<div id="readability-page-1">Marks and Spencer Group LON: MKS said adjusted profit declined in its 2026 annual results as the retailer continued to work through the effects of a cyber incident that disrupted trading, stock flow and online operations during the year. Management said the company ended the period with a strong balance sheet and plans to accelerate investment across stores, supply chain and technology.Chairman Archie Norman said last year’s figures were “heavily colored” by the incident, which occurred in April and affected trading performance through much of the year, particularly in fashion, home and beauty. Norman said the business continued reshaping itself during the disruption and entered the new year with confidence. “We’re not really here to massage the status quo or worry about one year at a time,” Norman said. “We’re here to build a growth business for decades to come.” Chief Executive Officer Stuart Machin said the year was “extraordinary” in the company’s 142-year history and “tested” the business, but also demonstrated its capabilities. He said M&amp;S is moving from what it called “reshaping for growth” to a new phase of “reinvesting for growth.” <h2>Profit Falls, But Second Half Improves</h2> M&amp;S reported group adjusted profit before tax of GBP 671.4 million. Machin said the figure represented a year-on-year decline, although profits improved in the second half. The result included GBP 100 million of lost-profit cyber insurance proceeds claimed and received in the first half. Total group sales were GBP 17.4 billion, up more than 20% from the prior year due to the consolidation of Ocado Retail. Excluding Ocado Retail, sales were GBP 14.2 billion, up 1.9%. Adjusting items totaled GBP 292 million, including GBP 131 million related to the cyber attack. The company said those cyber-related costs were tied to resource augmentation to replace remote outsourced technology teams and corporate advisory costs. Free cash flow from operations was GBP 131.3 million, down GBP 312 million from the prior year. The company said the decline reflected lower operating profit, increased working capital and cash adjusting items related to the cyber incident, partially offset by lower taxation due to reduced profits. M&amp;S closed the year with net funds of GBP 338 million excluding lease liabilities. Including Ocado Retail leases and other liabilities, group net debt increased to GBP 2.4 billion from GBP 1.8 billion, with the majority of the increase attributed to Ocado leases. The company said it retained significant liquidity and headroom to its investment-grade credit rating metrics and would pay an increased dividend. <h2>Food Sales Grow Despite Margin Pressure</h2> Food was the company’s strongest performer, with sales up 7% in value and 3.3% in volume. The food operating margin fell to 4.6% from 5.4% a year earlier, reflecting higher markdown and waste in the first half as M&amp;S manually pushed stock to stores after the cyber incident. Machin said the impact on food was contained to the first half, and food profit grew by GBP 80 million in the second half. He said the performance was supported by new and upgraded products, value investment and a focus on availability. M&amp;S upgraded more than 1,000 food products and launched more than 1,400 new products during the year, including its nutrient-dense range. Machin said the company’s food quality perception is at its highest level in more than five years and that market share reached 4.1%, or 4.6% including M&amp;S on Ocado. The company said it sees long-term opportunities in food, including the potential to double sales over time. Its near-term priorities include expanding the store pipeline and building a more modern and resilient supply chain. <h2>Fashion, Home and Beauty Hit by Online Disruption</h2> Fashion, home and beauty sales fell 7.7% for the year. Store sales declined 2.3%, while online sales dropped 18.4%. Management said the unit was heavily affected by the cyber incident, including a roughly six-week pause in website orders during the first half and a phased return over the summer. Availability challenges and disrupted stock flows continued to pressure the business after the website came back online. The company said excess stock holding led to higher markdowns, particularly in the second half. Fashion, home and beauty operating margin declined to 5.5% from 11.3% a year earlier, reflecting lower sales, stock management costs and markdowns. However, Machin said both stores and online returned to growth in the fourth quarter as availability improved and spring-summer ranges resonated with customers. Machin said the company has made progress on product appeal, noting that M&amp;S became number one for style perception for the first time, up from fifth in 2021. He also said the retailer remained number one for quality and value perception. The company highlighted its value positioning, saying more than half of its spring-summer fashion ranges were priced at GBP 30 or below. Machin also said M&amp;S had sold more than 1.8 million of its GBP 10 bras and that “over half the women in the U.K. are wearing an M&amp;S bra.” <h2>Ocado Retail Turns Small Profit</h2> Ocado Retail, the company’s joint venture, reported an operating profit of GBP 15.2 million for the 51 weeks to the end of March. Sales rose 15%, driven by growth in active customers and increased order frequency. Machin said M&amp;S product sales through Ocado increased 17% and exceeded GBP 1 billion in turnover for the first time. He said productivity and customer fulfillment centers also improved, contributing to profitability. However, Machin said there is “much more to do” before M&amp;S commits to future growth investment in Ocado Retail. International sales fell 7.2%, though the company said performance improved in the second half as new wholesale and online marketplace business partly offset declines in owned and franchise stores. M&amp;S expanded its range on Zalando in Europe and launched new wholesale partnerships in Australia and America. <h2>Investment to Accelerate in Stores, Supply Chain and Technology</h2> M&amp;S plans to invest between GBP 650 million and GBP 750 million of capital in the year ahead, net of disposals. About GBP 150 million will go to maintenance capital expenditure, with the remainder directed toward growth and cost-out projects across stores, supply chain and digital technology. The company plans to spend about GBP 200 million on stores, most of it in food. It aims to grow its food estate to more than 420 stores over time while creating a more productive full-line store estate of roughly 180 to 200 stores. In the year ahead, M&amp;S plans to open 18 new food stores. Supply chain investment is expected to total about GBP 270 million, including GBP 70 million for a new fully automated distribution center. The Avonmouth regional distribution center is expected to come online this financial year, while the company will begin installing automation at its future Daventry national distribution center before its planned 2029 opening. M&amp;S also plans to spend about GBP 140 million on digital and technology, including rollout of a planning platform, online capabilities and improvements to website and app search, imagery, checkout and payment. Machin said the company is “hardwiring AI across the whole business” and investing in data capability. The company said its structural cost-out program has delivered about GBP 390 million of savings over three years, including GBP 89 million in the latest year. It plans to deliver more than GBP 120 million of additional savings in the year ahead and is targeting GBP 600 million of savings by fiscal 2028. Looking ahead, Machin said retailers face headwinds from higher taxes, increased regulation and broader cost pressures. He said M&amp;S will seek to mitigate those through improved buying, investment in value and structural cost savings. The company expects profit growth to resume versus fiscal 2024/25 and anticipates further progress on its transformation as it reinvests for growth.<h2>About Marks and Spencer Group LON: MKS</h2>M&amp;S has a heritage of quality, innovation and value for money and has been voted the UK's most trusted brand. From these foundations, M&amp;S is reshaping for sustainable profitable growth and value creation. We operate as a family of businesses, selling high-quality, great-value, own-brand products and services, alongside a carefully selected range of third-party brands. We do this through a network of stores and websites globally, and together, across our stores, support centres, warehouses and supply chain, our 65,000 colleagues serve over 30 million customers each year.This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.<h2>Should You Invest $1,000 in Marks and Spencer Group Right Now?</h2>Before you consider Marks and Spencer Group, you'll want to hear this.MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. 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Marks and Spencer Group reported a decline in adjusted profit for 2026 due to a cyber incident affecting trading and operations. Despite this, the company ended the year with a strong balance sheet and plans to invest in growth. Food sales increased, while fashion, home, and beauty sales fell due to online disruptions. The company aims to double food sales over time and has seen improvements in product appeal and availability.

Marks and Spencer Group H2 Earnings Call Highlights