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M&S clothing sales hit by COVID and trading restrictions in Christmas quarter

Marks & Spencer has reported a big fall in clothing and homeware sales during the Christmas quarter, due to coronavirus and retail restrictions caused by the pandemic. 08 January, 2021

Marks & Spencer has reported a big fall in clothing and homeware sales during the Christmas quarter, due to coronavirus and retail restrictions caused by the pandemic.

The retailer also warned that the UK's new trade deal with the European Union had led to "potential tariffs" on part of the range it exports to the bloc.

Revenue at M&S's clothing and home division slumped 25.1% in the 13 weeks to 26 December, its third quarter, following a 21.3% fall in the previous quarter.

Between 5 November and 1 December - when England had extra coronavirus restrictions - revenue for this division was down 40.5%.

UK sales fell 7.6% on a like-for-like basis during the third quarter, with food up 2.6% and home sales down 24.1%, but the November restrictions sent food and non-food sales falling 4.5% and 40.5% respectively.

Online sales remained strong - including a new tie-up with Ocado to offer grocery deliveries - with sleepwear and leisurewear especially popular as shoppers were ordered by the government to stay at home to limit the spread of the coronavirus.

M&S also warned that the new trade deal with the European Union had led to "potential tariffs on part of our range exported to the EU, together with very complex administrative processes" which will "significantly impact" its businesses in Ireland, the Czech Republic and franchises in France.

On Wednesday, it was revealed that more than 50 British retailers, including M&S, face potential tariffs for re-exporting goods to the EU.

The trade deal was meant to provide zero-tariff and zero-quota access to the bloc's single market but it has emerged that goods sourced from outside - or even inside - the EU that are brought into the UK and then re-exported to the EU can attract a tariff under the rules of origin.

M&S chief executive Steve Rowe said earlier in the week: "Tariff-free does not feel like tariff-free when you read the fine print (of the deal).

"For big businesses there will be time consuming workarounds but for a lot of others this means paying tariffs or rebasing into the EU."

Commenting on the retailer's financial results, Mr Rowe 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 and home online.

"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."

Ross Hindle, retail sector analyst at research firm Third Bridge, said: "Part of M&S's recovery is dependent on an effective vaccine rollout and a return to the business as usual some say may come from autumn onwards.

"However long-term success will be dependent on the company fixing the structural problems it faces around a bloated product range, high SKU (stock keeping unit) count, and high street store portfolio."

Shares in Marks & Spencer Group closed down 2.4% on Friday.

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