M&S to change how it supplies Irish stores in response to £30 million Brexit burden
MARKS & Spencer is considering sourcing more local produce and switching supply lines after revealing a £30 million administrative burden on its island of Ireland operation due to Brexit.
The retailer said it needs to reconfigure how it operates, partly in response to the new checks and controls on goods moving across the Irish Sea.
M&S said it may result in more locally sourced goods and re-routing produce through European hubs
The grocery giant tumbled to a £201.2m pre-tax loss for the year to March 27 on revenues of £9 billion, after its clothing and home business was particularly hammered by pandemic restrictions
But the retailer said it has also been exposed to additional costs following Brexit, revealing £27-33m of extra costs linked to operations on the island of Ireland.
Food products in particular have become more expensive to move from Britain into the island of Ireland due to new certification requirements around products of animal origin.
“The most challenging effect of the Brexit deal is to make the supply of fresh and chilled product, especially prepared food, into the EU very lengthy and bureaucratic creating an enduring impact on availability and trading costs,” said the retailer.
“This situation is unlikely to improve in the near term and we therefore need to reconfigure trading with our EU businesses.
“The most significant impact is on our food operations in the island of Ireland and we are implementing multiple medium-term solutions to stabilise the business in both the North and the Republic.”
M&S listed additional supply chain costs at its Motherwell and Faversham depots, as well as costs of a digital track and trace platform, additional variable cost per tray, veterinary certification, and costs of change.
The retailer has also confirmed that it targeting 30 more store closures in the "next phase" of its long-term transformation plan.
It has already closed or relocated 59 stores but said it is accelerating changes to its portfolio of shops following the impact of the pandemic.
The 30 planned closures will be part of a shake-up of around 110 stores, with the majority of these sites set for relocation.
M&S said the impact of the pandemic has provided it with a strong opportunity to purchase new locations, with the group currently targeting six new stores in former Debenhams units.
The group current has 254 full-line stores, which sell food and clothing, but it plans to reduce this to around 180 over the next 10 years, with some of these being replaced by food-only or purely clothing and home sites.
The £201.2m pre-tax loss reported on Wednesday followed a £67.2m statutory profit in the previous year.
The group told shareholders that total revenues dropped after this slump offset an improvement in its food operations.
It reported that food like-for-like revenues increased by 1.3 per cent over the past year but the company saw its clothing and home business report a 31.5 per cent slump despite 53.9 per cent online growth.
Clothing and home operations saw a £129.4m operating loss, although M&S said the performance improved in the second half of the year.
These sales have also returned to growth since the reopening of all stores on April 12, M&S said.