Marks & Spencer (M&S) has frozen pay hikes and scrapped its dividend this year as it braces for temporary store closures over the coronavirus.
Shares in the high street giant (MKS.L) dived 4.7% on Friday morning after it announced it had seen “substantial sales declines” in the clothing, home and international parts of the business.
It said it would slash spending, including saving £130m as it now “does not anticipate” paying out a final dividend to shareholders this financial year.
The company’s margins will be “severely impacted” by a surplus of unsold seasonal stock and “probably clearance activity in the marketplace.” It said in a trading update it did not expect a return to normal trading in the autumn.
The retailer said it expected its food business to “trade profitably” throughout the growing crisis however, with a modest uplift noted already as shoppers stock up, and more home eating expected to sustain demand.
But it added: “Our heavy bias to chilled and fresh means we are not seeing the forward buying uplift experienced by the major grocers.”
The company also said it had begun preparing now in case some stores had to temporarily close.
The company will:
Defer all pay increases for staff.
Move as many workers as possible from home and clothing teams into food stores.
Spend only around £80m in capital investment in its 2020-2021 financial year, from a budget of £400m.
Cut all “non-essential” spending and recruitment, and slash marketing budgets.
The company, which will report its full-year results in May, said it did not believe the “long-term value of M&S beyond the coming year would be impacted by the virus.
It praised the “extraordinary cheerfulness” of staff in difficult times, adding: “M&S has served customers without cease through two world wars, terrorist bombings and numerous local disasters and we are determined to support our customers now as we always do.”
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