Marks and Spencer Group H2 24/25 Earnings Report

Marks and Spencer Group EPS Results

• Actual EPS: GBX 31.90
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Marks and Spencer Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Marks and Spencer Group Announcement Details

• Quarter: H2 24/25
• Date: 5/21/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 21, 2025
• Conference Call Time: 2:00AM ET

M&S has a heritage of quality, innovation and value for money and has been voted the UK’s most trusted brand. From these foundations, M&S is reshaping for sustainable profitable growth and value creation. We operate as a family of businesses, selling high-quality, great-value, own-brand products and services, alongside a carefully selected range of third-party brands. We do this through a network of stores and websites globally, and together, across our stores, support centres, warehouses and supply chain, our 65,000 colleagues serve over 30 million customers each year.

Marks and Spencer Group H2 24/25 Earnings Call Transcript

Key Takeaways

• Record FY25 results: Group sales rose 6.1% to £13.9bn with profit before tax and adjusting items up 22.2% to £875.5m, free cash flow of £443m and net funds exceeding £400m, earning M&S an investment-grade rating.
• Food growth: Sales jumped 8.7% (LFL 8.6%) driven by quality upgrades on 1,000+ products and 1,400 new lines, with a 10-year-high value perception and rollout of a new forecasting system and planned Bristol DC to support doubling the food business.
• Fashion, home & beauty progress: Sales grew 3.5% (LFL 4.4%) with stable full-price mix and stronger style credentials, while new managing director John Little focuses on supply chain, merchandising and online growth to build on three years of market-outperformance.
• Cyber incident response: A sophisticated cyber-attack post year-end forced temporary system shutdowns but kept stores trading; M&S is now accelerating its two-year technology upgrade into six months to bolster resilience.
• Outlook & impact: FY26 will absorb around £300m of profit headwinds from online pauses, manual operations and waste, partially offset by cost management and insurance, with a return to trading momentum expected in H2.

Presentation

[Archie Norman, Chairman at Marks & Spencer Group]

Hello, everyone, and welcome to the Marks and Spencer twenty twenty five annual results. So we ended last year in fine Fettle, and I felt after years of incredibly hard work, the business was starting to show its true potential. But in business life, just as you think you're onto a good streak, events have a way of putting you on your backside. And I'm sure that a lot of people today just want to talk about the cyber incident which happened after year end. And, of course, that's understandable because it is interesting, important, and different.

[Archie Norman, Chairman at Marks & Spencer Group]

After all, it's not every day you get a bunch of criminals, probably the other side of the world, trying to bring down one of Britain's most popular companies. As a result, last year's results seem like ancient history, but we should talk about them because they demonstrate what a reshaped M and S can achieve, exceptional performance in sales, market share, profits, and cash flow. And we're only halfway through our program of reshaping the business, so there's so much more to come. So, yes, the cyber attack has given us pause for thought, and, yes, we will need to bring forward some of our technology programs to make sure the business is very resilient in the future. But I'm very confident that in the great sweep of time, this will prove to have been a bump in the road.

[Archie Norman, Chairman at Marks & Spencer Group]

A painful bump, maybe, but a bump in the road. And I can tell you that everyone at M and S is just longing to get back to trading the business again. And we will come back, and we are coming back now stronger and more resilient. Lastly, I don't want this moment to pass without saying just a huge thank you from me and from the whole board. To all the colleagues in the stores who have been trading the business throughout despite the normal system support, to the colleagues in the DCs who kept working throughout, and, of course, to our technology colleagues who's done a magnificent job for us.

