M&S (MKS.L) posted a loss of £201.2m ($282m), with its clothing and home unit hit the hardest due to lockdown restrictions. It is also planning on ramping up store closures.
The company, however, said it has a "clear path to a transformed business in the medium term" and expects to generate profit before tax and adjusting items between £300m to £350m. It also hopes to reduce net debt "as capital expenditure recovers towards pre-pandemic levels."
Shares were down roughly 0.5% as markets opened on Wednesday morning but then surged about 4%.
M&S will move out of about 30 locations and build a chain of 180 main sites around the country, down from the current 254.
In another 110 stores it plans to "rotate the estate." This could mean switching to food-only or consolidating multiple stores into one. It has already closed or relocated 59 main stores, as well as cutting 7,000 jobs.
The company told Yahoo Finance it hasn't made any announcements about which stores in will be closing.
The group delivered proﬁt before tax and adjusting items of £41.6m in the 52 weeks to 27 March 2021, and a statutory loss before tax of £201.2m, in a year that it said was “characterised by unprecedented lockdowns, resilient performance and disciplined management of costs.”
Its full year underlying revenue fell 11.9% to £9bn.
“Clothing & Home results reﬂect the heavy impact of lockdowns on stores, a substantial change in product mix and the challenges of clearing stock, partially offset by very strong growth online of 53.9%,” the company said.
As a direct result of this, its net revenue declined 31.5%.
“Marks & Spencer is grappling with a sudden, and somewhat irreversible change in clothing tastes," said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
"Formal outfits and tailored clothing are on the way out, and that shift packs a particular punch for M&S. Not only was its bread-and-butter offering the first thing to fall out of fashion in the pandemic, but its online business was slow out the gate. The end result made full year numbers tough reading."
Online sales, up 54%, were a bright spot. M&S said its performance improved in the second half as online growth “made greater inroads” into the store sales decline.
The company did not have an online grocery delivery service for most of 2020, and it was only in September that it launched a delivery service with Ocado.
“Our results for the year bear the impact of the pandemic spanning the beginning of the ﬁrst national lockdown through to near to the end of the third lockdown in the UK,” said CEO Steve Rowe.
"With the right team in place to accelerate change in the trading businesses and build a trajectory for future growth, we now have a clear line of sight on the path to make M&S special again. The transformation has moved to the next phase," he added.
Going forward, the company's priority is to fund investment in building omni-channel capability, including investment in the supply chain.
M&S will assess the reintroduction of dividend payments but this is unlikely this year, as its focus is on restoring profitability.
"As high streets reopen for non-essential goods and people return to offices, the next quarter will be key in working out the shape of the post-COVID retail world," said James Andrews, personal finance expert at Money.co.uk.
"Marks & Spencer will need to assess where its priorities lie to convince both in-store and online shoppers to spend their money there as demand changes and priorities shift... it will need to boost other merchandising within its stores - alongside its grocery, home and fashion departments - to bounce back as the economy reopens.”