Marks & Spencer Group (MKS) H2 25/26 earnings summary

Executive summary

• Adjusted profit before tax was £671.4m, down 23.8% year-over-year due to a major cyber incident, but profits grew in the second half as recovery progressed.

• Statutory profit before tax fell 28.8% to £364.6m.

• Free cash flow from operations was £131.3m, and the group closed the period in a net funds position, maintaining a strong balance sheet.

• The business accelerated transformation efforts, investing in new and renewed stores, automation, and technology for long-term growth.

• Food sales rose 7.0% to £9.7bn, with adjusted operating profit of £444.5m and margin of 4.6%.

Financial highlights

• Total group sales reached £17.4bn, up over 20% due to Ocado Retail consolidation; excluding Ocado, sales were £14.2bn, up 1.9%.

• Adjusted profit before tax included £100m of cyber insurance proceeds; adjusting items totaled £292.1m, with £131.3m related to the cyber attack.

• Adjusted basic EPS fell 25.4% to 23.8p.

• Free cash flow from operations was £131.3m, £312m lower than last year, mainly due to the cyber incident's impact.

• Net funds position (pre-leases) was £338.2m; group net debt (including leases) increased to £2.41bn, mainly from Ocado leases.

Outlook and guidance

• Plans to invest £650m–£750m in capital, focusing on store rotation, supply chain, and digital/technology.

• Profit growth expected to resume in FY 2026/27, with continued transformation and reinvestment for growth.

• Dividend remains measured and conservative as reinvestment is prioritized; full year dividend increased by 16.7% to 4.2p.

• Food to drive volume growth via reinvestment in value, quality, innovation, and new store openings.

• Fashion, Home & Beauty to prioritize growth through style credentials and supply chain improvements.