[Archie Norman, Chairman at Marks & Spencer Group]

So that's it from me. Stuart is now going to take you through the results. Jeremy will go through the financial detail, and Stuart will sum up. Thank you.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

Well, thank you, Archie, and good morning, everyone. Welcome to our full year results. The presentation I'm doing today is here in Oxford Street, our Marble Arch store. Let me tell you why I've chosen Marble Arch. Well, this store has been here for nearly one hundred years, and this time next year, we will be redeveloping this store into a flagship store that will last for a further one hundred years.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

So I'm looking forward to coming back in a few years' time and presenting results in what will be one of London's biggest and best food and fashion stores. But now let's crack on with last year's results. If you're watching on Wednesday, May, there will be a conference call for analysts and investors at 09:45AM, where Jeremy and I will be available to answer your questions. There are four parts to today's presentation. First, I will start by updating you on our headline performance over the last year as it's really important we don't lose sight of what a strong year we had.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

I will give you some perspective on our progress on how we're reshaping M and S for growth across the business and, of course, over the last three years. Jeremy, our CFO, will then walk you through the financials from last year in some detail. Before I close, I will, of course, update you on the recent cyber incident and give you a view of the outlook for this financial year. Last year, we delivered a strong performance with profit before tax and adjusting items of 875,500,000, which was an increase of 22%. We grew free cash flow from operations to 443,000,000 and closed the year with net funds of over 400,000,000 while continuing to grow returns to shareholders through an increased dividend.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

We are now in the best financial health we've been for nearly thirty years. We continue to make progress in our quality and value credentials in food. And in fashion, home, and beauty, we've made good progress in improving style perceptions and broadening our appeal. Last year, I said we were at the beginnings of a new M and S. I said this deliberately because while we continue to make progress in transforming M and S, we still have so much to do, and there are so many opportunities ahead of us in future years to drive growth.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

But let me now turn to the businesses. In food, sales increased by 8.7% with like for like growth of 8.6%, driven by volume growth, which has outperformed the market now for over three years. During the year, we upgraded the quality of more than 1,000 products and launched over 1,400 new lines. This consistent drumbeat of innovation has driven increased customer interest and frequency. Our continued investment in quality and innovation is paying off through sales value and volume growth.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

And it's this virtuous cycle that enables us to continue investing in price and quality for our customers. These actions have enhanced customer perception of M and S value, which has reached a ten year high. Our mission is to become a shopping list retailer, and we're seeing more customers choose us more often for their everyday shopping. Our focus is to continue on fixing the backbone of M and S food as this is going to be critical to our future growth. This means making sure we have the right long term agreements with our supplier partners, the right systems, and the right capacity in our network to get ahead of the growth curve.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

And the team are making good progress on this. We continue to sign long term supplier agreements, which allow partners to invest and grow capacity. At the year end, we completed the rollout of our forecast ordering and allocation system, which helps us get the right stock to the right stores at the right time. And we've taken the first step in modernizing our logistics network with plans to open a new modern distribution center in Bristol next year. In summary, we're on track.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

Alex and the food team are making really good progress, but we have a lot more headroom to grow, and I believe we're well on our way to doubling the size of our food business. Turning now to fashion, home, and beauty. Sales increased three and a half percent with like for like growth of 4.4%. We've now outperformed the market for over three years. Our commitment to offering customers first price, right price as part of our trusted value strategy meant full price sales mix was broadly level on last year.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

An example of this is kids wear where we've removed our promotions but invested in lower prices on everyday essential items. And we have continued to improve our style credentials further, particularly in women's wear and men's wear, which has been reinforced with strong seasonal campaigns and some brilliant collaborations. Today, we are broadening customer appeal and attracting new customers across our fashion, home, and beauty business. We've made good progress over the past few years, but now our focus turns to addressing the backbone of our fashion home and beauty business. Recently, we appointed John Little into the role of managing director, and John will help us face into those big things in transforming our supply chain, merchandising, planning, and ranging, and also accelerating our online growth.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

Since John's arrival, he spent his first month working in our stores and across our distribution centers to get a feel for the M and S business and the opportunities ahead. In summary, we're on track, but we need to knuckle down and execute this next phase to deliver further growth and profitability. Moving now to international, we had a pretty challenging year. Our sales were down eight and a half percent owing to the performance in India and a softer fashion, home, and beauty order book in our franchise markets. It did get better in the second half of the year.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

Over this next year, we are resetting our joint venture in India under new leadership. We will also be implementing new operating principles and updating all of our commercial terms with our franchise partners. This will enable us to move to a more trusted value position because we're going to invest not only in style but also in value across our international markets. In summary, international continues to be a growth opportunity in the medium term. Our strategy remains the same, to build a capital light global omnichannel business that brings the best of M and S to the world.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

