Business Marks and Spencer saves to cushion pandemic shock

Marks and Spencer saves to cushion pandemic shock

The British brand Marks and Spencer announced on Wednesday a vast savings plan, which could include job cuts, faced with the drop in sales in food and clothing due to the pandemic.

The chain of stores has drawn a particularly bleak picture of its activity which should suffer for long months, according to a press release.

She expects a 70% collapse in sales in clothing – already her Achilles heel before the pandemic – and home products during the four months between April and July. The return to normal is not expected before February 2021.

In food, where it is penalized by the lack of online sales, turnover should plunge by 20%.

In total, the impact on its annual sales for 2020-2021 will amount to 2.1 billion pounds (2.4 billion francs). Its turnover reached just over 10 billion for the year ended.

The group said the new coronavirus had an impact in early March before the situation worsened considerably from the start of containment in the UK on March 23.

Over the full year, ended March 28, net profit nearly halved to £ 23.7 million, largely due to the Covid-19, with customers deserting stores even before introduction of containment by the government, which had already recommended physical distancing measures.

To weather this storm and save its finances, Marks and Spencer is putting in place a £ 1 billion savings plan.

This program will involve the reduction of all non-essential expenses, the freezing of salaries and recruitment, the reduction of property charges, the reduction of investment expenses and the abandonment of the dividend.

Marks and Spencer may also be eligible for a government loan of up to £ 300 million under the government’s aid plan.

New strategic plan

“While some consumer habits will return as before, others have changed forever” and “the trend towards digital is accelerating,” said Steve Rowe, managing director of Marks and Spencer.

To adapt to this longer-term environment, the group is launching a new strategic plan with the objectives in particular of reducing its clothing offer while now selling other brands than its own, making its staff versatile in stores and strengthen its digital offer.

Above all, he explains that the workforce will be examined at all levels, suggesting that possible job cuts will occur.

The group had also before the pandemic decided to launch an online food sales offer, an area in which it lagged behind its competitors.

This offer will be available from September 1 thanks to the agreement with the online distributor Ocado, with the acquisition by Marks and Spencer of 50% of its branch for individuals.

The market, for its part, welcomed the group’s announcements. The title jumped 7.27% around 09:40 GMT on the London Stock Exchange.

“We knew it was going to be difficult for Marks and Spencer and so investors are focusing on the transformation plan,” said Neil Wilson, analyst at Markets.com.

According to him, “Covid-19 could be the necessary accelerator to make Marks and Spencer a distributor of the 21st century” and the brand “seems in particular to have understood the importance of online sales”.


ats, awp, afp

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