M&S puts spring stock in hibernation: Retailer’s last-ditch scheme to mothball clothes as discount war looms
Marks & Spencer is among a raft of major clothing retailers busy snapping up warehouse space to ‘hibernate’ stock until next year.
In what is being described as a lost season for high street fashion, most stores are priming themselves for a massive stock clearance sale when shops reopen at the beginning of June.
But clothing giants including M&S, Next and Debenhams are sizing up alternatives to huge price cuts across the board by mothballing clothing and home products that could run into billions in value across the sector.
Sign of desperation: Marks & Spencer is sizing up alternatives to huge price cuts across the board by mothballing clothing
Stock including ‘fashion basics’ – such as no-frills summer tops, T-shirts and jeans – as well as neutral lines including office and formal-wear will be stored in vast warehouses for up to a year. The clothes would then be wheeled out next spring as long as trends have not changed too dramatically.
It is understood the plan to delay selling the stock could be applied to at least half of unsold ranges at M&S, Britain’s biggest clothing retailer, pending trading levels over the coming weeks and months.
Next revealed in a recent statement it has identified £330 million of stock from this season that can be ‘carried forward’ into 2021. That is around 15 per cent of its total stock for the spring and summer seasons in 2021.
It said: ‘This product is generally basic products, for example summer t-shirts and chinos.’
One senior retail source said: ‘There are warehouses, just large empty sheds, some of which haven’t been used for a while. They are being taken by big retailers looking for alternatives to clearance sales. Marks & Spencer, Next, Debenhams – they’re all doing it.’
Another retailer said: ‘We’ve essentially missed out a season and we don’t know right now what ‘normality’ on high streets is going to look like even when stores reopen or how many customers are going to turn up.
‘Sitting on some stock at this point in time is not as ludicrous as it sounds if you don’t desperately need to release the cash.
‘Better that than a fire sale. The question is can you afford to do it or do you need the money?’
Many retailers, including M&S, have already slashed prices online in the first indications of what The Mail on Sunday reported last month was being billed as ‘the sale of the century’.
Shops are due to reopen in two weeks’ time – on June 1 – at the earliest, according to the Government’s timetable.
However, Prime Minister Boris Johnson has stressed that relaxing lockdown rules is ‘conditional’ on the coronavirus pandemic being brought under control.
Although necessary to shift unsold stock, any severe discounting will be extremely painful for high street chains as they try to bounce back from the lockdown. On Wednesday, Marks & Spencer will unveil its financial results for the year to March.
The period was only marginally affected by the health crisis. But veteran City analyst Geoff Lowery at stockbroker Redburn said the company had pencilled in a 24 per cent slump in like-for-like clothing sales through the current financial year even if stores manage to open in an orderly manner.
Senior retail sources told the MoS that M&S chief executive Steve Rowe had harboured hopes of arresting the retailer’s clothing decline by autumn before the crisis hit. The result would have been hailed as a key moment.
Stock hibernation still bears a cost that could amount to more than half the gross profit margin of goods, sources said. That includes removing vast quantities of clothes from stores, stock rooms or distribution centres to be driven to newly rented warehouse facilities. Stock is also piled high in containers at ports such as Southampton.
Retailers are weighing up how that might compare to slashing prices to clear the stock as weeks under lockdown roll by. Many are also trying to calculate how much stock they will need for autumn with store opening programmes still uncertain M&S’s results are also likely to show a 2.5 per cent drop in food sales, according to stockbroker Redburn.
But Redburn partners said the available cash at M&S put it ‘in the survivor bracket’ for the Covid-19 crisis – even if the impact of the lockdown on its sales and profits this year and next was ‘opaque’.
That view is likely to be reflected in comments this week by M&S management, who have drawn up a range of forecasts to satisfy the City.
Sources said the company has ‘used its time wisely’ during lockdown and is now hoping to accelerate some of its transformation strategies.
These include preparing for the Ocado launch on September 1 and speeding up its five-year plan to double its food sales.
It is also aiming to renegotiate many loss-making leases on stores while shutting other premises.