M&S records sharp earnings recovery in first half despite clothing challenges

UK retail group Marks & Spencer (M&S) has reported a sharp recovery in earnings for the first half of the financial year, supported by market share gains across its food and fashion businesses following the disruption caused by a cyber incident in the previous year. However, performance remained below the level recorded two years earlier, as strong trading in food failed to fully offset continued weakness in clothing.

Adjusted profit before tax reached 403.2 million pounds (542.7 million dollars), compared with 184.1 million pounds in the corresponding period last year. Statutory profit before tax rose to 355.1 million pounds from 3.4 million pounds, while the interim dividend increased by 16.7 percent to 1.4 pence per share. Group sales grew by 16.2 percent to 9.26 billion pounds.

“We hit the ground running in the first half of the year, accelerating the pace of change and delivering market share growth in both businesses,” said M&S chief executive officer Stuart Machin. “Availability and stock flow are now improving, we are broadening our appeal and the brand is in good health, but the results fell short of their potential and show there is a lot more to do.”

Machin added: “Although we have much improved product, the end-to-end transformation is in the foothills.”

The group expects full-year adjusted profit before tax to be in line with current market expectations of 941 million pounds.

Clothing sales recover, but remain below pre-disruption levels

The Fashion, Home & Beauty (FH&B) division reported an adjusted operating profit of 150.5 million pounds, with an operating margin of 7.5 percent. Division sales increased by 17.5 percent to two billion pounds, while like-for-like (LFL) sales rose by 17.3 percent.

Despite the recovery, sales and profitability remained below levels recorded two years earlier, as the business struggled to convert demand fully into sales. Product availability was constrained by the longer-than-expected impact of manual ordering processes introduced following the cyber incident. Profitability was also affected by a higher proportion of online sales, which carry increased fulfilment costs.

Store sales declined by 5.2 percent compared with 2024/25 levels, while adjusted online sales grew by 11.2 percent, taking online penetration to 35 percent from 33 percent.

Womenswear faces availability challenges as menswear maintains growth

Menswear delivered steady sales growth, while womenswear faced conversion challenges due to product availability constraints in selected core sizes, reflecting the lingering operational impact of the cyber incident.

An excessive weighting towards trend-led ranges in certain categories also affected stock conversion, limiting the division's ability to translate customer demand into sales.

Ahead of the autumn/winter (AW) season, M&S improved availability across core inventory while continuing to maintain its seasonal product offering. However, margins remained under pressure from higher fulfilment expenses and customer returns associated with the expansion of online sales.

Distribution investments and Sephora partnership support transformation

To simplify operations and reduce handling costs, M&S is investing in its acquired Lichfield distribution centre, developing a dedicated returns facility in Sheffield and adding capacity at Castle Donington.

The group has also announced a retail partnership with French beauty specialist Sephora, which will introduce dedicated beauty spaces in selected M&S stores and online from spring 2027.