Coronavirus pandemic threatens a severe hit to Mark & Spencer’s financial performance

on Mar 20, 2020
  • M&S says the Coronavirus pandemic is likely to weigh heavily on its financial performance.
  • M&S declined by 5.3% on Friday that posted a total loss of 49% in 2020 so far.
  • M&S eyes £100 million worth of reduction in the clothing supply pipeline.
  • M&S is left with £1.34 billion of liquidity to survive through the Coronavirus pandemic.

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Marks & Spencer (LON:MKS) said in a statement on Friday that its financial performance in the next few quarters is likely to take a massive hit due to the Coronavirus pandemic.

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The British retailer also declared its final dividend (fiscal 2019-2020) suspended and said that it is difficult to give meaningful guidance for its financial performance in 2020-21 at the moment. The company, however, expressed confidence that its business will recover its strength once the ongoing health emergency is contained.

M&S declined by 5.3% in the stock market on Friday that posted a total loss of 49% in 2020 so far.

Marks & Spencer Highlights Poor Performance In Its Home And Clothing Businesses

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The rapidly spreading Coronavirus is weighing heavily on the retailer’s home and clothing businesses. Marks & Spencer is currently working committedly to manage costs in the aforementioned units. In the meantime, the company accentuated a sharp increase in its food business. M&S wishes to redeploy a large number of its workers to the food unit to meet the rising demand. As per the company, it has redeployed 4,600 workers already.

M&S anticipates a prolonged downturn in its clothing and home businesses and is currently strategizing accordingly. The retailer is also bracing itself for the contingency that a few of its global outlets may have to be shut down temporarily.

In an attempt to defer supply, M&S is considering a £100 million worth of reduction in the clothing supply pipeline. The retailer also eyes a delay in all pay increases, capital commitments, and discretionary spending. Suspending the final divided, according to Marks & Spencer, will save £130 million for the company.

Marks & Spencer Estimates Worse Than Expected Pre-Tax Profit In 2019-2020

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Analysts had forecast £440 to £460 million in pre-tax profit for Marks & Spencer in 2019-2020 excluding one-off items. In its announcement on Friday, M&S also warned that due to a severe hit to its home and clothing businesses, pre-tax profit is likely to print below the analysts’ estimate.

The lack of liquidity to survive amidst the fast-spreading Coronavirus is another major challenge posed at M&S. The firm accentuated on Friday that it is left with £1.34 billion of liquidity which, as per the analysts, may not prove to be sufficient if the healthy emergency gets any worse.

Marks & Spencer had not performed well in 2019 either with an annual loss of around 10% in the stock market.

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