Marks and Spencer Group H2 25/26 Earnings Report

Marks and Spencer Group EPS Results

• Actual EPS: GBX 23.80
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Marks and Spencer Group Revenue Results

• Actual Revenue: $17.27 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Marks and Spencer Group Announcement Details

• Quarter: H2 25/26
• Date: 5/20/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 20, 2026
• Conference Call Time: 2:30AM 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 25/26 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: M&S said it is entering a new phase of “reinvesting for growth,” with capital spending set at GBP 650 million to GBP 750 million this year across stores, supply chain, and digital/technology.
• Positive Sentiment: Food was the standout performer, with sales up 7% and market share rising to a record 4.1% (or 4.6% including Ocado), while management said the business has the potential to double sales over time.
• Negative Sentiment: Fashion, home and beauty had a difficult year, with sales down 7.7% and operating margin falling to 5.5% from 11.3%, though management said performance improved in the fourth quarter as availability recovered.
• Positive Sentiment: The company highlighted strong progress on cost control, saying its structural cost-out program has delivered about GBP 390 million of savings so far and remains on track to reach GBP 600 million by FY2028.
• Neutral Sentiment: Adjusted profit before tax fell to GBP 671.4 million and free cash flow from operations was GBP 131 million, with the cyber incident still weighing on the year, although M&S ended with a net funds position excluding lease liabilities and said profits grew in the second half.

Presentation

[Archie Norman, Chairman at Marks & Spencer]

Hello and welcome to the Marks & Spencer 2026 annual results. Stuart Machin, our Chief Executive Officer, is going to introduce the results. Alison Dolan, our Chief Financial Officer, will take you through the financial detail, and Stuart will then talk about the future. Obviously, last year's figures were heavily colored by the incident that occurred in the early part of the year. Although it actually happened in April, the impact on our trading performance rolled on through much of the year, tapering towards the end, and particularly affected fashion, home, and beauty. There's a limit to what you can read into the figures. The results are what they are.

[Archie Norman, Chairman at Marks & Spencer]

Adversity can make you stronger, and I feel that we came together through the year with common purpose, that actually we continued the reshaping of the business, the investment, particularly in new stores and renewal stores, and we ended the year with a very strong balance sheet. Our conviction is this business has not really delivered its potential for decades. We're not really here to massage the status quo or worry about one year at a time. We're here to build a growth business for decades to come, and therefore, we're very happy to be moving now into a stage where we can accelerate the pace of investment.

[Archie Norman, Chairman at Marks & Spencer]

It's a new phase for M&S. We already have some very exciting commitments to automation the supply chain, to technology, some of it fashionably AI, and also to a very solid pipeline of new stores and renewal stores where we're investing increasingly in larger, high-intensity, high sales per foot stores with our new formats. All of that delivered by a powered-up management team. We're confident that the results will be a very high return on investment. Sometimes I think M&S has a surfeit of historians, people who want to tell you what went wrong 15 years ago or 10 years ago. This is a very different situation with a very different management team. That's why we're looking forward to the future. We're going to shake the dust off our heels from last year and look forward to the year ahead with more confidence than ever.

[Archie Norman, Chairman at Marks & Spencer]

With that, I'll hand over to Stuart.

[Stuart Machin, CEO at Marks & Spencer]

Thank you, Archie. Well, good morning, everyone, welcome to our full year results presentation. If you're watching on Wednesday the 20th of May, there will be a conference call for analysts and investors at 9:30 A.M., when Alison and I will be available to take your questions. There are four parts to today's presentation. Firstly, I would like to start by updating you on our headline performance. Alison, our CFO, will walk you through the financials in detail. I will provide an update on our strategic plans for the next 12 months before closing with a view of the outlook for this financial year. Last year was an extraordinary period in M&S's 142-year history, a year that tested us, but also a year that showed what our business is capable of.

[Stuart Machin, CEO at Marks & Spencer]

We worked incredibly hard to recover after the cyber incident last year. As always, our focus was on our customers throughout. Let me start by thanking everyone who shops with us. Whether you shop in store or online, we're hugely grateful for the trust and loyalty that you've given us, our customers, which we never take for granted. Once again, M&S remains the U.K.'s most trusted brand according to YouGov. I also would like to thank our supply partners for their commitment and their support, and finally, I want to thank all of our colleagues across the whole of M&S. We faced into this challenge together as one team, sleeves rolled up, helping us forge the culture we need to transform. There's now a real sense of determination in the business today, still positively dissatisfied, and we are very ambitious for the future.

