Marks & Spencer PLC (LON:MKS) has taken more steps to strengthen its balance sheet as it expects its clothing division to struggle for the remainder of 2020 as the coronavirus pandemic impacts the high street.
“In the absence of a clear basis for forecasting, our scenario planning and stress tests are based on materially subdued trading for the balance of 2020 in Clothing & Home,” the FTSE 250-listed firm said in a statement.
Food trading has also been adversely affected by the closure of cafes and curbs on travel, said M&S, though it added that it expects to benefit from the multichannel venture with Ocado PLC (LON:OCDO) that is on track to launch in September.
The retailer has already suspended the final dividend for the year to March just ended and has now confirmed it will not pay a dividend at all in the current year to March 2021 saving a further £210mln.
Covenants on M&S’s £1.1bn revolving credit facility have also either been relaxed or removed while the retailer has been confirmed as eligible for the UK Government's coronavirus scheme. Even on adverse assumptions, that would mean the business would have significant undrawn credit available for 18 months ahead, M&S said.
A recovery is expected to start in 2021 alongside an acceleration of its transformation programme, it added.
“We are scheduled to report preliminary full-year results on 20 May and will at that stage provide a further update on the very significant measures being taken to reduce costs and protect cash flow during the crisis period. The crisis has created a very different way of working and rapid learning for the business at all levels,” the company said in the statement.