Turning to Ocado. Just to remind you, last year's results for Ocado Retail are reported separately by Ocado Group. But I wanted just to give you a very quick update. Sales were strong in the year with growth of over 15%, driven by sales of M and S products, which grew over 20%. Today, M and S volumes represent over 30% of Ocado retail volume.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

While the top line is an improved position, profitability remains limited by high service delivery costs and continuing high fees for the old Hatfield site. In the year ahead, there will be an increased focus to improve delivery efficiency and to maximize capacity from the existing network. It's critical we improve the productivity and the profitability of Ocado Retail before investing in new capacity. Finally, from this financial year, we will be consolidating Ocado Retail's financials into M and S as part of the terms of the original joint venture agreement. This has no impact on our share of the business.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

I will now share with you some thoughts on where we are with our overall transformation. In October 22, we set out a plan for reshaping M and S for growth. Our objective was to protect the magic of M and S and modernize the rest of the business. What this means is making sure we protect all of those great things in our heritage, like quality, value, service, innovation, and trust, while modernizing the areas that are holding us back from growth, like our legacy store estate, our end to end supply chain, and our aged technology. Nearly three years on, we've now delivered three years of growth in sales value and volume, growth in market share, growth in profits, and improved return on capital.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

But to make sure we sustain this growth, one of our key priorities was to strengthen the balance sheet. Over these three years, our free cash flow from operations has increased from a hundred and 82,000,000 to 443,000,000. And our net debt, including our lease liabilities, has reduced from 2,600,000,000.0 to 1,800,000,000.0. Given the progress we've made in strengthening our financial position, both S and P and Moody's upgraded us to investment grade status. This gives us the capacity to further invest in M and S.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

This year, we will invest CapEx net of disposals of between 606 hundred and 50,000,000. 4 hundred to 4 hundred and 50 million will be invested in our three strategic areas for growth, which I've mentioned previously, store estate, end to end supply chain, and our technology foundations. In store rotation, we're stepping up the pace. We're stepping up the openings. We have plans to open two full line stores and at least nine food stores and two extensions.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

In our supply chain, we have our first new distribution center in Bristol with plans to modernize the network in the coming years, creating capacity for future growth. In technology, as we said at last year's Capital Markets Day, we need to upgrade our legacy technology infrastructure, our networks, our store technology, and our supply chain systems. We are making use of the recent disruption to bring forward that investment and deliver the two year plan of changing technology in just six months. The remaining 200,000,000 to 250,000,000 will be invested in essential maintenance, looking after the upkeep of our store estate, upgrading our logistics fleet, and replacing outdated assets. We will continue to invest in a very disciplined way to make sure we achieve our hurdle rates.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

With a strong balance sheet, we can invest with confidence but also manage any short term setbacks. So in summary, last year was another strong year of performance across M and S. We've now delivered three years of growth in sales value and volume, growth in market share, growth in profits, and improved return on capital. While we've made progress across so many of our priorities, we are clear there remains so much more to do. We look at this as a positive.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

These future opportunities provide future growth, and that is what energizes us. Our consistent performance demonstrates our momentum, and I'm confident that with continued focus on our plan and the execution of our plan, we will deliver future growth.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

Thanks, Stuart. Before I take you through the full year financial performance, I wanted to confirm that recent events relating to the cyber incident took place after the financial year end and therefore the following results relate to business as usual trading to the March 2025. This overview will not touch on the financial impact of recent events and Stuart will provide an update on this year's financial outlook. So let me start with the group headlines, which highlight another strong performance during the financial year as we continue to reshape M and S for growth. Group sales were 13,900,000,000 up 6.1% on last year with profit before tax and adjusting items of £875,500,000 up 22.2% on last year.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

