Marks & Spencer has moved to secure its liquidity for the duration of the coronavirus crisis after seeing both its food and non-food businesses take a major hit from the current lockdown.
With stores closed, the group confirmed sales of clothing and homeware had been “severely constrained” and would be lower for the rest of the year, even as restrictions are gradually lifted.
Although its food halls and Simply convenience outlets have remained open, M&S has not enjoyed the same boost to food sales as other grocers. This is because shoppers have been stocking up on essentials and packaged groceries rather than chilled and fresh products that feature strongly in M&S’s offering.
The group said today that food trading has also been adversely affected by lockdown due to the closure of cafes and slowdown in travel and some city centre locations. However, it stressed it still has a strong food business with the Ocado joint venture on track to start selling M&S lines in September.
In order to maximise its liquidity, M&S has reached an agreement with the banks that provide its £1.1bn overdraft facility to relax or remove certain financial conditions until September 2021.
The group has also accessed the government’s coronavirus corporate finance scheme and will not pay a dividend for the 2020-21 financial year, saving it £210m of cash. Last month, the group axed its final dividend for 2019-20, saving £130m.
M&S is due to report full-year results on 20 May. “We…will at that stage provide a further update on the very significant measures being taken to reduce costs and protect cash flow during the crisis period,” it said.
The retailer has already warned profits for the last financial year will fall short of the £440m that analysts had forecast before the crisis.
Before the outbreak, M&S was trying to turnaround its struggling clothing unit. It said today its financial planning included resources to underpin both a recovery and a faster transformation of the division in 2021.
NAM Implications:
- Still looking like a split of food and non-food will become a necessary move.
- Worth conducting a ‘what-if’ to that effect?
