M&S hit by Covid-19 restrictions and EU paperwork

business
M&Amp;S Hit By Covid-19 Restrictions And Eu Paperwork
An M&S worker adjusts a Christmas window display, © PA Wire/PA Images
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By Simon Neville, PA City Editor

Covid-19 restrictions in the past three months saw Marks & Spencer take a knock in sales, as the retailer suffered from a November lockdown and tiering restrictions in England.

Bosses at the high street stalwart revealed that sales in the three months to December 26th fell 7.6 per cent on a like-for-like basis, with the food division growing 2.6 per cent, but clothing and home sales dropped 24.1 per cent.

The national lockdown in England hit particularly hard, with both food and non-food sales down 4.5 per cent and 40.5 per cent respectively.

Online sales were strong – including a new tie-up with Ocado to offer grocery deliveries for the first time – and shoppers were keen on buying sleepwear and leisurewear as they stayed indoors.

Boss Steve Rowe also warned that, despite the UK signing a free trade agreement with the EU, new rules and regulations are set to “significantly impact” its overseas ventures in Ireland, the Czech Republic and France, although he insisted the company is “actively working to mitigate” the issues.

However, he said that, in spite of the Brexit and Covid knocks, M&S had a “robust” Christmas period.

M&S saw strong sales of champagne and sparkling wine – up 48 per cent, pigs in blankets up 22.5 per cent, Brussels sprouts up 26 per cent, hampers up 139 per cent, flowers up 128 per cent and smaller turkeys up 35 per cent due to Christmas gathering restrictions.

“More importantly, beneath the Covid clouds, we saw a very strong performance from the food business, including Ocado retail, and a further acceleration of clothing and home online.”

Looking forward, Mr Rowe said: “Near term, trading remains very challenging, but we are continuing to accelerate change under our Never The Same Again programme to ensure the business emerges from the pandemic in very different shape.”

International revenues

On the food division, the retailer saw mixed results, with food-on-the-go sales dropping in towns and city centres as office workers stayed at home.

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But there were strong sales in the four weeks leading up to Christmas – up 8.7 per cent – particularly at large retail park and Simply Food stores, which have remained open throughout as “essential” retailers.

M&S added that the clothing and home division has been repositioning its ranges and the 46.5 per cent fall in in-store sales was partially offset by 47.5 per cent growth in online sales. This included a rise in the number of full-price items sold.

International revenues dropped 10.4 per cent due to global Covid-19 restrictions, and the company warned that the new free trade agreement between the UK and the EU is causing problems with “potential tariffs on part of our range exported to the EU, together with very complex administrative processes”.

Mr Rowe explained that the problem stems from “point of origin” rules, which he said create huge complexities.

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He said: “Essentially, there is about a third of the product in our food business that is subject to very complex rules of origin arrangements, around the components within it, and how much has been altered in the UK.

“Depending on that there is a variable tariff. Any product that’s manufactured in Europe, comes to the UK and is then redistributed to somewhere like Republic of Ireland also, potentially faces a tariff.

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“So, the best example is Percy Pig is actually manufactured in Germany, and if it comes to the UK and we then send it to Ireland, in theory, he would have some tax on it.”

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