[Stuart Machin, CEO at Marks & Spencer]

This is one of the most important years in our history, and the next three years are critical for M&S as we invest for growth. We have a clear plan, and there is so much opportunity ahead of us, and that's why it's incredibly exciting. Today, we're announcing M&S Group adjusted profit before tax of GBP 671.4 million. This is a decline year on year, but profits grew in the second half. Despite a fall in profitability, our free cash flow from operations was GBP 131 million, and we closed the period in a net funds position. Our strong balance sheet has allowed us to keep moving forward, never pausing our transformation, but accelerating it. In fact, I'm speaking to you now from our Pantheon store in Oxford Street. This is what we call an R&D store, where we've been developing our new blueprint for fashion, home, and beauty.

[Stuart Machin, CEO at Marks & Spencer]

We've been testing and refining our new food format since I joined M&S in 2018. In fashion, home, and beauty, we've not updated our new store formats and how it's going to look in the future in new stores. We've been working here at Pantheon for the last few months, and we will fully open this store in July. We will take all the learnings as we think about the future of our fashion, home, and beauty stores. It's just one example of how we're making good progress. We're now looking forward to the next phase of our transformation, a phase we now call Reinvesting for Growth, which I'll come back to later. Let me talk you through our performance in the year. Food was our standout performer this year, with sales growing 7% on the year in value and 3.3% in volume.

[Stuart Machin, CEO at Marks & Spencer]

Food operating margin was 4.6%, down from 5.4% last year. The dip in profit reflects higher markdown and waste in the first half as we manually pushed stock to stores following the cyber incident. That impact was contained to the first half, and profit in food grew by GBP 80 million in the second half. At M&S, we are a product business. Our product is at the heart of everything we do, and we're obsessed with it. Our performance in food was underpinned by a consistent program of new and upgraded product launches, investment in value, and a continued focus on protecting availability for customers. We upgraded over 1,000 products and launched over 1,400 new products, including our nutrient-dense range, which offers healthier choices without compromising on taste or quality.

[Stuart Machin, CEO at Marks & Spencer]

Our relentless focus on quality means perception is now at its highest level in over five years, extending our lead over the market. Our investment in trusted value has driven sales growth across our Remarksable Value, Dropped & Locked, and our Bigger Pack, Better Value ranges, particularly in core categories such as protein and produce. This has led to strong volume growth. Our ambition is to become a true shopping list retailer. This is reflected in our market share gains, which is now at our highest level at 4.1% share or 4.6% if you include M&S on Ocado. More customers are choosing to fill their baskets at M&S more often and across all demographics and all age groups in the U.K. In summary, our food business is on track and we see significant long-term opportunities ahead of us, including the potential to double sales over time.

[Stuart Machin, CEO at Marks & Spencer]

Our focus now is reinvesting for the future, growing our store pipeline and building a modern, resilient supply chain, and we're making good progress. In fashion, home and beauty, sales were more challenged, down 7.7%. This was largely driven by the impacts of the incident in the first half when we had to pause online orders, followed by a gradual recovery. Sales across both channels during the year were affected by stock flow challenges and reduced availability. Fashion, home and beauty operating margin was 5.5% of sales, down from 11.3% last year. This decline reflects lower sales, higher stock management and markdown costs. Both stores and online were in growth during the fourth quarter, with improved availability in time for our customers to enjoy our new spring-summer ranges, which are now resonating strongly. We've been making good progress on our product appeal overall.

[Stuart Machin, CEO at Marks & Spencer]

As one fashion editor recently put it, M&S has finally dumped the frump. I really value the time that I spend with our buying teams reviewing all of our ranges, making sure we have the best style, the best quality and the best value for all of our customers. In fact, we remain number one for quality and value perception. We became number one for style perception for the first time, up from number five in 2021. As a result, we are now attracting customers from a wider age range. We're also committed to offering customers first price, right price as part of our trusted value strategy, with more than half of our spring/summer fashion ranges being GBP 30 or under. We've sold over 1.8 million of our GBP 10 bras as we invest further in quality and value across lingerie.

[Stuart Machin, CEO at Marks & Spencer]

Now with a three pair GBP 10 knicker pack to match. By the way, now over half the women in the U.K. are wearing an M&S bra. In summary, it's been a challenging year for Fashion, Home and Beauty, but we are back on track and confident in the long-term opportunity to double sales online by modernizing how we buy, plan, and flow stock while increasing operational efficiency to improve profitability. Our focus now is reinvesting for the future, strengthening our supply chain to improve productivity and efficiency, and to reduce the cost to serve as we begin the next phase of our transformation. Let's move to International. Sales were down 7.2% with an improvement in the second half as new business in wholesale and online marketplaces partly offset the declines in owned and franchise stores.

