M&S FY25 Profit Down, Revenues Rise; Lifts Dividend; Sees GBP 300 Mln Cyber Attack Impact In FY26

Marks and Spencer (MKS.L) reported a 24% drop in fiscal 2025 pre-tax profit to £511.8 million, impacted by a £248.5 million impairment charge on its investment in Ocado Retail, though revenue increased 6% to £13.82 billion. The company anticipates a £300 million impact on 2026 operating profit due to a cyber incident in April, but expects to mitigate the impact through cost reductions, insurance, and trading actions, while also raising its dividend by 20%.

Analysis

Marks and Spencer Group Plc (MKS.L) reported a complex fiscal 2025, with statutory profit before tax declining 24% to £511.8 million, primarily due to a significant £248.5 million non-cash impairment charge related to its investment in Ocado Retail Limited. This resulted in a 33.3% decrease in basic earnings per share to 14.6 pence. However, on an adjusted basis, profit before tax reached £875.5 million, the highest in over 15 years, and adjusted basic earnings per share grew 29.7% to 31.9 pence, indicating strong underlying operational performance. Group revenue increased by 6% to £13.82 billion, with sales up 6.1% to £13.91 billion. Despite the statutory profit decline, the company announced a 20% increase in its dividend, proposing a full-year dividend of 3.6 pence for 2025. Looking ahead to fiscal 2026, M&S anticipates a substantial impact of approximately £300 million on operating profit stemming from a cyber incident reported in April, before accounting for cost mitigation, insurance, and trading actions. The company expressed confidence in its strategy and its ability to return to pre-incident performance levels in the second half of the year, maintaining its long-term growth plans.

Key Decisions for Investors

• Investors should weigh the strong underlying adjusted profit growth and increased dividend against the significant statutory profit decline due to the Ocado impairment and the material projected impact of the cyber incident on FY2026 operating profit.
• Monitor the company's progress in mitigating the financial effects of the cyber incident, as the £300 million pre-mitigation estimate presents a considerable headwind for the upcoming fiscal year.
• Assess the sustainability of the dividend increase in light of the anticipated profit reduction and the company's ability to execute its recovery and long-term reshaping strategy effectively.
• Consider the contrasting signals: while current operational momentum (excluding one-offs and future incidents) appears positive, upcoming challenges require careful risk assessment regarding MKS.L's near-term earnings trajectory.