ii view: M&S places cyber-attack firmly in rear-view mirror

First-half results to 27 September

• Revenue up 22% to £7.965 billion
• Adjusted pre-tax profit down 55% to £184.1 million
• Interim dividend up 20% to 1.2p
• Net debt including lease liabilities up 17% from a year ago to £2.53 billion

Guidance:

• Expects second-half profit to at least match that of last year
• Medium-term cost saving target raised to £600 million from a previous £500 million

Chief executive Stuart Machin said:

“The first half of this year was an extraordinary moment in time for M&S. However, the underlying strength of our business and robust financial foundations gave us the resilience to face into the challenge and deal with it. We are now getting back on track.”

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

ii round-up:

Marks & Spencer Group (LSE:MKS) is a retailer of fashion, homewares, beauty lotions (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). 

The UK and Irish food business generated most revenues over the group’s last financial year to late March at 65%, followed by the UK and Irish FHB division at 30%, and the International business the balance of 5%. 

For a round-up of these latest results announced on 5 November, please click here. 

ii view:

Began in 1884, M&S today employs over 60,000 people. Clothing and food stores totalled 226 as of late September, with a further 828 food related outlets bringing the total UK portfolio to 1,054 stores. A further 56 stores across Ireland and the Channel Islands add to 376 overseas stores. Management strategic focuses include reducing large store numbers, ongoing store renewals, supply chain improvements and enhancing the company’s technology. 

For investors, significant costs for a major cyber-attack and subsequent disruption have been suffered as well as a hit to the group’s reliability reputation. A forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap. Losses for the company’s 50:50 joint venture with Ocado continue to be made, while a forecast dividend yield of just over 1% compares to estimated yields of over 3% at fellow retailers Tesco, Sainsbury's and Next.   

• These dividend stocks will deliver £7.3bn Christmas windfall
• The Week Ahead: Topps Tiles, Paragon Banking, Balfour Beatty
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

More favourably, an ongoing performance improvement plan has seen targeted cost savings over the medium term raised to £600 million from a previous £500 million. Having swallowed costs for the cyber-attack, management is now predicting second-half profits to late March which at least match the figure achieved during the previous financial year. A strong balance sheet exists, with net funds of £176 million held when excluding lease liabilities, while the number of households visiting M&S food outlets has hit 9.3 million in 2025, according to data from Worldpanel, up from 7.8 million in 2022.  

On balance, and while some caution looks sensible, ongoing performance improvement initiatives and a consensus analyst estimate of fair value above 420p per share imply reason for longer-term hope.   

Positives: 

• Product and geographical diversity
• Targeting cost savings

Negatives:

• Competition not standing still
• Uncertain economic outlook

The average rating of stock market analysts:

Buy