Marks & Spencer’s sales rose 3.3% to £4.2bn in the third quarter, ignoring exchange rates and the consolidation of Ocado Retail into the business. Total group sales were £5.0bn including Ocado Retail.
Food sales were up 5.6% to £2.7bn on a like-for-like (LFL) basis. Market share at record levels helped volumes grow by 2.3%, with price increases contributing the remainder.
Fashion, Home & Beauty sales fell by 2.9% on a LFL basis, with performance held back by the long-term impacts on inventory levels and data management due to the cyber-attack in early 2025.
Ocado Retail sales increased by 13.7% to £0.8bn, driven by double-digit volume growth.
Full-year profit guidance remains unchanged, pointing to underlying pre-tax profits of around £650mn.
The shares rose 3.5% in early trading.
Our view
Marks & Spencer’s Food continued to be its shining light this festive season, helping the group grow its market share to record levels. The Fashion, Home & Beauty division took some shine off headline figures as it continues to work through the issues caused by the cyber-attack in early 2025, but progress on this front remains promising.
To help offset some of the financial impact from the cyber-attack, the group’s set its sights on achieving £100mn worth of cost-savings through efficiency improvements. And with operations set to return to normal by March, we’re optimistic that second-half profits can rebound above last year’s level.
Back to underlying performance, and demand for M&S food remains robust, driven by increased customer numbers and a growing market share. New products and a continued focus on affordability should also help to attract more families, who on average spend more on each shop.
Fashion, Home & Beauty sales were hit hardest by the cyber-attack in the first half. Despite some heavy discounting over the festive period to clear old stock, underlying trends remain positive, reflecting improved customer perceptions of value, quality, and style. New and improved stores are a key part of the growth story here. Its recent openings are gaining momentum, and many more are planned for the years ahead.
M&S's joint venture with Ocado remained a drag on performance last we heard, but losses are narrowing. There’s still potential to significantly improve productivity and revenue, but we remain cautious about when this will start to have a meaningful positive impact on the bottom line. The disagreement between the two parties over payments for hitting (or missing) certain performance targets remains up in the air. Tension in a business partnership is far from ideal.
The cyber-incident looks to have sharpened management’s focus on operational and strategic improvements within the business, and we’re optimistic that the group can bounce back stronger. The balance sheet remains in decent shape, and there’s a prospective dividend yield of 2.0% on offer, but as always, no dividends can be guaranteed.
M&S remains a healthy business and with expectations now reset, the worst appears to be over. Sitting at a discount to peers, the valuation offers attractive upside in our view, making it one of our preferred names in the sector. Still, competition is fierce, and there’s no guarantee operations will recover on management’s timeline.
Environmental, social and governance (ESG) risk
The food and beverage industry tends to be medium-risk in terms of ESG though some segments like agriculture, tobacco and spirits fall into the high-risk category. Product governance is a key risk industry-wide, especially in areas with strict quality and safety requirements. Labour relations and supply chain management are also industry-wide risks, with other issues varying by sub-sector.
According to Sustainalytics, Marks & Spencer’s management of ESG risk is strong.
The group plans to become a net zero business by 2040, with scope 1, 2, and 3 emissions targets in place. The addition of doors and panels on store refrigeration devices is a critical step towards increasing energy efficiency. However, there’s a reluctance to put an obstacle between customers and their products, especially when it’s not commonplace in the market. Product governance is also weak, with a lack of disclosure and no formal policy on the issue in place. The 2025 cyber-attack raises some questions around data privacy.
Marks & Spencer key facts
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This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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