Marks & Spencer fashion segment faces headwinds after cyber disruption

London-based retailer Marks and Spencer Group plc (M&S), has reported its preliminary financial results for the 52 weeks ended March 28, 2026. The group posted a resilient overall performance despite experiencing a significant operational impact from a sophisticated cyber incident during the first half of the financial year.

Including Ocado Retail, group statutory revenue rose 25 percent to 17.3 billion pounds (23.2 billion dollars) and group sales rose by 24.8 percent to 17.4 billion pounds. Excluding the impact of Ocado, group sales saw a modest increase of 1.9 percent to 14.2 billion pounds.

In a statement regarding the group's results, M&S chief executive Stuart Machin commented: “Recovery has taken longer, but there is strong growth potential. To support this, we have accelerated our supply chain improvements... We've now got the momentum to do that at pace.”

Segment performance impacted by systems pause

The fashion, home and beauty segment experienced a demanding year, with sales declining by 7.7 percent to 3.9 billion pounds compared to the prior fiscal period. The decline was primarily driven by the operational disruptions of the cyber incident in the first half. This necessitated a temporary pause in online trading and systems access, which severely restricted product availability and disrupted stock flows across both channels.

Womenswear experienced the most substantial impact from the system disruptions. Despite these challenges, the division recorded an encouraging improvement in customer style perception metrics. The business continued to refine its product appeal by creating a more edited store range, removing 9 percent of options for the spring/summer season.

The segment began to stabilise in the second half of the year, with sales ticking up by 0.2 percent as online trading was fully restored and website traffic grew. Online sales for the full year decreased by 18.4 percent to 1.2 billion pounds due to the gradual recovery over the summer months. Store sales decreased by 2.3 percent to 2.7 billion pounds, though they returned to positive growth in the final quarter.

Profitability compressed by seasonal clearance

The division's adjusted operating profit declined by 55.4 percent to 213.4 million pounds, down from 478 million pounds in the previous year. The segment's adjusted operating margin compressed by 5.8 percentage points to 5.5 percent. This margin erosion was heavily influenced by a 2.7 percentage point drop in gross margin, driven by increased stock management and markdown costs weighted toward the second half to clear excess seasonal stock.

The group enters the 2026/27 financial year with a clear plan to reinvest for growth, prioritising supply chain modernisation, technology transformation and store rotation. A major focus will be placed on rewiring the end-to-end supply chain to expand online capacity and reduce handling costs. To achieve this, M&S has secured a fully automated 437,000 square feet fashion distribution site in Lichfield. The facility is projected to begin fulfilling customer orders in 2027, accelerating online capacity growth at a lower capital cost than initially projected.

Furthermore, digital and technology investments are being accelerated to roll out a new fashion planning platform, upgrade the e-commerce platform and improve the online user experience in search, imagery, check-out and payments. The division aims to double its online sales in the medium term, improve profitability and increase online participation to 50 percent, alongside optimizing a profitable estate of 200 full-line stores by 2027/28.

International wholesale partnerships offset franchise declines

In the international division, reported sales declined by 7.2 percent to 543.3 million pounds, or 5.7 percent at constant currency, following a lagging recovery from the cyber incident and shipment delays to the Middle East. Franchise sales fell by 10 percent to 244.4 million pounds, and owned market sales fell by 9.1 percent to 228.8 million pounds. However, international adjusted operating profit grew by 8.9 percent to 39.1 million pounds due to strict cost management and a reset of franchise terms to invest in trusted value.

Wholesale sales grew by 110.7 percent to 25.5 million pounds, supported by selective new agreements with major retailers, including Nordstrom in the US for fashion and Coles in Australia for food. Online international sales are also expanding through digital marketplaces, notably via an expanded range on Zalando in Europe.