[Stuart Machin, CEO at Marks & Spencer]

This include the shipment delays to the Middle East in the final month of the year. During the year, we made progress resetting partnership terms and grew through marketplaces with expanded ranges on Zalando in Europe. We also launched new wholesale partnerships in Australia and America. These initial improvements give us confidence in our long-term ambition to build a global omni-channel brand with a focused capital light model. Finally, onto Ocado Retail, which has reported a small operating profit in the year. Ocado Retail sales were up 15%, driven by growth in active customers and increased frequency. This was supported by a 17% uplift in M&S product sales, which have now surpassed GBP 1 billion in turnover for the very first time. Productivity and customer fulfillment centers also improved in the year, contributing to the boost in profitability.

[Stuart Machin, CEO at Marks & Spencer]

In summary, we're now beginning to see efficiency and productivity in the Ocado Retail joint venture, but there is much more to do before we commit to future growth investment. I'll now hand over to Alison, who will walk you through the financials in more detail.

[Alison Dolan, CFO at Marks & Spencer]

Thank you, Stuart. Good morning, everyone. I'll start by taking you through the group financial headlines. Total group sales were GBP 17.4 billion, up over 20% on last year as a result of the consolidation of Ocado Retail. Excluding Ocado Retail, sales were GBP 14.2 billion, 1.9% ahead of last year. M&S Group adjusted profit before tax was GBP 671.4 million, which includes the receipt of GBP 100 million of lost profit cyber insurance proceeds, which were claimed and received during the first half. Adjusting items during the year totaled GBP 292 million, of which GBP 131 million was incurred through the cyber attack. Free cash flow from operations for the period was an inflow of GBP 131.3 million, and I'll provide further detail on this later in the presentation.

[Alison Dolan, CFO at Marks & Spencer]

Despite a challenging year with reduced profit and cash generation, we maintained a net funds position excluding lease liabilities, reflecting strong profit conversion and disciplined debt management, including the repayment of medium-term notes and the issuance of a new 2032 bond. Return on capital employed decreased, reflecting lower adjusted operating profit and the consolidation of Ocado Retail's leases. The overall group performance shows a movement in year-on-year profit before tax, driven by the impact of the cyber attack. The adjusted PBT decline we reported in the first half was partly offset by growth in the second. Turning to the second half, in Food, the need for manual store replenishment alongside higher waste and markdown had largely concluded. A strong Christmas profit performance reflected tighter buying, improved operational execution and higher sell-through, and resulted in healthy profit growth in the second half.

[Alison Dolan, CFO at Marks & Spencer]

In Fashion, Home and Beauty, the website was offline for approximately six weeks in the first half, followed by a phased return over the summer. We came back online, stock flows were materially disrupted, putting pressure on the supply chain. This constrained availability and led to excess stock holding, resulting in higher markdown than planned during the second half. Outside of the Food and Fashion, Home, and Beauty business units, the international business delivered a small full-year profit increase driven by reduced variable costs in owned markets. Financial services had a relatively small profit impact due to disruption to the travel money business throughout the incident. Reported at the half year, our financials now consolidate Ocado Retail. For the 51 weeks to the end of March, Ocado Retail made an operating profit of GBP 15.2 million as fulfillment center efficiency improved somewhat.

[Alison Dolan, CFO at Marks & Spencer]

The presentation of the consolidation also removes last year's share of associate loss, but increases net finance costs due to the consolidation of its leases. We report non-controlling interest above the adjusted profit before tax line, maintaining the disclosure of adjusted profit in line with prior years to reflect the fact that our economic interest in Ocado Retail remains unchanged at 50%. Adjusting items during the year totaled GBP 292 million. The cyber attack drove GBP 131 million of those costs, approximately GBP 100 million in the first half and GBP 30 million in the second half. They relate to resource augmentation to replace remote outsourced technology teams and corporate advisory costs, and they remain in line with the guidance we gave at the half-year results.

[Alison Dolan, CFO at Marks & Spencer]

The remaining adjusting items in the period relate primarily to our strategic programs, including store rotation, the M&S Bank transformation, and the amortization of Ocado Retail. Looking at the results in more detail, the food business grew sales by 7%, driven by increased shopper numbers and supported by investment in value, continued quality upgrades, innovation, and new store openings. The cyber attack had a significant impact on food gross margin from manual store replenishment driving higher markdown, higher waste, and stock loss. Operating costs increased by 4.9% in the period, significantly lower than sales growth, driving operational cost leverage. Operating costs in the period were driven by retail and logistics costs from increased colleague pay, national insurance contributions, volume growth, and new store openings, partly offset by cost savings as well as lower central costs, reflecting reduced incentive accruals and lower marketing spend.

