Marks and Spencer Group plc (LSE: MKS) reported adjusted profit before tax of £403.2 million for the 26 weeks ended September 26, 2026, more than doubling from £184.1 million a year earlier as its food business expanded and trading recovered from the previous year’s cyber incident. Group sales increased 16.2% to £9.255 billion, while Food revenue grew 13.9% and Fashion, Home & Beauty sales increased 17.5%. However, adjusted group profit remained below the £413.1 million recorded two years earlier, while Fashion, Home & Beauty operating profit was still approximately £93 million below its pre-disruption level. The results suggest that Marks & Spencer has restored important parts of its earnings base, but the durability of its recovery depends on improving clothing availability, fulfilment efficiency and profitability alongside continued grocery expansion.
Why did Marks and Spencer Group’s first-half adjusted profit more than double after the 2025 cyberattack?
Marks & Spencer reported adjusted profit before tax of £403.2 million, compared with £184.1 million in the corresponding period of the previous financial year. Statutory profit before tax increased from £3.4 million to £355.1 million, while operating profit before adjusting items rose 93.5% to £486.5 million. The scale of the recovery reflects improvements across its businesses and the unusually weak comparison created by the previous year’s cyber disruption.
The distinction between recovery and underlying growth is important when interpreting the headline earnings improvement. In the comparable period two years earlier, adjusted profit before tax was £413.1 million, slightly above the latest £403.2 million result. The business has therefore recovered much of the profitability lost during the disruption without yet surpassing its previous earnings benchmark.
Adjusted basic earnings per share increased from 6.6 pence to 14.8 pence, while statutory basic earnings per share rose to 12.9 pence from 0.3 pence. The recovery also benefited from lower adjusting items, which fell to £51.7 million from £167.8 million. These changes contributed to the substantial improvement in reported profitability.
Management has been investing in store operations, merchandise planning, supply-chain capacity and digital infrastructure. These programmes are intended to create a more efficient business following the disruption, but they also introduce costs during implementation. The financial results indicate that operational recovery is progressing, although full benefits from the investment programme have not yet been realised.
Marks & Spencer faces a more demanding comparison in the next reporting periods as the exceptional weakness of the previous year moves out of the financial base. Future earnings growth will need to be supported by customer demand, operating productivity and sustainable margins rather than relying predominantly on recovery from disrupted trading.
How did Marks & Spencer Food achieve 13.9% sales growth and an 11.9% increase in product volumes?
Marks & Spencer Food generated first-half sales of £5.163 billion, compared with £4.532 billion a year earlier. Total sales increased 13.9%, while like-for-like sales rose 11.7%. Product volumes increased 11.9%, indicating that stronger customer purchasing activity was a substantial contributor to growth.
The business also gained approximately 1.5 million additional customers over the preceding two years. Management attributed the improvement to investment in value, product quality and innovation, alongside a broader grocery assortment. The retailer has been seeking to increase its share of customers’ main shopping baskets rather than being used primarily for occasional premium purchases.
Adjusted Food operating profit increased to £288.6 million from £89.1 million a year earlier. Operating margin improved to 5.6% from 2%, an expansion of 360 basis points. The latest margin was also above the 5.1% recorded two years earlier, suggesting that the food business has moved beyond merely recovering its previous profitability.
The company invested more than £50 million on an annualised basis in food value during the period. This supported demand in categories including frozen products, groceries and bakery items. The performance suggests that Marks & Spencer has been able to strengthen customer appeal while improving operating leverage, although the precise contribution from pricing, mix and purchasing efficiency varies across categories.
The continued expansion of larger food stores is also changing the business’s commercial proposition. Bigger locations support a broader assortment and allow customers to purchase more of their regular groceries in one visit. Management believes this creates opportunities to increase shopping frequency and average basket size.
The retailer has set an ambition to double the size of its food business over time. Achieving that objective will require continued store development, stronger distribution capacity and sustained customer demand. The latest results provide encouraging evidence, but the longer-term financial returns will depend on maintaining attractive margins as the network expands.
Why is Marks & Spencer’s clothing business still less profitable than before the cyber disruption?
Fashion, Home & Beauty reported sales of approximately £1.995 billion, an increase of 17.5% from the previous year. Like-for-like sales increased 17.3%, while adjusted operating profit rose to £150.5 million from £46.1 million. Operating margin improved to 7.5% from 2.7%, reflecting a substantial recovery from the disrupted comparison period.
