Marks & Spencer: ‘watching from the side-lines’
Marks and Spencer have released their Christmas 2020/2021 trading statement, revealing that revenue fell 8.4% to £2.8bn in the third quarter.
Steve Rowe, Chief Executive said: “Given the on-off restrictions and distortions in demand patterns our trading was robust over the Christmas period. More importantly beneath the Covid clouds we saw a very strong performance from the Food business including Ocado Retail and a further acceleration of Clothing & Home online. I want to thank all my colleagues for a first-class execution of Christmas for our customers in near impossible conditions.
“Near term trading remains very challenging but we are continuing to accelerate change under our Never the Same Again programme to ensure the business emerges from the pandemic in very different shape.”
Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown said: “It looks like Marks & Spencer food watched Christmas from the side-lines. The bigger supermarkets we’ve heard from enjoyed much brighter sales than this high street giant. That might come as a surprise, given UK shoppers were looking for higher end and traditional treats to make their smaller gatherings feel extra special. But Marks & Spencer is far more exposed to high street and service station footfall, which have been seriously tempered by on-again, off-again lockdowns. The bright spot comes from the strong demand seen in M&S’ retail park and Simply Food stores. This is significant because it means Marks & Spencer’s food proposition is working and is a true asset to the business, but sales are having their wings clipped by the old adage: location, location, location. Declines elsewhere will also have been offset in recent weeks by the mad rush for online delivery slots at the joint venture with Ocado retail.
“Clothing & Home is having a more difficult time, with lockdowns having a more severe impact on performance. The most disappointing part is online sales which, while seriously improved, haven’t reached the heady heights others have reported. This is likely a function of two things – the first being M&S was behind the curve when it came to online, so has been playing catch up infrastructure-wise. The second, we suspect, is M&S customers prefer traditional shopping, and are perhaps less likely to transfer online.
“Potential tariffs on EU products are an added headache for the international business. This extra financial burden is something the group could really do without, while it continues spinning a vast number of plates elsewhere. In the midst of a huge turnaround, and a challenging near-term, M&S will be hoping nothing else gets added to the rapidly expanding to-do list.”