Marks & Spencer reduces stock levels and increases logistics and supply chain investments in face of record losses

Costs associated with Covid-19 and Brexit weighed on Marks & Spencer, but the retailer said it would continue to invest in e-commerce logistics capacity as well as supply chain capabilities to manage the flow of goods internationally.

Overall the retailer made its first pre-tax loss (£87.6 million) in 94 years with turnover falling by 15.9% to £4.09 billion in the first half of its financial year as its Clothing & Home division saw store sales slump, and increases in e-commerce had failed to off-set the slide.

Furthermore M&S warned that as it entered a period of new Covid-related restrictions in coming weeks its Clothing & Home sales in store would be significantly reduced, albeit offset by continued increases in online sales.

It said the division was approaching the circuit-breaker lockdown with stock levels down by more than £100 million on last year and with less stock hibernated to next Spring than previously envisaged.

The retailer had already revealed plans to increase its online capacity for Christmas through a 30% increase in staffing numbers, alongside the roll-out of automation technologies, at its Castle Donington, Leicestershire distribution centre. To that end it also said it had increased in-store picking capacity.

For the 26 week-ending 26 September, M&S’s Clothing & Home division saw total revenues decline 40.8% (comprising a decline of 61.5% in Q1 and 21.3% in Q2). Online revenue increased 34.3% but
growth was insufficient to offset the decline in store sales. In-store it said the priority had been to clear stock.

M&S also said that food sales in the same period had seen  2.7% like-for-like growth (6.6% excluding hospitality). On 1 September volumes of M&S food began moving through its 50% joint-venture with Ocado Retail.

M&S said that investment were in place to drive substantial growth in Ocado Retail, with 40% additional capacity coming on stream by Autumn 2021, as revenue growth in the joint-venture was currently constrained by the capacity limits of its established Customer Fulfilment Centre (CFC) network.

Its Food business, it said, had also spent much of the six month period preparing for Brexit, managing the administrative changes to import from the EU and moving goods from Great Britain to Northern Ireland and European markets.

The retailer said it had invested in technology to support it tracking goods and providing the information required for the new customs and certification requirements.

It said that for goods inbound to the UK from the EU it was working with suppliers on import compliance to ensure continuity of supply and it had also created a single export centre in Motherwell to manage goods movements from Great Britain to the island of Ireland.

It warned that the increased administration would result in additional costs for both our Food and International businesses and if no Free Trade Agreement was signed between the UK and the EU there would be further costs for all food retailers in the UK “which will likely affect retail pricing”.

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