M&S fashion sales plunge, but reopening has delivered growth
M&S delivered a bleak full-year earnings report on Wednesday, although the bad news was far from unexpected. In the 53 weeks to April 3 — a period that included three lockdowns during which its clothing departments weren’t open in its stores — sales plummeted.
The previous year was a 52-week one, so the company adjusted its figures to reflect that direct comparison. But extra week or not, the numbers didn’t paint a pretty picture.
Clothing & Home (C&H) revenue was down 31.5% and although M&S saw online growth of 53.9% in this area, it couldn’t make up for the store sales that were down 56.2%. Store sales still dominate its C&H revenues and this is an area it’s working hard to fix.
At least food like-for-like revenue rose 1.3%, although given that its stores’ food departments were allowed to trade during lockdowns and its Ocado home delivery link-up had begun, that rise seemed quite tame.
But the company said "overall trading” for the first six weeks of the financial year and since reopening “has been ahead of the comparable period two years ago in 2019/20 and our central case”. C&H sales have been growing since reopening and online is “robust”.
LAST YEAR’S NUMBERS
Looking at the company-wide figures for the 2020/21 year, group revenue for the adjusted 52 weeks was £8.972 billion, down from £10.182 billion a year earlier. Group operating profit before adjusting items in the 52 weeks fell to £209.7 million from £590.7 million. The pre-tax loss this time in the 52 weeks was £201.2 million, down from a profit of £67.2 million a year earlier, and the loss after tax was £194.4 million, down from a £27.4 million profit.
As mentioned, C&H struggled. Its operating loss on a 52-week basis was £129.4 million, down nearly 158% from a £223.9 million profit a year earlier. This reflected “the heavy impact of lockdowns on stores, a substantial change in product mix and the challenges of clearing stock”. But the company said the performance improved in the second half as online growth made greater inroads into the store sales decline.
Meanwhile, International operating profit fell 59.3% to £45.1 million. It was “resilient due to online growth which helped to mitigate the pandemic impacts on store sales in different regions”.
But International C&H sales declined 21.6% at constant currency, largely driven by lower store sales in the Republic of Ireland and India and working with franchise partners to manage the effects of the pandemic. The online growth helped to offset a weaker performance in travel franchise sales in Europe and disruption from Brexit in Q4.
International’s operating proﬁt before adjusting items of £45.1 million reﬂected in large part the lower C&H sales. The International business also incurred Brexit-related costs of £6.2 million in the year.
Given the unappealing results, it’s no surprise that the company talked a lot about the future and how it’s forging ahead with its 'Never The Same Again' strategy.
It said its objective is to “deliver an omnichannel Clothing & Home business in the UK, backed by exceptional data and highly personalised customer relationships. All channels will be driven by a 'product engine' providing a more contemporary focused M&S range bought in greater depth alongside a family of internal and external partner brands with distinctive appeal to our customers”.
It added that it has made “huge strides” in reshaping ranges around new trading principles, “most notably to buy fewer lines in greater depth from fewer strategic suppliers. The extent of the shift has been obscured by Covid and the related trading turmoil, but we believe there is a marked improvement in style, shape of buy and value”.
For instance, by autumn 2021, total option count is expected to be around a quarter lower than 2018 with the team implementing new range management tools to maximise rate of sale of each option. And it’s planning further option count reductions in several areas.
Online, growth in the past year means C&H now has a base of over nine million active online customers “making it one of the largest platforms in the UK”. And its aim is to achieve “in excess of 40% of Clothing & Home revenue through online in three years' time”.
But this also comes at a cost and it seems more store closures are planned with a reduction in the number of its stores that sell its full offer.
Copyright © 2021 FashionNetwork.com All rights reserved.