[Alison Dolan, CFO at Marks & Spencer]

Food operating margin fell to 4.6%, down 80 basis points from last year's 5.4%. In fashion, home, and beauty, sales fell by 7.7%. Store sales were down 2.3% and online sales down 18.4% in the year. In the fourth quarter, however, sales in both channels were in growth as availability began to improve. Gross margin fell by 2.7 percentage points driven by increased stock management and markdown related costs, which were weighted towards the second half. There was significant cost deleverage across retail, logistics, and D&T as the drop in sales exceeded cost reduction. Logistics costs were lower year-on-year, driven by reduced volumes, the exit of bulky furniture, and efficiencies which more than offset incident-related warehouse costs.

[Alison Dolan, CFO at Marks & Spencer]

Digital and technology costs increased due to systems development, including the planning platform and the relaunch of Sparks. While central costs reduced overall, reflecting lower incentive accruals, partly offset by higher performance marketing spend. Cost increases in retail reflected colleague pay, national insurance contributions, and in-store maintenance, partly offset by cost savings. As a result, Fashion, Home, and Beauty operating margin declined to 5.5% from 11.3% in the prior year. Our Structural Cost-Out Program is a key part of our ambition to achieve operating margins of over 10% in Fashion, Home, and Beauty and over 4% in Food. three years into the program and approximately GBP 390 million of savings has been achieved with GBP 89 million delivered in the year across key areas such as retail, supply chain, and digital and technology.

[Alison Dolan, CFO at Marks & Spencer]

We plan to deliver increased savings in the year ahead of over GBP 120 million with a target of achieving GBP 600 million cost savings by FY 2028. Savings are focused on improved retail operations, new warehouse capacity, and technology transformation, and will help to offset frontline colleague pay inflation, increased packaging taxes, and other government tax levies. Free cash flow from operations was an inflow of GBP 131 million, which was GBP 312 million adverse to last year. The primary driver of the cash movement was the impact of the cyber attack, which resulted in a decline in operating profit, increased working capital, and adjusting items in cash flow, all partially offset by reduced taxation on the back of lower profits.

[Alison Dolan, CFO at Marks & Spencer]

The working capital outflow reflected higher receivables from growth in food sales, money tied up in stock, new wholesale partnerships in international, which increased receivables and incentive accruals in the prior year. Fashion, home, and beauty stock holding was higher year-over-year, driven by higher core and seasonal stock, which we expect to sell through in the first half of this year. Terminal stock is provided for. The consolidation of Ocado Retail resulted in a small operating profit, increased depreciation, offset by increased cash lease payments, and the elimination of last year's share of associate loss. Finally, cash contributions to the DB pension fund in free cashflow recommenced in the year. Net CapEx reflects increased investment in our growth and cost out opportunities, primarily in property and the supply chain. As a result, the group had closing net funds of GBP 338 million, excluding lease liabilities.

[Alison Dolan, CFO at Marks & Spencer]

Including Ocado Retail leases and other liabilities, overall group net debt increased to GBP 2.4 billion from GBP 1.8 billion the prior year. The majority of the increase is the Ocado leases. We retain significant liquidity and headroom to our investment-grade credit rating metrics. To summarize, the trading performance of the last financial year reflects the one-off impact of the cyber attack. The impact of higher food markdown and waste was contained to the first half. The impact on fashion, home, and beauty, which disrupted stock flows, created additional markdown, and challenged availability, did last longer, but is now tapering. During the year, we reduced structural costs by GBP 89 million, and are on track to deliver GBP 600 million of cost savings between FY 2023 and FY 2028, with a further GBP 120 million or more in the coming year.

[Alison Dolan, CFO at Marks & Spencer]

Free cashflow reflects the profit impact and increased capital expenditure from our investment in growth and cost out in the period. Overall, we maintain a strong investment-grade balance sheet. We retain a net funds position pre-leases, and we will be paying an increased dividend, all reflecting our strong and growing cash generation. I'll now hand you back to Stuart Machin. Thank you.

[Stuart Machin, CEO at Marks & Spencer]

Despite the disruption during the last year, we've remained laser-focused on delivering our strategy. In the year ahead, we're moving from reshaping for growth to reinvesting for growth as we step up reinvestment in our products and in our transformation program. This year, we plan to invest between GBP 650 million-GBP 750 million of capital, net of disposals. Around GBP 150 million is being spent on maintenance CapEx. The balance is going to growth and cost out projects across our three strategic priorities: store rotation, supply chain, and digital and technology. As a reminder, all of our growth and cost out projects are assessed and approved to meet strict investment hurdle rates.