However, performance remains weaker when measured against the period before the cyber incident. Fashion, Home & Beauty generated £243.4 million in adjusted operating profit two years earlier, with a margin of 12%. The latest operating profit is approximately £92.9 million lower, while operating margin remains 450 basis points below that earlier level.
The company identified continued merchandise availability problems as an important constraint. Manual ordering processes introduced following the cyber incident had longer-lasting consequences for stock flow than initially anticipated. Shortages in selected core lines and sizes reduced the ability to convert customer interest into completed purchases.
Management also acknowledged that some womenswear assortments had moved too far towards trend-led products. This created an imbalance between seasonal innovation and dependable core merchandise. The company is now attempting to restore product availability while maintaining sufficient newness to attract customers.
The wider British clothing market also weakened. Marks & Spencer cited a 5.5% decline in the clothing market compared with two years earlier, while prolonged summer weather affected store demand. Despite these pressures, the retailer reported market-share gains, indicating that its performance was relatively stronger than parts of the wider market.
The remaining commercial challenge is converting that improved relative position into higher absolute profitability. Stronger market share does not guarantee improved margins when the retailer faces higher fulfilment costs, stock inefficiencies and weaker sales productivity at some physical stores.
How are online shopping and higher clothing return costs affecting Marks & Spencer’s retail margins?
Marks & Spencer reported that Fashion, Home & Beauty online sales increased 11.2% compared with two years earlier, adjusted for its exit from bulky furniture. Online sales participation increased to approximately 35% from 33% over that period. The shift provides additional access to customers but introduces different operating costs from physical retail.
Management identified higher fulfilment expenses and customer returns as important contributors to margin pressure. Online apparel purchases can generate additional processing, delivery and reverse-logistics costs, particularly when customers order several sizes or return products that do not meet expectations. These costs can increase faster than sales when returns volumes rise disproportionately.
The company has been investing in new distribution and returns infrastructure to address these inefficiencies. This includes the acquired Lichfield distribution centre and a dedicated returns warehouse in Sheffield, alongside improvements at Castle Donington. Management expects the changes to improve stock flow and reduce handling costs.
The retailer is also updating sourcing, buying and merchandise planning systems. Better inventory visibility can improve product availability and reduce the need for markdowns when merchandise reaches stores too late. These initiatives should be evaluated through their effects on stock turnover, fulfilment costs and operating margins.
Marks & Spencer’s renewed Oxford Street store provides another example of its investment strategy. Fashion, Home & Beauty sales on the refurbished floors increased 27% compared with two years earlier after reopening. Although encouraging, the result reflects one prominent location and cannot automatically be extrapolated across the wider estate.
Management is pursuing a combination of larger modern stores and improved digital operations. The financial benefits will depend on whether the higher sales productivity of renewed locations and more efficient fulfilment can offset the capital and operating costs involved.
What does Marks & Spencer’s £750 million investment programme mean for store expansion and supply-chain capacity?
Marks & Spencer expects approximately £750 million in net capital expenditure during the financial year, consistent with its existing guidance. Around two-thirds of the planned investment is directed towards Food, with the remainder supporting Fashion, Home & Beauty. The programme includes store development, supply-chain modernisation and technology.
The company completed 18 store investments during the first half, comprising 13 new or extended locations and five renewals. Larger food stores have become increasingly important because they support broader product ranges and higher shopping frequency. Management has identified strong performance from some locations converted from former Homebase properties.
Supply-chain investment is intended to support this expansion. The company’s Avonmouth and Daventry distribution developments are expected to provide more than 30% additional capacity when fully implemented, alongside improvements in cost per case. Management expects Avonmouth to begin supporting volumes during the Christmas peak period.
The capacity increase is a planned infrastructure benefit rather than an indication that all additional distribution capability is already operational. Commissioning and implementation will determine when the new facilities contribute to the company’s logistics network. The timing is relevant because food sales are growing more quickly than the existing infrastructure was originally designed to accommodate.
Marks & Spencer expects more than £120 million in structural savings during the financial year. These savings are intended to help offset cost inflation and support investment, although the latest results do not establish that the full amount has already been realised. Management has indicated that cost savings and operational improvements will become more prominent during the second half.
The capital programme creates opportunities to improve long-term efficiency, but financial returns will depend on the productivity of new stores and distribution facilities. Higher capacity is commercially valuable when additional customer demand supports utilisation without requiring disproportionate operating expenditure.
