M&S to increasingly turn to Irish food producers to curb post-Brexit headwinds
MARKS & Spencer has said it will increasingly turn to locally sourced food products to mitigate the impact of Brexit on its Irish operations.
The supermarket chain said ongoing EU border issues, largely relating to its business in the Republic, has cost it around £13 million in the six months to October 2 2021.
M&S relies on distribution centres in Britain to supply its stores on the island of Ireland. Food products arriving into the Republic from Britain have faced new checks in the post-Brexit era.
The supermarket chain said has faced “significant cost and complexity in servicing the Republic of Ireland”.
The new arrangements under the Northern Ireland Protocol, including the current grace period for food products coming from GB, has also proved challenging for the retailer, which turned Mallusk-based Henderson Group to resolve some supply problems.
M&S said the “unspecified extension to the Northern Ireland easement” was continuing to cause uncertainty.
In a trading report covering the 26 weeks to October 2, M&S it is continuing to “mitigate the very substantial headwinds relating to the impact of EU border issues on the Irish food business”.
That has included “restructuring the cost base and a planned step up in local sourcing”.
The supermarket chain said it had also restructured its operations across the island of Ireland. Other post-Brexit measures include ending its relationship with a French franchise partner and adapting product ranges available in other European locations.
Despite the warnings over costs and supply disruption, M&S still increased its annual profits outlook for the second time in less than three months.
Shares in the retail giant leapt more than a fifth higher at one stage on Wednesday morning after it revealed that food sales rose more than 10 per cent and cheered a "substantial improvement" in its once-ailing clothing and homewares business.
Chief executive Steve Rowe thanked a boost from pent-up demand after lockdowns, but also said "for the first time we can see that the hard yards of driving long-term change are beginning to be borne out in our performance".
M&S swung to underlying pre-tax profits of £269.4m in the six months to October 2 against losses of £17.4m a year earlier at the height of the pandemic.
Profits were 52.8 per cent higher than they were two years ago, before Covid-19 struck.
The group expects full-year underlying profits to beat expectations, now guiding for around £500m - having already upgraded its guidance in late August to above £350m.