M&S festive sales hit by 'on-off' Covid restrictions; warns on Brexit impact

(Sharecast News) - Food and clothing retailer Marks & Spencer reported a fall third quarter revenue as it warned the latest UK Covid lockdown would hit sales and the Brexit trade deal "significantly impact" some of its European operations.
Like-for-like revenue in the 13 weeks to December 26 fell 7.6% to £2.5bn with a 4.4% rise on food sales over the festive period was offset by a 24.1% slump in clothing and homewares. The November national lockdown in England was also painful, sending both food and non-food sales down 4.5% and 40.5% respectively.

Food did perform well in the four-week period to Christmas, with like-for-like sales, excluding hospitality and franchise up 8.7%, with large retail park and Simply Food stores significantly outperforming.

M&S cited "on-off restrictions and distortions in demand patterns" due to the coronavirus crisis and warned that Brexit-related bureaucracy would harm some of its European operations.

"The free trade agreement with the EU means we will not incur tariffs on our core UK sales. However potential tariffs on part of our range exported to the EU, together with very complex administrative processes, will significantly impact our businesses in Ireland, the Czech Republic and our franchise business in France which we are actively working to mitigate," M&S said on Friday.

International revenues already fell 10.4% due to changing Covid-19 restrictions.

The company said its tie-up with online firm Ocado had produced "very strong" results, while customers had responded to its "innovative seasonal product" during the four-week run-up to Christmas.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown said while larger supermarkets such as Sainsbury's had enjoyed bumper sales as Britons under Covid restrictions over Christmas "were looking for higher end and traditional treats to make their smaller gatherings feel extra special" M&S was "far more exposed to high street and service station footfall, which have been seriously tempered by on-again, off-again lockdowns".

"The bright spot comes from the strong demand seen in M&S' retail park and Simply Food stores. This is significant because it means Marks & Spencer's food proposition is working and is a true asset to the business, but sales are having their wings clipped by the old adage: location, location, location. Declines elsewhere will also have been offset in recent weeks by the mad rush for online delivery slots at the joint venture with Ocado retail."

"Potential tariffs on EU products are an added headache for the international business. This extra financial burden is something the group could really do without, while it continues spinning a vast number of plates elsewhere. In the midst of a huge turnaround, and a challenging near-term, M&S will be hoping nothing else gets added to the rapidly expanding to-do list."