Coronavirus shutdown ravages high street as retailers take emergency action | Business | United States International Supply Chain Commission

The coronavirus shutdown is laying waste to the high street, with Marks & Spencer warning of store closures, as Primark told suppliers that it was cancelling orders and Debenhams sought extra time to settle its bills.

On Friday, M&S axed its dividend to preserve cash because its clothing arm faced being “severely impacted” over the coming months as Britons were forced to stop shopping. The retailer also said it was preparing for the likelihood that some stores would have to close temporarily.

The gloomy update came as it emerged that Debenhams chief executive, Stefaan Vansteenkiste, had written to the department store chain’s suppliers to inform them they would be getting their money a month later than expected.

“Unfortunately, we have to ask you for extra support,” wrote Vansteenkiste. “We will be extending all supplier payment terms by 30 days – except in those cases where we are already on extended terms. This decision is crucial to make sure we can ultimately pay the outstanding payable balances we have with you.”

Debenhams had already asked landlords for a five-month rent holiday as it faces “unprecedented pressures” because of the pandemic. The department store, which has closed 22 stores in recent months and is set to close 28 more next year, was struggling even before the virus hit.

The World Health Organization is recommending that people take simple precautions to reduce exposure to and transmission of the coronavirus, for which there is no specific cure or vaccine.

The UN agency advises people to:

Frequently wash their hands with an alcohol-based hand rub or warm water and soap

Cover their mouth and nose with a flexed elbow or tissue when sneezing or coughing

Avoid close contact with anyone who has a fever or cough

Seek early medical help if they have a fever, cough and difficulty breathing, and share their travel history with healthcare providers

Many countries are now enforcing or recommending curfews or lockdowns.

In the UK, NHS advice is that anyone with symptoms should stay at home for at least 7 days.

If you live with other people, they should stay at home for at least 14 days, to avoid spreading the infection outside the home.

In a sign of the scale of the slump that retailers now expect, Primark has written to suppliers urging them to “seriously consider putting a halt on all current and future production and the purchasing of any materials in relation to any Primark orders”.

“We have been left with no option but to place a hold on any new orders being placed,” Primark states. Orders already in train were also being reviewed, it said, adding: “It is likely that in most circumstances we will have little option but to terminate those orders pursuant to our contractual rights.”

Earlier this week Primark’s parent company Associated British Foods said around a fifth of its selling space was already closed as stores shut in Italy, France, Spain and Austria. In the letter, Primark states: “We foresee that this pattern of store closures will continue over the coming days and weeks.”

M&S said it had served customers “without cease through two world wars” but the Covid-19 outbreak meant it anticipated the performance of its clothing and homewares departments – where sales were already falling – would worsen. It was seeing substantial declines in these departments and has redeployed many staff to support its food retail business amid a run on supermarkets by panicked shoppers.

With demand for its spring and summer ranges expected to be weak, M&S has ditched plans to order £100m-worth of goods so as to avoid being left with a glut of stock. As Next’s chief executive, Simon Wolfson, put it this week: “People do not buy a new outfit to stay at home.”

Unlike high street rivals such as Next and Mike Ashley’s Frasers Group – which on Friday issued a profit warning and announced plans to close five Jack Wills stores – M&S is expected to be among a handful of “essential” retailers alongside supermarkets and pharmacists permitted to keep shops open throughout the crisis.

M&S said its food halls were busier than usual but its bias towards selling chilled and fresh food (which have a short shelf life) meant it had not experienced the same huge sales uplifts experienced by the major grocers.

M&S said scrapping the dividend would save £130m as it warned profits for the year to the end of March could fall short of the £440m pencilled in by analysts. The government’s decision to suspend business rates would also save it about £180m.

In further evidence of the tough outlook faced by retailers, Hotel Chocolat said the virus signalled the closure of some or all of its 125 UK stores.

The Shore Capital analyst, Greg Lawless, said: “The UK retail sector is facing a storm of reduced footfall to the high street, particularly for the general retail sector. Nobody knows how long normal lives will have restrictions in place – so the impact on financial forecasts is unknown.”

“Cash preservation is the new priority,” added Lawless. “Those companies that adapt quickly and do the right thing will survive but we are in uncharted territory.”

In other developments:

Harrods, the luxury department store, became the latest department store in London’s West End to announce it was “closing for a while”.

Travis Perkins, the builders’ merchant, cancelled its dividend and delayed the demerger of its Wickes chain to focus on crisis management ahead of an expected sharp downturn in sales if it was forced to shut its stores.