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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Marks & Spencer Group plc    MKS   GB0031274896

MARKS & SPENCER GROUP PLC

(MKS)
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Walmart, Marks & Spencer brace for tumultuous 'back-to-school' season

07/21/2020 | 10:20am EST
FILE PHOTO: Walmart department manager Karren Gomes helps stock shelves with school supplies as the retail store prepare for back to school shoppers in San Diego, California

As more school districts roll back their reopening plans to curb the spread of coronavirus, major retailers in the United States, EU and UK are aggressively discounting back-to-school backpacks and uniforms and airing new advertisements featuring students happily taking classes at home.

In the UK, Marks & Spencer - a market leader - is offering deeply discounted merchandise, including 25% off across the entire school uniform range and free delivery for orders over £50. Land's End will offer shoppers 60% off all backpacks Monday and Tuesday.

Walmart Inc, which created a mask section in its "back to school clothing" department online, has begun airing a commercial showing a boy attending school, alone, in a mask one day, then taking class online in his bedroom the next day. Another ad shows a mom packing up a backpack with school supplies for her daughter to use while performing a chemistry experiment in the backyard.

In Europe, retailers would normally expect increased traffic for at least a week in August depending on when schools reopen, according to Sensormatic Solutions.

But shopper footfall in June and July was down substantially this year--by 60% in Britain, 50% in Spain, Italy and France and more than 30% in Germany. That could spell trouble for retailers where back-to-school is a key sales driver on par with Christmas, according to Thomas Schnabel of the German retailer association HBS.

In Germany, parents tend to start buying just before summer holidays and throughout August, Schnabel said, highlighting how it was lucky lockdowns lifted when they did as he doubted back to school sales would transfer easily online. "People want to try the pens and feel the fit and the fabric of rucksacks," Schnabel said.

In England, all kids are expected to return to school in September, while schools in Los Angeles and San Diego - California's two largest public-school districts - are set to resume classes online only in August.

New York City Mayor Bill de Blasio unveiled a plan for reopening schools in September with a "blended learning" schedule that would have students alternating between classrooms and their homes.

U.S. laptop sales may boom as parents anticipate the COVID-19 pandemic will keep at least some classes online, retailers say, citing survey data. But spending on clothing is likely to take a hit. A Deloitte survey of 1,200 U.S. parents in July found they plan to spend 18% less on apparel and 28% more on technology.

Alycia Zimmerman, 38, a Brooklyn, New York, mother of a 3- and a 5-year-old, said she intends to buy fewer outfits for her kids this fall. "There will be a lot of time spent at home when I don't care if they're wearing the same thing four days in a row - and they don't have to look presentable," she said.

Several retailers - from department store operators Macy's Inc, Nordstrom Inc to discount stores like Ross Stores Inc - canceled summer orders from suppliers at the onset of COVID-19.

To better manage inventory, Jane Elfers, Chief Executive of Children's Place said on a June 11 earnings call that the Secaucus, New Jersey-based company had invested in services like ship-from-store.

In the UK, retail executives expect parents to make fewer shopping trips, to fewer retailers. Most schools have a uniform requirement, and generally, there's a compulsory product - a crested blazer, special tie, a games jersey available only at a particular supplier, while parents can get generic products like a white shirt or black trousers from anywhere, including Marks and Spencer.

"Parents who have to go to a store to go and buy that blazer and tie are then saying, 'let me buy my trousers and my shirts from here because I don't want to go to another store,'" said Mark Stevenson, co-chair of the Schoolwear Association, a UK group that represents uniform manufacturers.

M&S said Monday it would cut 950 jobs as part of a store management revamp.

Several American makers of uniforms applied for aid from the United States Paycheck Protection Program, which injected about $521.4 billion in taxpayer cash to businesses impacted by the COVID-19 pandemic.

Portland, Oregon-based Dennis Uniform and Philadelphia-based Flynn and Ohara Uniforms, for instance, were given between $2 and $5 million, according to data released by the Trump Administration. The companies were not immediately available for comment.

Roger Spatz, president of JanSport and Eagle Creek backpack brands, both owned by VF Corp, said "demand is hyper-dynamic as COVID-19 surges in some states and contracts in others during the key back-to-school selling months."

Kipling America, another VF Corp backpack line, is pitching its backpacks for home use. "In the past, we might have led with great images of 'in your school' environment," the company's marketing director Priscilla Mera Serrano told Reuters. "But now we're leading with content and images of setting yourself up at home and how to get yourself organized."

(Reporting by Melissa Fares in New York, Nivedita Balu in Bengaluru; Additional reporting by James Davey in London and Victoria Waldersee in Lisbon; Editing by Vanessa O'Connell and Nick Zieminski)

By Melissa Fares and Nivedita Balu


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
MARKS & SPENCER GROUP PLC -3.31% 135.65 Delayed Quote.-36.58%
NORDSTROM, INC 11.65% 27.41 Delayed Quote.-33.03%
OHARA INC. 0.86% 1412 End-of-day quote.-3.75%
ROSS STORES, INC. -2.20% 110.92 Delayed Quote.-2.59%
THERMO FISHER SCIENTIFIC 2.02% 448.45 Delayed Quote.35.30%
VF CORPORATION -1.33% 87.57 Delayed Quote.-10.95%
WALMART INC. 0.31% 151.83 Delayed Quote.27.76%
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Financials
Sales 2021 9 021 M 12 084 M 12 084 M
Net income 2021 67,8 M 90,8 M 90,8 M
Net Debt 2021 3 951 M 5 292 M 5 292 M
P/E ratio 2021 33,1x
Yield 2021 0,36%
Capitalization 2 643 M 3 537 M 3 540 M
EV / Sales 2021 0,73x
EV / Sales 2022 0,65x
Nbr of Employees 75 505
Free-Float 99,5%
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Mean consensus OUTPERFORM
Number of Analysts 23
Average target price 132,55 GBX
Last Close Price 135,40 GBX
Spread / Highest target 29,2%
Spread / Average Target -2,10%
Spread / Lowest Target -26,1%
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Managers
NameTitle
Steve Rowe Chief Executive Officer & Executive Director
Archie J. Norman Chairman
Eoin Philip Tonge Chief Financial Officer & Director
Carl Dawson Director-Information Technology
Andrew Nigel Halford Senior Independent Non-Executive Director
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