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M&S Profit More Than Doubles to £403.2m

Marks and Spencer's first-half adjusted profit has rebounded from last year's cyber-attack hit, led by Food, while Fashion, Home & Beauty profitability lagged and full-year guidance is only in line with expectations.

Marks and Spencer (LSE: MKS), the food and fashion retailer, reported first-half adjusted pre-tax profit of £403.2m, more than double the £184.1m of a year earlier, when a cyber incident hit the business. Group sales rose 16.2% to £9,255.0m in the 26 weeks to the 26th of September.

MKS.LSE

The recovery is not quite complete. Profit still sits just under the £413.1m reported two years ago, which the company put down to heavier cost growth early in the year and weaker Fashion, Home & Beauty profit. Cyber costs were £0.3m this half, against £101.6m last time.

Bar chart of M&S half-year adjusted pre-tax profit showing a sharp fall from £413.1m to £184.1m, then a strong recovery to £403.2m, just short of the earlier peak.
M&S first-half adjusted pre-tax profit, £m. Source: M&S interim results.

Food did the heavy lifting. Sales rose 13.9% to £5,162.9m, with like-for-like growth of 11.7% and volumes up 11.9%. Adjusted operating profit reached £288.6m from £89.1m, lifting the margin to 5.6% from 2.0%.

Fashion, Home & Beauty grew sales 17.5% to £2.0bn and made £150.5m of adjusted operating profit. Its margin of 7.5% compares with 2.7% last year but 12.0% two years ago, and the company’s ambition is above 10%.

Availability was constrained by manual ordering after the incident. Store sales fell 2.0% to £1,289.7m, while online sales were £705.7m. Chief executive Stuart Machin was frank about the result.

“…the results fell short of their potential and show there is a lot more to do.”

Stuart Machin, chief executive of M&S

For the full year, M&S expects adjusted pre-tax profit “in line with current market expectations”. It expects Fashion, Home & Beauty to improve in the second half and Food margins to finish ahead of 2024/25, helped by over £120m of structural savings. The company also said it performed solidly in October.

Costs remain a drag, including about £35m of packaging taxes and higher pay and national insurance. Capital spending is planned at around £750m this year, about two-thirds of it in Food.

Net funds excluding leases rose to £374.7m from £176.1m, with cash and short-term investments of £1,072.1m. The interim dividend rises 16.7% to 1.4p, with the 26th of November the ex-dividend date, the 27th of November the record date and payment on the 8th of January.

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