Marks & Spencer Group (MKS) H1 25/26 (Q&A) earnings summary

Executive summary

• Group sales rose 22.1% year-over-year to £8.0bn, mainly due to the consolidation of Ocado Retail, while underlying sales were flat; results were significantly impacted by a major cyber incident, leading to a sharp drop in profit and increased costs, but operational recovery and transformation investments are underway.

• Group adjusted profit before tax fell 55.4% to £184.1m, with statutory profit before tax dropping to £3.4m, and net funds position maintained excluding lease liabilities.

• Interim dividend increased by 20% to 1.2p, reflecting policy commitment.

• Transformation efforts accelerated, focusing on store rotation, supply chain modernization, and technology upgrades.

• The business remains focused on disciplined capital allocation and long-term growth.

Financial highlights

• Food sales grew 7.8% to £4,532m, with three consecutive years of monthly volume growth and continued market outperformance.

• Fashion, Home & Beauty sales declined 16.4% to £1,698m due to online and supply chain disruptions, with operating profit before adjusting items down 81.1% to £46.1m.

• International sales fell 11.6% to £256m, but operating profit before adjusting items rose 24.3% to £13.3m, margin at 5.2%.

• Ocado Retail sales rose 14.9% to £1,538.8m, with M&S product sales up 20% and operating loss before adjusting items reduced to £3.1m.

• Free cash flow from operations was negative £193.0m, reflecting incident costs and working capital movements.

Outlook and guidance

• Profit for the second half is expected to be at least in line with the prior year as incident effects subside.

• Full recovery and return to normal operations anticipated by the end of the financial year, with FY27 expected to be a clean, unimpacted year.

• CapEx guidance for the year is £650–750 million, with continued investment in stores, supply chain, and digital transformation.

• Structural cost savings target raised to £600 million by FY28, mainly through supply chain and productivity improvements.

• Medium and long-term ambitions for growth and margin improvement remain unchanged.