M&S has flagged that post-Brexit complexity is hitting profitability at its Irish business, as chairman Archie Norman ruled out further European expansion due to the added expense of exporting fresh food.
Chief executive Stuart Machin told shareholders at its virtual AGM that Brexit was its biggest challenge after inflation. “It added considerable amount of complexity, cost and distraction and we are still trying to find the way through,” he said.
Norman added that its Republic of Ireland business is now only “break even” due to the increased customs and border controls.
He revealed that the retailer’s international expansion plans do not include Europe as it is now too expensive and complex to export fresh food: “We cannot legally send some of our products into the EU.”
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Machin told shareholders that M&S Food had made a “good start” to the new financial year.
It comes as the retailer’s food margin took a 130 basis point hit in its year to 1 April as it opted not to pass on the full weight of cost inflation to consumers.
However, Machin said: “That has given us a good start by the way into this year.”
The M&S boss warned that food prices were taking time to filter down to shoppers.
“I’m slightly worried about deflation, because it’s not going to come down as quick as the inflation,” he said. “Now we’re tracking that really carefully and trying to pass that on as well to customers.”
M&S was criticised earlier this week for holding a fully digital AGM for the fourth year in a row, with investors complaining about not meeting the directors face to face.
The move to the digital-only format, introduced during the pandemic, was designed to boost participation at the meeting.
Norman said the board could backtrack on the move: “[We have] heard the feedback and we are thinking about it”.
“The question now, which the board is going to have to think about given the feedback we have had, is ‘Why can’t I come along physically and look the chairman eye to eye and buttonhole him?’,” he said, adding that he didn’t think the request was “unreasonable”.
