Marks & Spencer reveals slump in sales as Covid-19 restrictions hit it hard

Sales in the UK fell 7.6% on a like-for-like basis in the three months to December 26, with the food division growing 2.6%, but clothing and home sales dropped 24.1%.

The company also revealed the November national lockdown in England was particularly painful, sending both food and non-food sales down 4.5% and 40.5% respectively.

Bosses warned that the new EU trade deal has led to “potential tariffs on part of our range exported to the EU, together with very complex administrative processes” which will “significantly impact” its businesses in Ireland, the Czech Republic and franchises in France”.

Steve Rowe, the chief executive said: "Given the on-off restrictions and distortions in demand patterns our trading was robust over the Christmas period.

"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 & Home online. I want to thank all my colleagues for a first-class execution of Christmas for our customers in near impossible conditions.

"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."

Ross Hindle, retail sector analyst at Third Bridge, said: "Marks & Spencer saw positive growth in food sales of 2.6%. However the growth is not enough to is offset their fashion-division declines with total sales for the group down 8.4% for the quarter."

"M&S's potential acquisition of Jaeger hints at the potential for a more aggressive shift into the multi-brand space. M&S have numerous large stores which could be filled with non-M&S merchandise in order to drive their top-line. The risk here is whether such brands might cannibalise M&S branded products."

"Despite the pressure faced by their clothing division, the M&S food division is expected to deliver solid results, propelled by both stock-piling and its Ocado partnership. Ocado has outperformed throughout the pandemic gaining 20 basis points in market share, however capacity issues continue to limit the Group’s growth potential."

"Part of M&S's recovery is dependent on an effective vaccine rollout and a return to the business-as-usual some say may come from Autumn onwards. However long-term success will be dependent on the company fixing the structural problems it faces around a bloated product range, high SKU count, and high street store portfolio."

"The UK's third national lockdown poses some unprecedented challenges to the fashion division at M&S, which was already struggling pre-covid."