ii view: M&S confident about profit growth forecast
A recovery derailed by a cyberattack, but with costs now covered and the shares up 18% over the last month alone. We assess prospects.
15th June 2026 11:46
by Keith Bowman from interactive investor
Full-year results to 28 March
- Revenue up 25% to £17.37 billion
- Revenues excluding the newly included Ocado joint venture up 1.9% to £14.2 billion
- Adjusted pre-tax profit down 23.8% to £671.4 million
- Final dividend of 3p per share
- Total dividend for the year up 16.7% to 4.2p per share
- Net debt including lease liabilities up 35.5% from a year ago to £2.42 billion
Guidance:
- Expects growth in year ahead 2026/27 profits compared to 2024/25
- Continues to target cost savings of £600 million between 2022/23 and 2027/28
Chief executive Stuart Machin said:
“That was an extraordinary year. We were laser focused on our customers, worked incredibly hard to recover our business, and we came out stronger.
“A resilient balance sheet supported by the hard work done on our cash position in recent years allowed us to absorb the cost of disruption without compromising our financial health.
“With strong net funds we continued our transformation at pace, completing our most ambitious year in a decade of opening new and renewal stores alongside significant advances in supply chain and digital capability.
“Retailers face a triple whammy of headwinds with increased taxation, a greater regulatory burden and ongoing global conflict. At M&S we are unshaken by short-term events. We have a clear plan and there is much within our control as we reinvest in value and quality for our customers.”
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ii round-up:
Marks & Spencer Group (LSE:MKS) is a retailer of clothing or Fashion, Home and Beauty (FHB), as well as food, both in store and online, and in the UK and overseas.
The UK food business includes a 50% joint venture with delivery company Ocado Group (LSE:OCDO).
For a round-up of these latest results announced on 20 May, please click here.
ii view:
Started in 1884, M&S today employs over 50,000 people. In-store Food generated most sales over the latest financial year at 56%. Online food delivery sales via Ocado accounted for a further 18%, with UK Fashion, Home and Beauty accounting for 22% of sales and Overseas stores making up most of the 4% balance.
Management strategic focus includes doubling food sales over the long term, supported by investment in new stores, improving the company’s supply chain facilities and enhancing technology.
For investors, a major cyberattack has impaired momentum for the retailer’s revival plan under CEO Stuart Machin as well as tainting its reputation for reliability. War in the Middle East may affect International sales over the current financial year. A relaunch of the group’s Sparks customer loyalty programme comes against a previously revived Nectar scheme at Sainsbury (J) (LSE:SBRY) and ongoing momentum for Tesco (LSE:TSCO)'s Clubcard. Cyber challenges for Mark & Spencer’s online operations contrast with almost 60% of all profits coming from online ops at rival retailer Next (LSE:NXT), while a forecast dividend yield of around 2% compares to yields of over 3% at Tesco and Sainsbury's.
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To the upside, an ongoing performance improvement plan sees £600 million of cost savings targeted by 2027/28, with £89 million coming over this latest financial year. Investment of between £650 million and £750 million is planned for the year ahead. Although net debt increased over this latest financial year given the take-on lease liabilities for Ocado, net funds excluding lease liabilities totalled £338 million, while management wants to double long-term food sales to build on sector leading food margins.
In all, and while some caution remains sensible, ongoing performance improvement initiatives and a consensus analyst estimate of fair value above 425p per share look to offer grounds for continued longer-term optimism.
Positives:
- Product and geographical diversity
- Targeting cost savings
Negatives:
- Competition not standing still
- Uncertain economic outlook
The average rating of stock market analysts:
Buy
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