year the UK high street has been severely affected but the future for M&S appears bright in comparison to the likes of Debenhams and John Lewis who have taken a harder hit.

“A key difference … is what M&S offers with its food hall and grocery options. The retailer made a smart move with its deal with Ocado; with Marks & Spencer seeing food revenue up 1.3% thanks to the partnership. This deal effectively supported them through the end of this financial year.”



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