Marks & Spencer is stepping up store closures and shifting focus on clothing from formal outfits to so-called athleisure gear as it aims for recovery after being driven to a £201m loss by the pandemic.
The loss for the year to 27 March, compared to a profit of £67m a year before, comes after like-for-like clothing and home sales slumped by 31%.
M&S said that in recent weeks, sales had staged a recovery as non-essential stores reopened and customers re-stocked their wardrobes – but the retailer is expecting to see a permanent shift in shopping habits as it targets a recovery in profits after the pandemic.
It is planning for less demand for formal and tailored clothing and is shifting focus to growth areas such as "new office smart wear" and casual children’s clothes, as well as its athleisure range.
M&S’s bottom-line profit figure was dragged into the red after one-off costs of £243m partly thanks to the acceleration of plans "to address the drag of legacy stores unsuitable for modern trading or in declining locations".
The retailer, which currently has just over 250 "full-line" sites selling clothing and home as well as food ranges, is aiming to cut this number to around 180.
M&S has already closed 59 full-line stores, plus 15 food-only sites and eight outlets, under previously-outlined plans and said the effect of the pandemic means it can now move faster.
Some stores will be switched to "food only" and others moved to new locations, while around 30 will close, it said.
It is planning 17 new or expanded full-line shops over the next two years, including a number of sites that were previously part of collapsed department store chain Debenhams.
The retailer’s annual results offered contrasting fortunes for stores, where clothing and home sales were down by 56%, and online, where they climbed by 54%.
In food, where stores remained open, revenues grew by 1.3% even before accounting for the contribution of the retailer’s online delivery tie-up with Ocado, which now sells M&S products and delivered a £78m boost to its bottom line.
Trading since the reopening of non-essential stores in April has been ahead of pre-pandemic levels in 2019 but it was unclear whether demand would be sustained, M&S said.
The group reported COVID costs totalling £88m including for pandemic safety measures and bonuses for non-furloughed staff who worked throughout.
It received government pandemic support totalling £306m – £175m in business rates relief and £131m through the furlough scheme supporting wages for temporarily laid-off workers.
M&S also recorded a £16m Brexit charge after the end of the transition period disrupted the supply of fresh and chilled food to overseas markets including the Republic of Ireland, as well as Northern Ireland.
It expects Brexit-related costs of up to £47m in the current financial year as a result of red tape on food trade as well as possible tariffs on clothing.
Chief executive Steve Rowe said: "In a year like no other we have delivered a resilient trading performance, thanks in no small part to the extraordinary efforts of our colleagues."
He said the group’s "never the same again" programme, which has already seen it axe thousands of jobs, was helping "to forge a reshaped M&S".
"We now have a clear line of sight on the path to make M&S special again," Mr Rowe said. "The transformation has moved to the next phase."
Shares rose more than 6% on the update.