Marks & Spencer set to post loss as coronavirus hits clothing and home sales

Marks & Spencer
Marks & Spencer Oxford Street

Marks & Spencer is set to deliver a loss for the past six months as the pandemic weighed on clothing and home sales.

Investors are prepared for the retailer to reveal a knock from COVID-19 but will be particularly keen for an update on its Never the Same Again programme, to accelerate its transformation into a more streamlined and digitally focused business.

In August, the company said it would cut around 7,000 jobs as part of a major restructuring plan. In the same update, it said food sales had remained resilient in the face of the virus but lower clothing and home sales weighed on profitability.

A consensus of analysts has predicted M&S will deliver a £59 million pre-tax loss when it confirms its half-year trading performance on Wednesday 4 November.

The high street stalwart is expected to report 0.3% growth in like-for-like food sales for the period, while like-for-like clothing and home sales are expected to be 41% lower for the half after enforced store closures.

M&S reported a 1.1% decline in food sales in the 19-week period to mid-August but said this was rapidly improving, with 2.5% growth in the last eight weeks of this period.

Meanwhile, clothing and sales were also improving. It said sales for the department were 49.5% lower for the 19-week period which included closures, but improved to a 29.9% decline over the latter eight weeks.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said she suspects the retailer’s reliance on stronger food trading “hasn’t reversed” in recent months.

“The beat on trading in August has been driven by food, while clothing and home has really struggled,” she said.

“This dynamic was true before the pandemic, but a lacklustre online presence means this fault line has been exacerbated.

Analysts at Barclays have said they expect a “decent profit” in the food business to be “offset by a sizeable loss in clothing and home”.

However, they also said the contribution from M&S’s joint venture with Ocado is expected to be better than previously predicted.

Shareholders will be keen to get an update on the progress of the £1.5 billion partnership, after Ocado switched to working with M&S from Waitrose at the start of September.

Reporting: PA Media