Volatile Christmas trading leaves more of a mess at retailer M&S

Last year was grim for retailers, while M&S, the clothing sector’s chronic underperformer, struggled at Christmas too. Matthew Partridge reports.

Last year was a horror story on the high street. The British Retail Consortium says retail sales suffered their “biggest decline in 25 years” in 2020, says Richard Parrington in The Guardian. While total sales only fell by 0.3%, in itself “the worst performance since records began in 1995”, this masks a “dramatic collapse” in some sectors. Sales of food bought from shops increased, owing to the closure of restaurants and pubs, but “sales of all other products fell 5% from a year earlier”. Sales of non-food items in shops, as opposed to online, collapsed by 24%.

One retailer that has done particularly badly is Marks & Spencer, says Ashley Armstrong in The Times. Not only did the company announce its “first loss in its 94-year history” last November, but it has now said that “volatile trading” over the festive season has led to total clothing sales falling by 25.1% to £787 million over the 13 weeks to Boxing Day. Even strong online sales growth of 47.5%, helped by an improved presence on social media and the ability to ship trapped products in closed shops, failed to compensate for a 46.5% fall in in-store clothing sales.

Even food sales have failed to provide much a silver lining for M&S, says Ben Marlow in The Daily Telegraph. In theory, the fact that their food halls were allowed to remain open should have given them a competitive boost. However, unlike the supermarkets, they were still forced to cordon off their clothing aisles, while the closure of their cafes also hit the bottom line. No wonder, then, that the group has decided to “hang onto the Treasury’s business rates freebie” while the grocers and other retailers allowed to stay open have handed the tax break back.

Light at the end of the tunnel?

Investors shouldn’t panic just yet, says Jim Armitage in the Evening Standard. While the Covid-19 closures may have produced “grim” headline numbers, there are some “good signs”. For example, the Ocado tie-up “paid off handsomely”, with online grocery sales up. M&S have also “gauged shoppers’ demands far better than in recent times”. That has reduced the need to discount unsold goods – good news for margins. Meanwhile, its decision to buy Jaeger from Edinburgh Woollen Mill suggests that it wants to become “a destination for smart, middle-aged, middle class brands”, rather than clinging to the “M&S-only legacy of St Michael”.

Still, some clothing retailers have thrived during this crisis, says Jonathan Eley in the Financial Times. Next’s “years of investment in its online channel”, for instance, enabled it to limit the fall in the sales in the nine weeks to Boxing Day to just 0.5%. This also means that the chain is “far better positioned” to deal with the “demanding trading conditions”, posed by the current lockdown than many of its rivals. Not only does the company expect to make a pre-tax profit of £370m this fiscal year (which ends on 31 January), but it hopes to increase this to £670m in the following 12 months.

Recommended

The hidden cost of employee share schemes
Investment strategy

The hidden cost of employee share schemes

Paying employees in shares comes at a cost to investors – but it isn’t always easy to see how much, says Stephen Clapham.
26 Sep 2022
Sterling crashes to its lowest since 1985 after mini-Budget
Currencies

Sterling crashes to its lowest since 1985 after mini-Budget

The pound has fallen hard and is heading towards parity with the US dollar. Saloni Sardana explains why, and what it means for the UK, for markets and…
23 Sep 2022
Earn 3.7% from the best savings accounts
Savings

Earn 3.7% from the best savings accounts

With inflation topping 10%, your savings won't keep pace with the rising cost of living. But you can at least slow the rate at which your money is los…
23 Sep 2022
Three top-notch Asian stocks to buy
Share tips

Three top-notch Asian stocks to buy

Professional investors Adrian Lim and Pruksa Iamthongthong, managers of the Asia Dragon Trust, pick three of their favourite Asian stocks to buy now.
23 Sep 2022

Most Popular

Could gold be the basis for a new global currency?
Gold

Could gold be the basis for a new global currency?

Gold has always been the most reliable form of money. Now collaboration between China and Russia could lead to a new gold-backed means of exchange – g…
22 Sep 2022
Paypal, bitcoin, and the weaponisation of money
Bitcoin & crypto

Paypal, bitcoin, and the weaponisation of money

Recent events have shown how both business and governments can “weaponise” money and shut down dissent. What to do? Buy bitcoin, says Dominic Frisby.
22 Sep 2022
Why you should short this satellite broadband company
Trading

Why you should short this satellite broadband company

With an ill-considered business plan, satellite broadband company AST SpaceMobile is doomed to failure, says Matthew Partridge. Here's how to short th…
23 Sep 2022