We continue to focus on strengthening the balance sheet and as a result delivered £443,000,000 of free cash flow from operations, improving our net funds excluding the lease position to £438,000,000. Our improved financial position means we now have an investment grade credit rating from both our rating agencies. I'll now take you through the results in more detail by business area. The food business grew sales by 8.7% with performance in q four growing 10% despite no Easter in the reporting year. Like for like sales were slightly lower at 8.6% growth as the impact of full line closures in the year took effect.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

UK food volumes grew by 6.7% supported by growth in larger basket shopping missions as we progress towards becoming a shopping list retailer. Food adjusted operating margin improved by naught point seven percentage points. Gross margin decreased by 0.1 percentage points as investment in value and quality was largely offset by cost reductions from sourcing programs. Operating costs increased 5.4%, which was lower than sales growth of 8.7% resulting in operational cost leverage of 0.8 percentage points. Operating cost increases in the year related to retail investment in Colleague Pay and in store services partly offset by structural cost savings.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

Supply chain investment in colleague paying costs associated with additional volumes offset by structural cost savings and efficiencies. Increased investment in digital and technology core infrastructure with central costs being broadly level on the year. In fashion, home, and beauty, sales grew 3.5% as quality value and style perceptions grew year on year. Full price mix remained broadly level in a more promotional market. Sales were driven by online as we started to invest in the digital experience for customers, performing particularly well with new season campaigns and collaborations.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

Fashion Home and Beauty adjusted operating margin improved by naught point five percentage points. Gross margin increased 1.2 percentage points driven by better buying and currency related gains, which more than offset supplier labor cost headwinds. Operating costs increased 5.1%, which was higher than sales growth of 3.5% resulting in operational cost deleverage of 0.7 percentage points. Operating cost increases in the year related to logistics costs associated with growth in online orders, investment in core infrastructure in digital and technology, increased central costs associated with marketing, website improvements, and transformation. And conversely, retail costs decreased in the year as investment in colleague pay was offset by cost savings.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

Moving now to international, which this year has been resetting and refocusing for growth. Sales in the year were down 8.5% with lower fashion, home, and beauty shipments following actions taken to reduce stock levels by franchise partners and ongoing challenging trading conditions in owned stores in India. Adjusted operating profit declined in the year due to the reduction in sales, partially offset by improved cost control in owned markets. Looking ahead, we remain confident in our plans for international to become a growth opportunity in the medium term. As set out in our Capital Markets Day in October 2022, '1 of our objectives is to permanently remove costs from the business.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

Two years into the program and £300,000,000 of savings have been achieved with approximately £120,000,000 saved in the last twelve months, predominantly in retail and supply chain. And we remain confident of delivering savings of over £500,000,000 by 2028. The overall group performance shows a movement in year on year profit before tax driven by food and fashion, home and beauty, partly offset by decline in international. Sales grew in Ocado Retail with M and S products driving strong growth, although there remained some way to go to get back to a profit contribution. I note for the reporting period 2425, Ocado Retail was accounted for as an associate interest as we have previously reported.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

From financial year twenty five-twenty six, Ocado Retail will be consolidated in the results of M and S in accordance with the joint venture agreement. Details relating to this will be shared over the summer. Financial services and other reflects the updated arrangement between M and S and HSBC UK. Adjusting items in the year include a fair value remeasurement of the carrying amount of the group's interest in Ocado Retail prior to the consolidation. Other adjusting items include The UK store rotation plans and the M and S financial services transformation.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

Overall, the group generated £443,000,000 of free cash flow from operations slightly ahead of last year. Growth in operating profit before adjusting items was partly offset by a planned working capital outflow and increased CapEx net of disposals. The working capital outflow was driven by a change of payment terms in Fashion, Home and Beauty from ninety days to seventy five days at the end of the prior year. Increased food inventory was offset by growth in payables partly due to Easter timing. Net capital expenditure increased with the focus on investment in the group's key strategic areas of store rotation, supply chain and digital and technology.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

For the forthcoming year, we expect to spend £600,000,000 to £650,000,000 net of disposals across our key areas of investment with 400,000,000 to £450,000,000 spent in growth and cost out areas and £200,000,000 to £250,000,000 in maintenance. Tax increased due to higher profit before adjusting items in the year and the reduction in financial interest paid was driven by the repurchase of medium term notes. And so to summarize, the last twelve months, another strong year with sustained trading momentum driven by positive top line and bottom line performance across food and fashion, home and beauty. The structural cost program remains on track and we remain confident to deliver savings of over £500,000,000 by 2028. We remain committed in our focus on delivering sustainable and consistent free cash flow and balance sheet capacity.

[Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group]

Over the last three years, our debt position has improved by £900,000,000 to a net funds position of over £400,000,000 today. Our return on capital employed continues to improve and stands at 16.4% for the year. This gives us confidence to continue investing in our transformation across our key strategic areas store rotation, supply chain and digital technology. And we expect to spend CapEx of 600,000,000 to £650,000,000 net of disposals in the year ahead, all while paying an increased dividend to our shareholders. I'll now hand you back to Stuart.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

Before I talk about the outlook for the coming year, let me talk about the cyber event. We are now in recovery and getting back to business. We've been working with cyber experts and officials, and, of course, we've been advised on what we can share, but here is a quick summary. April started strong, continuing the momentum from last year. Then over the Easter bank holiday, it became clear that we were facing a highly sophisticated and targeted attack.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

We called in several cyber experts and assembled the best support team, including technology partners, and notified the authorities immediately. As a result, we were able to take control of the situation very quickly and take the right actions to protect the business, our customers, our suppliers, and keep our shops open and trading. This meant proactively taking down some of our systems, which resulted in short term disruption, but we think that was the right thing to do. So where are we today? We're now focused on recovery, and customers should be able to shop in our stores as normal.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

Our food business is delivering stock to stores in the normal way, and all customers should find much better availability and should find what they need. In our fashion, home, and beauty business, our stores are receiving product deliveries, so stock is flowing well. But, of course, in fashion, home, and beauty, online orders are still paused, but our plan is to reopen online in the coming weeks. It is a complex operation, so it's going to take some time for us to bring up our online systems. Looking ahead, we will use this window of disruption to accelerate our technology transformation plans, the plans we laid out a year ago.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

In fact, we will condense the two year plan into just six months. So in summary, this has been a challenging time, but like I say to all colleagues in our business, it's just a moment in time. As you've heard today, our business is in good shape with strong performance, strong foundations, and a solid financial footing. This has bolstered our resilience, meaning we can recover at pace and regain momentum. We will now draw a line under this and move on to business as usual, remaining focused on our long term strategy and transformation plans.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

Before I touch on Outlook, I wanted to take this opportunity to say thank you again to our colleagues and our supply partners for their huge work and support. And, of course, a very special thank you to all of our customers who have given us so much help and support and encouragement and who have shopped with us. It's greatly appreciated. Turning now to Outlook. As I previously said, M and S entered the new financial year with strong momentum with both food and fashion, home, and beauty trading ahead of budget.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

Since the incident, food sales have been impacted by reduced availability, although, as I stated earlier, this has improved. Also in our food business, we have incurred additional waste and logistics cost due to the need to operate manual processes, which will impact profit in the first quarter. In fashion, home, and beauty, online sales and trading profit have been heavily impacted by our decision to pause online shopping. However, stores have remained resilient. We expect online disruption to continue throughout June and into July as we then restart and ramp up online operations.

[Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group]

This does mean we will have increased stock management costs in the second quarter. Therefore, our current estimate is an impact on group operating profit of around 300,000,000 for this financial year, and that will be reduced through the management of costs, insurance, and other trading actions. We're confident that we will enter the second half of this year with a strong customer proposition returning to the performance that we were delivering immediately prior to the incident and continue the momentum of the last financial year. Having personally spoken to all of our colleagues across the business, there is an incredible fighting spirit within our teams. We want to get back on track and serve our customers to the best of our ability, and that's what we intend to do.

Participants

Analysts

• Archie Norman, Chairman at Marks & Spencer Group
• Stuart Machin, Chief Executive Officer & Director at Marks & Spencer Group
• Jeremy Townsend, Chief Financial Officer at Marks & Spencer Group