Marks and Spencer Group Lifts Investment to £800 Million a Year, Doubles Dividend

Key Points

• M&S plans average annual investment of £800 million over the next three years, including £470 million a year in food, and doubled its ordinary dividend to 8.4 pence.
• Fashion, Home & Beauty’s first-half operating margin was 7.5%, held back by rising costs and product availability problems. The division is targeting a sustainable margin above 10% and a doubling of online sales to at least half of divisional sales.
• The retailer is overhauling supply chains and online fulfillment to improve availability and cut costs, including new automated distribution capacity and a returns center. It has delivered £450 million of its £600 million structural cost-saving target and expects to complete the remainder in the coming financial year.

Marks and Spencer Group LON: MKS plans to increase investment in stores, supply chains and technology as it seeks to improve profitability in its fashion business and expand online sales, executives said at the retailer’s capital markets day.

The company outlined average annual capital spending of £800 million over the next three years, up from the £750 million indicated a year earlier. Chief Financial Officer Alison Dolan said the increase largely reflected the removal of some planned disposals from the figures and higher investment in food logistics.

M&S also announced it had doubled its ordinary dividend to 8.4 pence. Dolan said the company intends to link future dividend growth to earnings and return excess cash to shareholders after funding investments and other commitments.

Fashion margins under pressure

John Lyttle, managing director of Fashion, Home & Beauty, said the division had gained market share in a declining market, but operational problems had constrained growth and profitability. The division’s first-half operating margin was 7.5%, with costs rising faster than sales.

Transformation Director Jag Weatherley said availability fell to an all-time low of 81% in the first half. Executives linked the shortages partly to long lead times and manual processes following the cyber incident. Womenswear Director Maddy Evans said the company had also run short of smaller sizes and had adjusted its size ratios and invested more deeply in key lines.

Lyttle said the division’s plan does not depend on a market recovery. Its medium-term objectives include low-to-mid single-digit sales growth, a sustainable operating margin above 10%, and doubling online sales to at least 50% of divisional sales.

“Our product continues to resonate with customers, but our growth and margin were heavily constrained by our operations,” Lyttle said. He expects profitability to improve in the second half as changes begin to take effect.

Supply chain and online overhaul

M&S is introducing connected planning and product-development systems and changing how it buys different types of merchandise. Director of M&S Man Mitch Hughes said the average product planning process had fallen from 57 weeks to 34 weeks under a new approach with separate tracks for core, seasonal and faster-moving products.

The retailer is also expanding automated online fulfillment. Lyttle said the Lichfield distribution site is due to begin manual operations in January and be fully automated by late summer. A new returns center in Sheffield is expected to reduce the cost of processing a returned item from £3.18 to £1.56 and put products back on sale in under six days.

Lyttle said the changes would help reduce online costs to serve by at least 500 basis points over time, with around 300 basis points from core savings without relying on growth.

Online Director David Clark said M&S plans to launch a subscription-based Delivery Pass early next year and an M&S-branded flexible credit product, M&S Pay, in fiscal 2028. The company also plans to roll out its Sephora partnership to 100 stores and online by summer 2028.

Food investment and capital returns

The food business remains central to the investment plan. Dolan said M&S expects to invest an average of £470 million a year in food over the next three years, including 66 new food halls between fiscal 2028 and fiscal 2030.

Food Managing Director Alex Freudmann said the company is investing £340 million over six years in a national distribution center at Daventry. The site is expected to begin operating in 2029, with automation intended to reduce its cost per case by around 20% once operational.

Dolan said M&S had delivered £450 million of its £600 million structural cost-saving target and expects to deliver the remaining £150 million over the coming financial year. She said the company’s investment plan supports its ambition for mid-to-high single-digit sales growth over time, with profit growing faster than sales.

About Marks and Spencer Group (LON:MKS)

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.

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