[Stuart Machin, CEO at Marks & Spencer]

In property, our goal is to grow food to more than 420 stores over time, while creating a more productive and focused full-line store estate of around 180-200 stores as we build our online sales participation to, in fashion, home, and beauty. Over the last year, we opened 12 new food stores, including two conversions of former Homebase sites. In full-line, our new and relocated flagship stores in Bath and Bristol Cabot Circus have traded ahead of our expectations, showing how strong our offer is when we get the right size store in the right location. We've also invested in existing stores through our renewal program, with over 35% of the store estate now in renewal format, our biggest program in a decade.

[Stuart Machin, CEO at Marks & Spencer]

In the year ahead, we plan to spend around GBP 200 million investing in stores, most of this in food, with 18 new food stores, including Abingdon, which trades 18,000 sq ft and will offer the full Marks & Spencer food range. When it comes to our supply chain, we're investing to build a faster, leaner, and more efficient network to support growth while structurally lowering our cost to serve. In the year ahead, we plan to spend around GBP 270 million, which includes the GBP 70 million investment in a new fully automated distribution center, which we announced last week. In food, volume growth over recent years has reduced spare capacity, requiring temporary solutions and higher costs. We're now investing to unlock future supply chain capacity.

[Stuart Machin, CEO at Marks & Spencer]

The Avonmouth regional distribution center will come online this financial year. We'll begin installing automation kit at the future Daventry national distribution center ahead of its opening in 2029. In fashion, home, and beauty, we're reshaping the supply chain end to end to improve efficiency as the business becomes increasingly online-led. The new 437,000 sq ft Lichfield site will accelerate online capacity, reduce split shipments, lower our costs, and improve our customer service. Automation at Castle Donington and Bradford will come online this year to support the faster flow of stock and improve availability for our customers. Finally, in digital and technology, our priority over the last 12 months has, of course, been recovery, and that was the right thing to do. Now our focus is on accelerating the D&T transformation.

[Stuart Machin, CEO at Marks & Spencer]

Each of our managing directors has a D&T plan embedded into their business, so every business owns their technology transformation. This means hardwiring AI across the whole business and investing significantly in our data capability. Data is the foundation of our business, and it's critical we invest here, which brings me to Sparks. Most recently, we relaunched our Sparks loyalty program with a digital wallet and real money rewards, laying the foundations for greater personalization and engagement. In the year ahead, we plan to spend around GBP 140 million across digital and technology, mostly in fashion, home, and beauty, including the rollout of our planning platform and investing in our online capabilities. On the website and app, our near-term priorities are improving the customer experience through search, imagery, and checkout and payment.

[Stuart Machin, CEO at Marks & Spencer]

From a stronger commercial position and with a healthy balance sheet, we are well-placed to deliver sustained growth in earnings and free cash flow over time, and our approach to capital allocation and disciplined investment reflects this. Therefore, as we reinvest for growth, our dividend remains measured and conservative at this time. To finish, I'll give you the outlook. Retailers have been hit with a triple whammy of headwinds, much higher taxes, including national insurance and packaging taxes, more regulation, such as the Employment Rights Act, and higher cost pressures from the ongoing conflict in the Middle East and, of course, closer to home, lots of uncertainty. We will aim to mitigate these as much as we can through improved buying, reinvesting in value to drive volume, and savings from our program to reduce structural costs.

[Stuart Machin, CEO at Marks & Spencer]

At M&S, we have entered this financial year with a clear plan and a strong balance sheet and laser-focused on what's in our control. Food continues to drive volume through reinvestment in quality, value, and across our new store openings. We have a regular drumbeat of new, innovative products landing throughout the year. The priority in fashion, home, and beauty is delivering growth on the back of stronger style credentials and new supply chain capabilities. This is the year we begin to reset the backbone of our fashion, home, and beauty business. We expect profit growth to resume versus financial year 2024, 2025, and we anticipate further progress on the transformation in the year ahead as we continue to reinvest for growth. Despite a challenging year last year, our strategy and our ambition remains unchanged. We don't underestimate the scale of change ahead.

[Stuart Machin, CEO at Marks & Spencer]

Our job, though, is to protect the magic of M&S while modernizing the rest. We've got the momentum to do that at pace. We have a strong culture, a hardworking, focused team, and a growth business. There's an extraordinary opportunity ahead of us, and we're on it. Thank you.

Participants

Analysts

• Alison Dolan, CFO at Marks & Spencer
• Archie Norman, Chairman at Marks & Spencer
• Stuart Machin, CEO at Marks & Spencer