Marks and Spencer (LON:MKS) has unveiled a £1bn action plan to help fight the impact of coronavirus as a strategy shift towards food start to bear fruit.

Despite group revenue falling 1.9% to £10,377m in the year to 31st March 2020, operating profit rose 11.9%, helped by a 1.9% rise in like-for-like food sales. Clothing sales fell 6.2% on a like-for-like basis in the same period.

Although operating profit rose, the impact of COVID-19 on write downs and adjustments meant profit after tax fell 39.5% to £45.3m.

The increase in sales volumes represents the results of recent investment in the Marks and Spencer food business as it sought to build on areas of the business it was experiencing strength.

The acquisition of a stake in Ocado Retail was probably the highlight of this strategy shift and is already providing M&S with a return. M&S acquired a 50% stake in Ocado Retail in 2019 for £750m to help boost their food offering as clothing sales continued to disappoint.

Marks and Spencer recognised a £2.6m profit from it’s investment in Ocado Retail in the 7 months to 1st March.

Shareholders will be pleased with the early news from the Ocado acquisition as sales at Ocado Retail jumped 40.4% in the 9 week period to 6th May, due to lockdown restrictions causing rocketing demand for home deliveries.

The market took the results well and shares rose over 2% on Wednesday morning. However, Marks and Spencer shares are down 63% over the last year, seeing them lose their position in the FTSE 100.

£1bn Action plan

Marks and Spencer outlined £1bn worth of measures to help bolster the cash position which included £500m in cost reductions.

The group, which closed 54 legacy stores in 2019/20, had previously announced it was scrapping its final dividend to improve the balance sheet.

“Last year’s results reflect a year of substantial progress and change including the transformative investment in Ocado Retail, outperformance in Food and some green shoots in Clothing in the second half,” said Steve Rowe, Marks & Spencer CEO.

“However, they now seem like ancient history as the trauma of the Covid crisis has galvanised our colleagues to secure the future of the business. The way our people have rallied to support our customers and communities has been awe-inspiring.”

“From the outset we recognised that we were facing a crisis whose effects and aftershocks will endure for the coming year and beyond: Whilst some customer habits will return to normal others have changed forever, the trend towards digital has been accelerated, and changes to the shape of the high street brought forward. Most importantly working habits have been transformed and we have discovered we can work in a faster, leaner, more effective way. I am determined to act now to capture this and deliver a renewed, more agile business in a world that will never be the same again.”