// M&S says profit would be on lower end of expecations as coronavirus crisis continues to bite the retail sector
// Profit would now likely be at the lower end of its expectations, even with massive spending cuts
// All pay rises have been frozen, non-essential spending suspended, marketing budget cut, and non-essential recruitment suspended
Marks & Spencer has frozen all pay rises and suspended all non-essential spending as it warned that its clothing & home lines would take a hit from the coronavirus pandemic.
The high street stalwart warned that profit would now likely be at the lower end of its expectations, even as it massively slashed spending.
“Whilst we remain confident that the post-crisis future of the business and our transformation programme remains as strong as ever, trading over the next nine to 12 months in our clothing and home and international businesses is likely to be severely impacted,” M&S said in a statement to investors this morning.
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The retailer said staff members from its clothing and home segments would be moved into the food halls “wherever practical” and all pay increases would be deferred.
It will also suspend or cancel all discretionary spending, freeze non-essential recruitment and reduce the amount it spends on marketing.
Meanwhile, it will only spend around £80 million on capital projects in the 2020/21 financial year, a dramatic difference from a previous budget of up to £400 million
M&S also announced plans to grow online.
The retailer said that it was still on track to reach its full-year forecasts until this week.
However, it warned on Friday that profit before tax is likely to be at the lower end of its predicted £440 million to £460 million due to the “probable very depressed trading in clothing and home”.
Food sales have done better, but customers looking for tins and other durable goods have turned elsewhere since M&S focuses on fresh and chilled good.
The board also said it does not expect to pay a dividend this year.
“It is not possible to provide meaningful guidance on future earnings, although we are taking every step to secure future value for shareholders, colleagues and suppliers,” M&S said.
Earlier this week, M&S announced that its stores and business functions would remain open during the pandemic, as other retailers such as TK Maxx, Ikea and Clarks voluntarily shut theirs on a temporary basis.
M&S also implemented new measures to support customers and colleagues amid the outbreak.
The retailer’s food division also joined a growing list of grocers that have introduced temporary rationing, with purchase restrictions of two items per person.
Other grocers to have introduced full-scale rationing include Tesco, Asda and Waitrose.
with PA Wires