M&S to reduce clothing supply chain pipeline by £100m in COVID-19 response
Marks & Spencer said it is planning for a prolonged downturn in demand in its clothing and home division as a result of COVID-19 – and will be reducing its supply pipeline by over £100 million as it holds over stock.
In a trading update to investors M&S said that with two thirds of its clothing inventory ‘core’ product it would take extraordinary measures to hold over inventory.
M&S Castle Donington
The update on COVID-19 trading conditions also said that although it was possible that the slowdown in demand for clothing and homeware may ease in the summer, margins would likely to be severely impacted by the surplus of unsold seasonal stock and probable clearance activity in the marketplace.
It said that it was taking all possible steps to defer supply, but a “very large part of our core business is less seasonal year-round essential product and this should provide some scope for carrying forward stock”.
It said that at this stage it was not assuming a return to normal trading in the autumn.
However, M&S said that it expected its food business to trade profitably throughout the crisis.
Marks & Spencer, Croydon
“At this stage we have benefited on a small scale as customers stock up but our heavy bias to chilled and fresh means we are not seeing the forward buying uplift experienced by the major grocers,” the statement said.
“The significant shift to eating in home should however continue to benefit sales in the months ahead. Although there will undoubtedly be supply interruptions, we do not expect these to be prolonged or financially material.”
It also said that it was also preparing for the contingency that some stores may have to close temporarily but its business model of operating parallel clothing and food businesses and its strategy to move online – including the Ocado joint venture – would “provide more resilience than some single sector businesses”.