Marks & Spencer has taken £1bn worth of actions to manage cash including reducing expenditure by £500m as a result of the coronavirus.
M&S boss Steve Rowe told investors on the retailer’s full-year results call that all non-essential spending such as recruitment, marketing and technology had been deferred and savings were being made in areas such as clothing and home logistics.
In terms of managing cash flow, Rowe said M&S had cancelled £100m worth of stock from its suppliers.
“One of the biggest challenges the business has faced during the crisis is a mounting backlog of unsold stock for spring/summer 2020 and the forward pipeline already ordered for the autumn/winter seasons,” Rowe explained.
“We closed the year 19/20 with clothing and home stock of about £500m with committed orders of about £560m scheduled to arrive in the next six months.
“We’ve undertaken a detailed exercise to manage the flow of stock and action as follows: we cancelled around £100m of summer 2020 orders where the products will no longer be required. We’ve drastically reduced future commitment. However, in support of our supplier partners we have paid for all garments in production and fabric which was already committed to prior to the crisis.
“Around £400m of the balance of stock is year-round products, an area of strength for M&S, and will be carried over at low-risk to autumn. We’ve also made arrangements to hibernate around £200m worth of seasonal stock until spring 2021 and storage facilities have been secured.”
Rowe stressed that “customers may never shop in the same way again”, and highlighted the need for M&S to accelerate its transformation programme, which would see the retailer simplify its clothing and home range.
“We will have fewer, but more strategic supplier partnerships with more work being done directly from sourcing offices at a lower cost and closer to the supply base,” he said.
“With far fewer options and less commitment, we can develop our ‘test and reorder’ capabilities for faster clothing supply immediately.”
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