Marks & Spencer’s businesses in Ireland and France could be materially hit if Britain fails to reach a trade deal with the European Union before the Brexit transition period finishes at the end of the year, the company has warned.
The news came as the High Street group reported its first loss in 94 years as a publicly listed company after clothing sales were hammered by the Covid-19 pandemic, but an encouraging performance in food sent its battered shares higher.
The London-based retailer said it is facing increased administration costs as a result of Britain’s exit from the EU, even if a deal is agreed, which is looking more probable now. If no free trade agreement is signed with the EU and significant tariffs on food are imposed, it warned that retail prices will also rise.
“There would also be a potential further reduction in the profitability of our international businesses,” the company said in its interim earnings statement on Wednesday. “In particular this could have a material impact on our businesses in the Republic of Ireland and the Czech Republic and on our franchise food stores business in France.”
The company on Wednesday reported sales that held up better than expected during the pandemic, helped by a strong start for the UK retailer’s online grocery joint venture with Ocado. The clothing, home and food retailer sounded an upbeat tone, reporting a half-year adjusted pretax loss of £17.4 million (€19.35 million), less than a third of the loss analysts expected.
More agile
Chairman Archie Norman said the economic pressures of Covid-19 are forcing the retailer to make decisions it might have hesitated over and thus it’s becoming more agile.
“We are using the crisis to reshape the business and will emerge like a coiled spring for the future,” he said in a presentation on Wednesday.
M&S’s food business was the best-performing division, helped by strong demand as people work from home, with like-for-like sales rising by 2.7 per cent.
M&S’s clothing and home business was hit hard during mandatory store closures earlier this year, though that was slightly offset by a gain in online sales.
Chief executive Steve Rowe said the retailer is fully prepared for a “digital Christmas” and has increased its capacity to handle online orders.
– Bloomberg
