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Marks & Spencer expected to slide to £43m profit after Covid closures

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Profits are expected to fall at Marks & Spencer after the retail giant’s sales were strangled by pandemic store closures.

The group is expected to disclose that it tumbled to a £43 million pre-tax profit for the year to March when it updates investors on Wednesday May 26.

Marks and Spencer food delivery from Ocado
Marks & Spencer launched its Ocado Retail joint venture last year (Doug Peters/PA)

It would represent a 36% slump against the £67.2 million profit for the previous financial year, as pandemic costs further cut into its performance.

This is expected to have been driven by a dive in clothing and home sales, which are predicted to plunge 34% after being battered by the enforced closure of stores for many months.

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Analysts at Barclays have said the financial year is “likely to have been a poor one from the point of view of the raw numbers” but that a small pre-tax profit will still have seemed a “decent outcome” at the height of the pandemic.

They added: “Moreover, the company has arguably had some positive achievements in the last year – with the Ocado switchover having gone well, with clothing and home sales transitioning online relatively smoothly, and with the cost structure being tackled.

“Of course, the share price has also bounced materially from its lows, so we now need some reassurance that sales trends are starting to recover and some greater confidence about the direction of profits and cash in the year ahead.”

The retailer’s recovery strategy also saw it announce a management shake-up earlier this week.

Katie Bickerstaffe and Stuart Machin will become joint chief operating officers to help lead the company’s revival.

Investors will be keen to hear about how stores have performed since they reopened on April 12.

M&S’s food partnership with Ocado is also expected to drive positivity among shareholders, as online grocery orders remained strong during the latest lockdown.

The Ocado Retail joint venture launched in September and is expected to help the M&S food business to 1.2% like-for-like sales growth for the year.

The retailer is also expected to hold off paying a dividend to shareholders again until profits improve, with analysts suggesting it might not return for another two years.

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