M&S claims its share of the UK online clothing market increased during the first phase of the pandemic, lifting it to the number two slot behind Next but above Asos © Dylan Martinez/Reuters

Marks and Spencer has had more makeovers than the Bride of Wildenstein, whose plastic surgery cost the socialite millions. It has cost M&S millions, too. After restructuring costs of £90m, it lost £88m in the first half to September. That is a first in the retailer’s history as a listed company. 

Steve Rowe, chief executive, is using Covid-19 to accelerate his plan to cut jobs and reshape what was once a high-street stalwart and turn it into a leaner, meaner, more digital retailing machine. 

On the upside, M&S claims its share of the UK online clothing market rose during the first phase of the pandemic, lifting it to the number two slot behind Next but above Asos. Cash was up and net debt was down at the half-year mark, too. 

However, same-store sales of non-food clobber fell 21 per cent in the second quarter to September. That is sobering. Compare that with Primark, which this week reported that its same-store revenues post-lockdown dropped less than a tenth. Moreover, in the four weeks since the end of September, Marks’ clothing and homeware sales fell a fifth compared with last year.

Yet more sobering is the cost of store closures and restructuring. M&S thinks the total cost of the programme will be an eye-watering £680m or so over the next seven years. The Financial Times has calculated the group has made close to £2bn in adjustments to cover job losses, store impairments and the like since 2015.

M&S still struggles to extricate itself from its legacy as a stallholder selling garments.

Revenues from flogging socks and frocks matter less and less. Food sales are about three times the size of sales of knickers and knits, and growing. However, margins on food are half or even a third of those earned on apparel. A tie-up with Ocado on food delivery will accelerate grocery growth and increase margins but not to the same levels of profitability of clothing. It will have to sell a mountain of food to make up for ditching party clothes, which historically have made up a quarter of M&S sales. 

M&S has dubbed the latest makeover as Never the Same Again. The recently deceased Sean Connery is reputed to have said “Never again” on quitting the James Bond role only to star in Never Say Never Again. That may be a better title for M&S’s next restructuring programme. It won’t be as much fun to watch.

Barclays bows to regulator

Another day, another bank mis-selling scandal, writes Bryce Elder. This one involves Barclays writing loans to pay for Maltese timeshares, which were being sold via cold calling and high pressure tactics applied to anyone willing to take the bait of a cheap holiday. 

Barclays knew nothing, of course. It was just the underwriter. Unfortunately, the company doing the selling, Azure Services, lacked Financial Conduct Authority authorisation to act as a credit broker. As a result Barclays has been forced to scrub all interest charges. Not without a fight, however. 

Because like many mis-selling scandals it is a story of corporate obduracy and regulatory acquiescence. In 2017, when Barclays said it was first made aware that the loans had been sold by an unregulated agent, its solution was to ask the FCA for retrospective validation. The FCA said yes. 

The story would have ended there but for legal action on behalf of consumers, which dragged all parties into the Royal Courts of Justice a year later. The crux of Barclays’ defence was that a lack of regulatory oversight made no difference to how borrowers were treated; the FCA said meekly that it saw no reason to disagree. The judge told everyone to go and have another think.

Last month the regulator concluded that, in a reversal of its previous stance, regulation could have made a difference. As a result, Barclays has not only to repay interest but to pass its Azure loan book on to an independent assessor for stress testing. If the assessor finds that timeshare debt was sold to the wrong sorts of people, Barclays will be on the hook to refund their payments. 

The sums involved are not huge — the more than 1,400 loans in question have a book value of about £48m, much of which is interest due to double-digit rates and terms stretching decades — but precedent matters. For the first time, timeshare loans are being evaluated on the basis of whether they ever should have been made. In a sector plagued by cowboy operators the consequences for underwriters could be very costly indeed.

Knowing your customer is tricky. The unending wave of mis-selling scandals have had a chilling effect on the UK lenders, whose approach to compliance is too often reduced to a laborious box ticking exercise. Passing the buck to agents and third parties has obvious attractions for the banks, but it can never be an excuse that bad practices were kept at arm’s length.

M&S: kate.burgess@ft.com
Barclays and timeshare: bryce.elder@ft.com

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