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Adapt to survive

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Adapt to survive

As England begins another month-long lockdown, it doesn’t seem long since we were being directed to Eat Out to Help Out and urged back to offices to boost the economy. It certainly isn’t long since Boris Johnson declared that the impact of a second lockdown would be ‘disastrous’ and was to be avoided at nearly all costs.

Unfortunately, the decisions that must be taken in attempts to preserve both lives and livelihoods are wholly unenviable.

Reflecting in no small part the havoc wreaked by the first lockdown, Marks & Spencer recorded the first loss in its 94-year history this week, with clothing sales having been particularly impacted. Revenue fell by 15.8%, and the retailer recorded a loss of £87.6m compared to a profit before tax of £158.8m last year.

M&S has been forced to adapt to the many changing consumer habits brought about by the pandemic and a period of lockdown; selling fewer sandwiches to office workers, selling more online, increased demand for leisurewear and falling demand for smarter clothes.

Given M&S’ stores generated two-thirds of its sales in high streets, shopping centres and town centres, and that formal and outerwear accounted for 25% of sales last year, you can see the scale of the challenge.

Opportunity v threat

M&S has long been criticised for its clothing offer falling wide of the mark, and perhaps this could be an opportunity to fix some things. CEO Steve Rowe sounded an optimistic note amid the uncertainty, claiming “out of adversity comes opportunity and, through our Never the Same Again programme, we have brought forward three years change in one to become a leaner, faster and more digital business.”

M&S also says it is well positioned to take advantage of the long-term opportunity created by the step change in online grocery shopping through its tie-up with Ocado in September.

In spite of the loss, the share price responded positively to the results – up as much as 5% on the day – albeit off a base more than 50% lower than the start of the year.

Boris Johnson’s reluctance to bring about a second lockdown is entirely understandable, but he found himself having to make the case for just that to Parliament on Monday. That Boris Johnson pulled out of his planned address at the CBI Conference on Monday to do that is symptomatic of the problem.

Later in the week he apologised to businesses via a pre-recorded address and thanked them for complying with the kind of diktat he never believed he would have to impose, adding that the measures “go against every free market instinct I possess.”

He sought to reassure that the measures will end on December 2nd. Given that unpredictability has become a regular feature of life, let’s hope that is the case.

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