M&S plans to overhaul Irish grocery business as Brexit hikes costs here
The range of groceries available at Marks & Spencer's Irish outlets is set to diverge from the group's British supermarkets as disruption caused by Brexit forces the business to source more products locally, according to an update from the retailer.
Marks & Spencer said that an increase in costs as a result of Brexit has created challenges for its Irish food business.
In the retailer’s annual results, M&S said that it would focus on improving profitability in this division in Ireland following “EU border related headwinds”.
Potential steps to improve trading here include cost restructuring, as well as increasing the proportion of locally sourced supply in its stores.
The retailer also plans to assess a number of new routes to market in Ireland. Last October, it agreed a partnership with roadside retailer Applegreen to stock M&S products in service station locations across Ireland.
In September 2021, the retailer revealed that it had to cut 800 lines from its stores in Ireland, including items such as free-range chicken and orchids.
Meanwhile, last May, the retailer said it had already spent £30m dealing with the initial impacts of Brexit and said that processing goods for dispatch to Ireland and Northern Ireland now takes an extra day.
Performance in clothing and home goods in Ireland remained robust, according to M&S.
Ireland is not the only market hit by heightened costs post-Brexit. In 2021, it said all 11 of its franchise stores would shut as a result of Brexit-related supply chain issues.
The retailer also had a charge of £700,000 (€805,000) in the Irish market due to store impairment testing.
This testing identifies stores where the “current and anticipated future performance” does not support the carrying value of the stores.
Operating profit for M&S’ international stores before adjusting items stood at £84.8m compared with £73.6m the prior financial year, which included a contribution in the prior year of £5.5m from Russia.
It said that profit growth was driven by its international markets except Ireland, with operating profit excluding the Irish market at £67.9m compared with £58.2m in the prior year.
While the retailer did not disclose sales for Ireland, it stated that sales for its international markets excluding Ireland were up 15.1pc.
Overall, pre-tax profits for the retailer rose 21.4pc to £475.7m (€546.7m) in the year ended April 1, while sales were up almost 10pc to £12bn.
The retailer now anticipates energy costs of over £50m, as well as pay increases of more than £100m, in its current financial year.
This is expected to be offset by over £150m of savings from its cost reduction programme, including self-checkouts.