Source: Sharecast
The company on Wednesday reported pre-tax losses of £209.4m for the 53 weeks to April 3 compared with a profit £67.2m a year earlier. Exceptional charges totalled almost £260m, mostly relating to organisational change and store closures.
M&S said it would speed up its plan to close outdated stores and create a chain of 180 main sites around the country, down from 254 at present. On top of the 30 closures, a further 110 large stores will become food-only outlets, or several stores would be combined into one.
Group revenue fell to £9.1bn from £8.9bn and the company said a dividend was "unlikely" this year. M&S said overall trading for the first six weeks of the financial year and since reopening had been ahead of the comparable period two years ago in 2019/20.
Clothing and homewares slumped to a £129m loss from a profit of £223.9m profit a year ago as like-for-like sales fell by a third. Food profits were down 9% to £213.6m, while sales on the same basis were up 1.3% as food outlets stayed open during the crisis.
Looking forward, the company said it expected to recover to a profit before tax and adjusting items of £300m-350m as it aimed for a further reduction in net debt.
"Core food is in strong growth although hospitality and franchise remain adversely affected, with clothing & home sales growing since reopening and online remaining robust. International sales continue to be impacted by on-going restrictions, particularly in India," M&S added.
"While encouraging, it is unclear how the recovery will develop and if consumer activity will sustain. International markets continue to face headwinds with ongoing disruption and the material costs of Brexit which we are working to mitigate."
"As we recover balance sheet metrics consistent with investment grade, we will assess the reintroduction of dividend payments, although as we focus on restoring profitability this is unlikely in the current year," it said.
Hargreaves Lansdown analyst Sophie Lund-Yates said M&S was "grappling with a sudden, and somewhat irreversible change in clothing tastes. Formal outfits and tailored clothing are on the way out, and that shift packs a particular punch".
"To say all the challenges are over would be a gross misstatement. The picture for clothing & home remains very tricky. The work being done to streamline the store estate and drag more of the business online must be applauded, but it’s too early to call if these gargantuan efforts have simply come too late."
"A restructuring effort this intense comes with huge risk, and there’s a chance the profit and cash outflows that come with it stretch further into the future than M&S is planning for.”