Marks & Spencer pledges ‘never the same again’ overhaul as Covid-19 hits trading

Marks & Spencer has revealed plans for a “never the same again” overhaul after coronavirus as it warned trading is set to be affected for the whole of 2020.

The retail giant said it expects its clothing and home arm to be “severely constrained” during the Covid-19 lockdown and remain under pressure due to an expected phased lifting of social distancing restrictions.

It added that trading in its food business has also been knocked by the closure of cafes and wider lockdown affecting travel and city centre sites.

M&S unveiled plans to give more details of the cost actions to weather the storm and said it will reveal how it will change ways of working “permanently” alongside next month’s results under a ramped-up overhaul, dubbed “Never the same again”.

The high street chain said it plans to scrap its shareholder dividend for the next financial year, having already cut the 2019-20 payout, while it has secured fresh funding to bolster its balance sheet in the face of the woes.

M&S gave an early hint of big changes to come across the chain, as it said the crisis has “created a very different way of working and rapid learning for the business at all levels”.

It has already been grappling with years of disappointing trading in its clothing and home arm and has been looking to restructure the group to focus more on online sales.

The chain has struck a deal with online grocery group Ocado for food deliveries, which it said is still on track for September.

M&S said: “We are planning for the clothing and home business to be severely constrained during lockdown and highly uncertain trading conditions in a prolonged exit period.

“In the absence of a clear basis for forecasting, our scenario planning and stress tests are based on materially subdued trading for the balance of 2020 in clothing and home.”

M&S has already warned that profits for the last financial year will fall short of the £440 million which analysts had forecast before the crisis.

But it will save £210 million by ditching the next year’s shareholder payout, on top of the £130 million in savings from axing its final dividend for 2019-20.

As well as the funding deal from its banks, it has also confirmed it is tapping into the Government’s emergency Covid Corporate Financing Facility to help shore up its finances.

We suspect we could see a longer-term shift to online grocery shopping once lockdowns start to lift, as more households will have become accustomed to the service – putting M&S in a good position

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said M&S is offering a “welcome dose of foresight” by warning over an ongoing hit to trading.

She said: “It would be a mistake to think the high street’s going to see a sea of shoppers the second lockdown restrictions are lifted.”

She added: “We suspect we could see a longer-term shift to online grocery shopping once lockdowns start to lift, as more households will have become accustomed to the service – putting M&S in a good position.”