Marks and Spencer first-half loss is smaller than expected

Marks and Spencer reported a smaller-than-expected first-half loss after a strong showing from its food business helped offset a weaker performance at its clothing and homeware divisions.

However, the retailer offered no guidance for the rest of the year, citing the uncertainty created by the second lockdown in England, which starts tomorrow and is due to last until December 2.

Overall, M&S reported an adjusted pre-tax loss of £17.4m for the six months to September 26 against a profit of £176m last year. The average of analysts’ forecasts calculated by CapitalIQ was for a loss of £78m.

The chain’s first-half sales were £4.1bn, also ahead of forecasts, but still £700m less than the same period last year. M&S shares were up as much as 3 per cent in early trading on Wednesday.

M&S’s food business benefited from a sustained cost-cutting effort and the enforced closure of pubs and restaurants in the UK over the spring. Profits were 19 per cent higher at £109m, even though sales were flat.

There was a £38m contribution from the company’s joint venture with Ocado, although about a third of this was attributable to an insurance claim in respect of a fire at one of Ocado’s distribution centres in 2019.

Ocado this week announced it had upgraded its full-year forecasts again, though M&S can only book a share of its profits.

The clothing business at M&S went from a first-half profit of £109m last year to a loss of £107m, as the first lockdown in the spring hit sales and trading was slow to recover once stores reopened.

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M&S said sales would have rebounded more quickly but for its heavy exposure to city centres, where sales were down by half even after the first lockdown ended.

The group also said it planned to accelerate its transformation efforts by creating what it terms “MS2” within its clothing business. It said this would entail “a step change in online product, presentation, pricing and social marketing including recognition that the online business will need a focused range”.

Chairman Archie Norman and chief executive Steve Rowe have previously said they intend to use the pandemic as a catalyst to accelerate internal change at the 136-year-old business.

In August, the company said it would cut 7,000 jobs in stores and at its London headquarters. The half-year result included a £92m exceptional cost to reflect these cuts and the group also said it would incur further charges of £120m in respect of store closures.



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