M&S Reports Highest Profit In More Than 15 Years

• Third consecutive year of growth and strong balance sheet
  
  
• Profit before tax and adjusting items up 22.2% at £875.5m (2023/24: £716.4m), highest in over 15 years.
  
  
• Statutory PBT down 23.9% at £511.8m (2023/24: £672.5m); £248.5m non-cash impairment of investment in ORL.
  
  
• Food sales up 8.7% to £9.0bn; adj. operating profit £484.1m (2023/24: £388.4m); margin of 5.4%.
  
  
• Fashion, Home & Beauty sales up 3.5% to £4.2bn; adj. operating profit £475.3m (2023/24: £437.5m); margin of 11.2%.
  
  
• International constant currency sales down 7.1% to £0.7bn; adj. operating profit £46.3m (2023/24: £47.8m) .
  
  
• Ocado Retail Limited (ORL) JV share of adj. loss £28.7m (2023/24: £37.3m share of adj. loss).
  
  
• Adjusted return on capital employed increased to 16.4% (2023/24: 14.1%).
  
  
• Full year dividend increased by 20% to 3.6p.
  
  
• Very strong balance sheet; £443.3m free cash flow from operations and £437.8m net funds excluding lease liabilities.

Increasing investment in Reshaping M&S to drive sustained growth

• Food volume and value share growth for three years. LFL sales up 8.6% in 2024/25.
  
  
• Fashion, Home & Beauty value share growth for three years. LFL sales up 4.4% in 2024/25.
  
  
• International resetting for future growth, developing a capital light operating model.
  
  
• Structural cost reduction of c.£120m in 2024/25; ambition to achieve cumulative savings over £500m by 2027/28.
  
  
• New Food and Full Line stores opened in last three years generating paybacks ahead of hurdle rates.
  
  
• Increasing capital investment in 2025/26 to £600m-£650m net of disposals to fuel growth and resilience.
  
  
• Expected cyber incident impact of c.£300m on 2025/26 operating profit, before cost mitigation, insurance and trading actions.

Stuart Machin, Chief Executive:

“Three years ago, we introduced our Reshaping M&S for Growth plan with the objective of protecting the magic of M&S and modernising the rest. Executing that strategy has delivered a third consecutive year of growth in sales and market share, profit and improving return on capital. Disciplined capital allocation and a much stronger balance sheet have put M&S on a robust financial footing, increasing resilience and creating capacity for future growth. M&S has net funds of over £400m and we are in our best financial health for nearly 30 years.

Our Food business had another strong year as more customers chose to fill their trolleys with M&S food, more often. Our continuous investment in quality, value and innovation is paying off. We’ve outperformed the market over the past three years and I’m confident we will continue the momentum and grow a bigger, fresher Food business.

In Fashion, Home & Beauty, our authoritative lead in quality and value perception and much improved style credentials has broadened appeal and grown market share. This renewed strength in product gives us the foundation to drive future growth through transforming our end-to-end supply chain and accelerating online. Consistent market outperformance over the past three years demonstrates the improvements we’ve made and I’m confident that with focused execution, we can deliver our plan. 

Overall, last year was another year of strong performance, and there are so many opportunities still ahead of us. As outlined at last year’s Capital Markets Day, we will continue our plan to invest in our key growth areas: Store rotation, supply chain and technology. 

We started the new financial year as we finished the last, with sales growth ahead of budget across both businesses. Over the last few weeks, we have been managing a highly sophisticated and targeted cyber-attack, which has led to a limited period of disruption. We have tackled this head on with incredible spirit, teamwork and deep sense of responsibility as we prioritised serving our customers. 

It has been challenging, but it is a moment in time, and we are now focused on recovery, with the aim of exiting this period a much stronger business. There is no change to our strategy and our longer-term plans to reshape M&S for growth and, if anything, the incident allows us to accelerate the pace of change as we draw a line and move on.

Over the last 140 years, M&S has overcome many challenges - testament to the longevity of this brand. This incident is a bump in the road, and we will come out of this in better shape, and continue our plan to reshape M&S for customers, colleagues and shareholders.

I would like to thank all of our colleagues and supplier partners for their hard work and dedication and, importantly thank our customers. They have been unwavering in their support, and we are incredibly grateful for their patience and trust in M&S.” 

CYBER INCIDENT AND OUTLOOK 

M&S entered the new financial year with strong trading momentum, with both Food and Fashion, Home & Beauty trading ahead of budget. 

Over the last few weeks, we have been managing a highly sophisticated cyber incident. As a team, we have worked around the clock with suppliers and partners to contain the incident and stabilise operations, taking proactive measures to minimise the disruption for customers. 

We are seeking to make the most of the opportunity to accelerate the pace of improvement of our technology transformation and have found new and innovative ways of working. 

We are focused on recovery, restoring our systems, operations and customer proposition over the rest of the first half, with the aim of exiting this period a much stronger business. 

Since the incident, Food sales have been impacted by reduced availability, although this is already improving. We have also incurred additional waste and logistics costs, due to the need to operate manual processes, impacting profit in the first quarter. 

In Fashion, Home & Beauty, online sales and trading profit have been heavily impacted by the necessary decision to pause online shopping, however stores have remained resilient. We expect online disruption to continue throughout June and into July as we restart, then ramp up operations. This will also mean increased stock management costs in the second quarter. 

Therefore, our current estimate before mitigation is an impact on Group operating profit of around £300m for 2025/26, which will be reduced through management of costs, insurance and other trading actions. It is expected that costs directly relating to the incident will be presented separately as an adjusting item. 

Overall, our strategy remains the same and there is no change to our longer-term plans to reshape M&S for growth. We are confident that we will enter the second half with a strong customer proposition, returning to the performance we were delivering immediately prior to the incident and throughout 2024/25, which is outlined in the following sections.

Source : Marks & Spencer

Image : Marks & Spencer

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