Marks & Spencer (MKS.L) has said it will not pay a dividend this year as it seeks to conserve cash in the business to weather the COVID-19 pandemic.
In an unexpected update on Tuesday, the retailer set out a range of measures it has taken to “maximise liquidity” during the crisis.
M&S said it has negotiated a relaxation of conditions on its £1.1bn ($1.3bn) credit facility with banks and been certified to issue credit notes under the governments Covid Corporate Financing Facility (CCFF) support programme. The axing of the annual dividend will save around £210m.
These measures will give the company enough runway for at least 18 months, M&S said.
Clive Black and Darren Shirley, retail analysts at stockbroker Shore Capital, said the update was “good news in the context of particularly difficult times.”
M&S said it would “provide a further update on the very significant measures being taken to reduce costs and protect cash flow during the crisis period” at its full-year results on 20 May.
The cost saving push came as M&S warned of a sharp downturn in trading caused by the nationwide lockdown. Clothing and homeware sales have been “severely constrained” and M&S said they were likely to be “highly uncertain” even once lockdown restrictions begin to be eased.
“Crucially the group’s planning for trading to be disrupted for a while,” said Sophie Lund-Yates, an equity analyst at stockbroker Hargreaves Lansdown. “That’s a welcome dose of foresight, it would be a mistake to think the high street’s going to see a sea of shoppers the second lockdown restrictions are lifted.”
Food sales have also been “adversely affected” by the coronavirus lockdown, due to the closure of M&S cafes and a slump in ‘on-the-go’ food sales like sandwiches.
“M&S’ food offering is very different to the bigger supermarkets, which means it relies more heavily on travel and city centre footfall,” Lund-Yates said.
“With so few of us now nipping into the sandwich aisle in motorway service stations, or on our lunch breaks from the office, it’s not a huge surprise sales have dipped.”
Shares in Marks & Spencer were down 0.25%.