Coronavirus: Shopping may never be the same, says M&S
Consumers “may never shop the same way again” following the coronavirus crisis, the boss of Marks and Spencer has said.
The comments came as the retailer said clothing and homeware sales had fallen by 75% in the six weeks to 9 May.
Food sales also fell, by 8.8%, although M&S said many of its Simply Food stores were trading strongly.
The update came as M&S said its profits for the year to March had dropped by more than 20%.
Pre-tax profits fell to £403m from £511m in the previous year, as M&S’s troubled clothing business continued to struggle.
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Marks & Spencer is undergoing a transformation plan led by its chief executive Steve Rowe.
But the coronavirus pandemic has created further problems for the High Street chain hoping to overhaul its business.
The last year’s results for the retailer also reflected its purchase of a 50% share of online supermarket Ocado’s retail business for £750m.
Mr Rowe said that Ocado’s strong performance during lockdown “further reinforced” the value of the deal for delivering groceries.
The retailer will go into partnership with Ocado from September this year, replacing the online grocer’s existing deal with Waitrose.
M&S announced on Wednesday that more than 1,000 non-food items, such as clothing or home furnishings, would also be available for delivery via its tie-up with Ocado.
“The trauma of the Covid-19 crisis has galvanised our colleagues to secure the future of the business,” said Mr Rowe.
“The trend towards digital has been accelerated, and changes to the shape of the High Street brought forward. Most importantly working habits have been transformed and we have discovered we can work in a faster, leaner, more effective way.”
Neil Wilson, chief market analyst at Markets.com, said: “Covid-19 has accelerated lots of consumer trends and it may just be the catalyst required to accelerate Marks and Spencer’s transformation into a 21st century retailer.
“In particular it looks as though M&S has learnt just how important online is – so it’s making its Ocado venture more central to the business.”
The company has been facing increasing competition from fashion giants such as Primark on the High Street and Asos on the internet in recent years.
In the year to March, M&S said its clothing sales fell by 6.2%, whereas its food sales were up 1.9%.
To add to its problems, M&S’s non-food stores have been forced to shut under the lockdown measures.
As a result, it faces a “mounting backlog of unsold stock” in its warehouses, it said.
The firm said that lockdown measures, social distancing and lower consumer demand was “likely to continue through the year”, adding that the coronavirus pandemic means that its performance over the next year is difficult to predict.
It is working on a scenario that assumes a sales hit of £2.1bn over the next year across clothing, home, food and international sales.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “Overall, M&S was facing challenges before coronavirus and these have simply been exacerbated.
“Within the difficulties there are real opportunities too, and the group appears to have a lot of the right ideas, but the next chapter really needs to be about execution.”