M&S slides to first loss as COVID-19 hammers clothing sales; Food sales up 2.7%

Marks & Spencer reported the first loss in its 94 years as a publicly listed company after clothing sales were hammered by the COVID-19 pandemic, but an encouraging performance in food sent its battered shares higher.

The stock was up 5 per cent at 1026 GMT on Wednesday, paring 2020 losses to 55 per cent, as investors took comfort the half year loss was not as bad as feared and from the initial success of a partnership with Ocado which has given M&S’s food business an online presence for the first time.

“Looking at H1 cold, it looks like a car crash but relative to expectations the print was OK,” said analysts at Peel Hunt.

Marks & Spencer (M&S) was struggling to reinvent itself after decades of failed attempts before the pandemic hit.

In May, it said the crisis would indelibly change its business and it would accelerate the latest turnaround plan, delivering three years of change in one. In August, M&S cut 7,000 jobs.

M&S made a pretax loss before one-off items of £17.4 million in the 26 weeks to 26 September – its first loss since joining the stock market in 1926.

The outcome was ahead of analysts’ average forecast of a £59 million loss. M&S made a profit of £176 million in the same period last year.

Clothing and homeware revenue slumped 40.8 per cent, damaged by a three-month coronavirus lockdown in the spring.

All clothing retailers have been hurt by the crisis. On Tuesday, Primark reported a 63 per cent fall in annual profit and Next last week forecast a 50 per cent decline.

M&S’s first-half food sales rose 2.7 per cent on a like-for-like basis, with weak performances from stores in city centres and transport hubs because of the government’s work-from-home directive offset by a better showing from suburban stores.

CEO Steve Rowe said the September launch of the Ocado venture had gone “fantastically”, with customer reaction ahead of expectations.

And despite the loss he struck a confident tone, telling reporters: “We’re building an M&S which is fitter, faster and more digital and is ready to emerge as a stronger, renewed business.”

In the first four weeks of M&S’s second half, food revenue was up 3 per cent, clothing and homeware was down 21.5 per cent and international revenue was up 7.4 per cent.

But M&S cautioned that England’s new four-week lockdown, beginning Thursday, would hit clothing and homeware sales and profit.