How are Ocado Retail and international partnerships supporting Marks & Spencer’s growth strategy?
Ocado Retail generated £25.6 million in adjusted operating profit during the first half, compared with a £3.1 million loss in the prior-year reported period. Active customers increased 14.3%, while revenue grew 16% on a comparable 26-week basis. The improvement reflects stronger customer activity and more efficient fulfilment operations.
Marks & Spencer Food sales through Ocado Retail increased 22.8%, with the retailer’s products accounting for 30.9% of the average customer basket. The performance reinforces the commercial relationship between Marks & Spencer’s grocery assortment and Ocado Retail’s online fulfilment platform. Higher customer frequency and throughput can improve operating leverage when distribution capacity is utilised efficiently.
International sales increased 22.1%, supported by franchise, marketplace and wholesale partnerships. Adjusted operating profit rose to £15.3 million from £13.3 million, despite disruption affecting parts of the Middle East. The company is seeking additional international reach without replicating its full UK store operating model in every market.
Online and marketplace sales increased 63.8% compared with two years earlier, reflecting stronger activity across European markets. Management also reported progress in wholesale partnerships, including relationships with Target in the United States. Such arrangements can broaden distribution, although growth from relatively small starting positions should not be confused with a proportionate increase in consolidated earnings.
Marks & Spencer has also announced a partnership with Sephora, with a new beauty offering planned for selected stores and online from spring 2027. The initiative could strengthen its position in beauty retail and broaden customer appeal. However, the financial benefit remains prospective until the programme launches and begins generating measurable sales.
The combined performance of Ocado Retail and international partnerships provides additional sources of growth beyond traditional British stores. Their contribution will depend on continued customer acquisition, efficient fulfilment and contractual economics.
Why did MKS shares rise after the results, and what will determine whether the recovery continues?
Marks & Spencer shares closed at 440.7 pence on November 4, up approximately 6.4% from the previous day’s 414.2 pence close. The rally coincided with the interim results, which showed substantial earnings recovery and strong food demand. The movement suggests a favourable near-term market response, although individual trading decisions cannot be attributed exclusively to one financial metric.
During November 5 trading, the shares moved above 449 pence, extending the recovery from earlier October levels. The movement brought the stock close to the upper end of its recent 52-week range. The positive price trend indicates improving market interest, but future valuation will depend on the company’s ability to sustain profitability after the cyber-related recovery effects normalise.
Marks & Spencer ended the first half with approximately £1.072 billion in cash and short-term investments and net funds excluding lease liabilities of £374.7 million. Its stronger financial position supports continued investment and shareholder distributions. The company also increased its interim dividend by 16.7% to 1.4 pence per share.
Management expects full-year adjusted profit before tax to remain in line with prevailing market expectations. It has not presented the recovery as a guarantee of accelerated earnings growth, particularly given the remaining operational work in Fashion, Home & Beauty. The Christmas trading period will provide an important test of merchandise availability, customer demand and cost control.
The food business is demonstrating sustained volume-led growth and stronger margins, while clothing is recovering from a materially weaker base. A more convincing long-term improvement would combine continued grocery market-share gains with Fashion, Home & Beauty profitability moving closer to its earlier 12% margin. Failure to improve clothing availability and fulfilment costs could leave the company dependent on Food for a disproportionate share of earnings momentum.
What are the key takeaways from Marks & Spencer’s £403 million profit recovery, food growth and clothing challenges?
- Marks & Spencer reported adjusted first-half profit before tax of £403.2 million, more than double the prior-year figure.
- Group sales increased 16.2% to £9.255 billion, supported by recovery from cyber-related disruption.
- Adjusted profit remained below the £413.1 million recorded two years earlier, limiting the interpretation of the earnings rebound.
- Food sales increased 13.9%, with product volumes rising 11.9% and operating margin improving to 5.6%.
- Fashion, Home & Beauty sales recovered strongly, but operating profit remained approximately £93 million below its earlier benchmark.
- Clothing availability problems, higher fulfilment expenses and customer returns continued affecting profitability.
- Ocado Retail returned to operating profit, supported by stronger online demand and higher throughput.
- The retailer expects approximately £750 million in annual capital investment across stores, supply chains and technology.
- MKS shares rose 6.4% on November 4 and extended their gains during the following trading session.
- The next financial test will be whether Christmas trading supports continued grocery growth and a more durable improvement in clothing margins.
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