M&S considers ‘temporary’ store closures and moving staff to food stores as coronavirus hits

M&S considers ‘temporary’ closures and moving staff to food stores with clothing sales set to take a big hit from the coronavirus outbreak

  •  Marks and Spencer is preparing to ‘temporarily’ close some stores
  •  It also plans to slash capital investment, dividend and defer staff pay rises
  •  M&S does not expect trading to come back to normal until the Autumn
  • Coronavirus symptoms: what are they and should you see a doctor?

Marks and Spencer is preparing to ‘temporarily’ close some stores, slash investment, dividend and defer staff pay rises as it becomes the latest retailer to warn of the coronavirus outbreak’s severe impact on trading.

While its food business is set to do well as more people are likely to be stuck at home and stockpile on food, it is its already struggling clothing and homes departments that will bear the brunt of the pandemic over the next nine to 12 months, it said.

M&S expects ‘substantial’ sales decline of clothes and home goods and is planning to redeploy ‘significant numbers’ of staff working in those departments into the food business.

Warning: M&S said it expects ‘substantial’ sales decline of clothes and home goods

It said it has already redeployed staff working in its cafes, which have closed down, to work in the food department, but with the coronavirus crisis remaining highly uncertain, it has not ruled out it may have to cut some jobs in the future.

It said in a statement: ‘It is too early to make any reasonable forecast for revenues in the next financial year but we are planning on the basis of a prolonged downturn in demand for Clothing and Home. We are preparing for the contingency that some stores may have to close temporarily.’ 

And added: ‘We are seeing substantial sales declines in Clothing and Home and we have to manage our costs accordingly but expect to be able to redeploy significant numbers of colleagues to support the Food business.’

M&S does not expect trading to come back to normal until the Autumn and now sees pre-tax full year profits to come in the bottom of expectations of £440-460million.

As sales of its clothes are expected to slump, it expects margins to be dented by surplus of unsold seasonal stock, hence it is planning to defer supply.

It is also deferring all pay rises, reducing capital investments to just £80million from a budget of £400million – but said it is looking to grow its online business.

Given the circumstances, it said it’s unable to provide ‘meaningful’ guidance on future earnings.

It also does not plan to pay a final dividend, which it says will save it around £130million.

‘We will review our policy at the interim results in November as visibility improves,’ the group said.

Also on the horizon are further costs associated with Brexit, which will likely hurt its Irish and French businesses starting at the end of the year.

M&S shares fell 4.4 per cent to 110.90 p in morning trading.

Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said: ‘COVID-19 has the potential to derail M&S’ Clothing & Home division for many months. These are uncertain times for retailers, but this is going to be a particular challenge for M&S as the Clothing & Home business has been struggling for a while.

‘With lockdowns and closures disrupting trading in its international markets too, the pandemic situation is likely to really hurt the group’s top line. That will then feed down to weaker margins.’

M&S is planning to redeploy 'significant numbers' of staff working in clothing and home departments into food stores

M&S is planning to redeploy ‘significant numbers’ of staff working in clothing and home departments into food stores

 

Source link