Marks and Spencer (MKSN) Q4 2026 Earnings Report

The call presents a cautiously optimistic tone. Strong performance and momentum in Food (7% sales growth, market share gains to 4.1% and GBP 1bn M&S-on-Ocado milestone), maintained net funds and positive operating cash flow are clear positives. The business is reinvesting heavily (GBP 650-750m planned) into stores, supply chain and D&T with concrete capacity additions (1.7m sq ft food DC space, Lichfield fashion DC) that should support medium-term margin and service improvement (material benefits expected from FY'28). However, significant short-term challenges remain: Fashion, Home & Beauty is down materially for the year (FHB -7.7%, online -18.4%), international sales are weaker, margins — particularly in everyday food items — are under pressure, and the group faces meaningful tax, regulatory and inflationary headwinds that compress near-term profitability. Given the substantive positive operational wins in food, progress on transformation, and a generally constructive outlook from management that profits should grow versus two years ago, the highlights marginally outweigh the lowlights.

Guidance summary: Management plans to reinvest for growth with capital expenditure of £650–£750m net of disposals this year (maintenance CapEx ~£150m; property ~£200m; supply chain ~£200m; D&T ~£140m), while maintaining a net funds position (ex‑leases) and targeting profit growth versus FY25 (mid‑single‑digit implied). Key operational targets include opening 18 new larger food stores (after 12 new/18 renewed last year), delivering 2–3ppt of sales from non‑like‑for‑like space, and continuing a £120m cost‑out programme. Food aims to keep net gross margin ~4%+, having grown sales +7% (volume +3.5%) to lift market share to 4.1% (4.6% incl. Ocado) and M&S on Ocado sales rose 17% to £1.0bn. Digital/supply‑chain investments include the 437,000 sq ft Lichfield site (purchase £67.5m + ~£20m automation) adding ~80% more picking capacity and ~20% more online stock points with benefits from FY28, a target long‑term online penetration ~50% (pre‑incident 34%), stock cover ~15 weeks, availability in the high‑80s, group sales £17.4bn (+20% incl. Ocado; excl. Ocado £14.2bn +1.9%), adjusted PBT £671.4m (incl. £100m cyber insurance) and operating free cash inflow £131.3m; dividend to be grown over time.