Marks and Spencer Group plc

Marks & Spencer said total group sales were GBP 17.4 billion, up 20% versus last year, mainly from Ocado Retail consolidation. Excluding Ocado Retail, sales were GBP 14.2 billion, up 1.9%. Adjusted profit before tax was GBP 671.4 million, including GBP 100 million of lost-profit cyber insurance proceeds. Free cash flow from operations was an inflow of GBP 131.3 million, and the company ended the year with a strong net funds position excluding lease liabilities. Food sales grew 7% and volumes 3.5%, while Fashion, Home and Beauty sales fell 7.7% (store sales down 2.3% and online down 18.4%). Looking ahead, management guided to FY25 capital investment of GBP 650 million to GBP 750 million net of disposals, with food store openings, two full-line store openings, and continued investment in supply chain and digital systems. They also reiterated food net margin of above 4% and said Fashion, Home and Beauty margins should trend back toward 10%+ over time, with benefits from Lichfield and other investments more visible from FY28 onward.

Stuart Machin framed the year as a recovery story after operational disruption, saying the business is now in a better place and “very much looking forward.” He emphasized that M&S is moving from reshaping the business to “reinvesting for growth,” with disciplined capital going into stores, supply chain, data/technology, and value. His tone was confident but pragmatic: he repeatedly pointed to weather, market conditions, and policy headwinds, while stressing that the company is in good financial health and focused on what it can control.

Alison Dolan focused on capital allocation, return hurdles, and the timing of payoffs. She said Lichfield’s headline purchase price was GBP 67.5 million, with about GBP 20 million more for automation commissioning, and that the company had set aside GBP 70 million in the investment line plus about GBP 20 million in D&T, with only a small amount of OpEx. On returns, she said D&T investments target a 20% IRR and about a 4-year payback, while supply chain projects have a longer payback; the most obvious near-term return is the GBP 2 to 3 percentage points of food growth from non-like-for-like space. She also said the priority for cash is to fund growth investments first, while aiming to grow the dividend over time.

Analysts pressed management on Fashion, Home and Beauty availability, margin recovery, and when supply-chain and tech investments would show up in profits. Machin said stock is in better shape, availability had improved into the high 80s, and Lichfield should help online margins and service, with benefits from FY28. Questions also focused on inflation, possible government price caps, and consumer weakness later in the year; Machin called the price cap idea “preposterous,” said the company has seen value perception dip slightly as household pressure rises, and stressed that M&S is trying to pass through as little inflation as possible while investing in value. On capital allocation and dividends, Dolan said cash will first fund growth and efficiency investments, with dividend growth over time rather than an immediate return to pre-COVID payout ratios.