Stock Watch

First loss in 94 years to hit Marks & Spencer share price?

CMC Markets

The Marks & Spencer share price looks set to be tested again this week, with the retailer expected to announce its first loss in 94 years as a public company at its half-year results. After a tough few months for the company, and the sector in general, the Marks & Spencer share price is down 55% since the turn of the year, as the Covid-19 pandemic impacted businesses across the globe.

M&S’s clothes and home division are set to be the biggest drags on profitability, with the food division making only modest gains. Analysts expect M&S’s loss to be in the region of £60m, a stark contrast to the profit of £176m this time last year.

M&S share price to see boost from Ocado deal?

M&S’s recent move to the Ocado delivery service will be under the spotlight as the latest numbers are announced, with the link-up expected to be one of the few highlights of the last quarter. When M&S reported in August, the Q1 numbers were slightly better than expected, with total food sales for example saw a rise of 2.5%, with the Ocado deal set to boost that number.

With the deal with Ocado now up-and-running, investors will hope that the M&S share price will benefit from increased sales. Ocado’s share price has been a big winner since lockdowns began across the country, more than doubling as consumers came to rely on delivery for their grocery shopping

Clothes and home departments hit hardest

Clothing and home are expected to reflect the biggest loss. While this is hardly unique to Marks and Spencer, the expected 40% drop in sales is still significant. In the eight weeks up until August in which stores were open, total sales fell 29.9%, with store sales down 47.9%. Online sales were up 39.2%, however questions do have to be asked; if the M&S online experience was better these numbers might be better.

The retail industry as a whole has been hit hard by store closures during the pandemic, and will be again as the second national lockdown takes hold. The ‘golden quarter’ leading up to Christmas will be severely hampered by the rise in coronavirus cases, a nightmare for high-street retailers everywhere.

M&S set for job losses

In the last update, management also announced that they were looking to reduce headcount by 7,000, and the latest results are expected to reflect the associated costs. The company hopes to offset some of these with new positions in online roles.

Explaining the job losses, M&S noted a “material shift in trade,” with the retailer stating that it was "too early to predict with precision where a new post-Covid-19 sales mix will settle. We must now act to reflect this change".

Bar set low for M&S share price recovery?

The shares have fallen over 10% since the update so the bar is low for an upside surprise, and the beginning of a possible move back to levels last seen in the middle of August.

With the retailer set to announce their half-year results on Wednesday at 7am, what will the latest numbers mean for the M&S share price?