Marks & Spencer is targeting faster sales growth, improved operating margins, and higher shareholder returns under a medium-term strategy that will require further investment in its food, clothing, and international businesses.
The retailer wants to achieve mid-to-high single-digit annual sales growth over the medium term, with profits increasing faster than revenue as operational efficiencies and cost reductions take effect.
Management outlined the ambitions during a Capital Markets Day on 10 November, providing further details of the company’s plans following several years of restructuring and investment.
Its Food division is targeting a doubling of sales over time, building on growth of more than 50% since the 2022 financial year.
The business is also seeking an operating margin of approximately 5%, supported by increased sales volumes, distribution improvements, and further market share gains.
Food has been one of M&S’s stronger-performing divisions, helping sustain overall trading while the company’s clothing operations have faced a more challenging consumer environment.
For Fashion, Home & Beauty, management wants online sales to account for approximately half of divisional revenue, alongside a network of around 180 highly productive physical stores.
The company is targeting operating margins above 10% in both its store and online channels.
Its international business will pursue growth principally through partnerships and other capital-light arrangements, reducing the need for extensive direct investment in overseas stores.
Further investment and cost reductions —
Delivering the strategy will involve continued investment in technology, distribution, stores, and the processes supporting the company’s operations.
M&S has maintained its target of achieving £600m in structural cost reductions by the 2028 financial year and intends to identify further opportunities to improve operating efficiency.
The programme covers changes to how the retailer purchases products, manages its supply chain, and serves customers across physical and digital channels.
Management believes a more efficient operating structure will allow profits to grow faster than sales, although achieving that outcome will depend on trading conditions and the successful delivery of its investment programme.
The ambitions follow a period in which M&S has strengthened its balance sheet, returning to an investment-grade financial position with net funds and substantial liquidity.
The company expects to generate free cash flow in each of the next three years, providing resources for further investment while increasing shareholder distributions.
It intends to double its full-year 2026/27 dividend from 4.2p to 8.4p per share, with subsequent payments increasing at least in line with earnings.
Maintaining the group’s investment-grade credit rating will remain a priority as management balances business expansion with returns to shareholders.
Different challenges across the business —
The strategy follows half-year results showing contrasting conditions across the retailer’s principal UK divisions.
Food continued to benefit from stronger customer demand and market share gains, while Fashion, Home & Beauty experienced more difficult trading.
Group profit recovered compared with the previous year’s period, which was affected by the major cyberattack, although profitability remained lower when measured against the equivalent period two years earlier.
These differences are reflected in the latest investment priorities. Food is concentrating on scale and distribution capacity, while Fashion, Home & Beauty is seeking higher productivity through a smaller, more effective store network and greater online sales.
International expansion will increasingly depend on using partners and existing distribution channels to reach customers without committing equivalent levels of capital to overseas property.
The targets presented by M&S are medium-term ambitions rather than achieved results or guaranteed forecasts. Management has linked their delivery to further investment and its continuing programme of operational transformation.
You must be logged in to post a comment.