Highlights

  • Marks & Spencer has been assigned a buy rating with a target price of GBP 9.51.
  • FY25 adjusted profit before tax reached GBP 875.5 million in FY25, the highest in over 15 years.
  • Full-year dividend increased by 20% to 3.6p.

Marks & Spencer Group Plc (LSE:MKS) has been assigned a buy rating by a leading broker, with a target price of GBP 9.51, suggesting a potential upside of 16.14% from current levels.

FY25 Financial Highlights

The Group reported an adjusted profit before tax (PBT) of GBP 875.5 million, a 22.2% increase from GBP 716.4 million in 2023/24, marking the highest PBT in over 15 years. Statutory PBT was lower at GBP 511.8 million due to a GBP 248.5 million non-cash impairment linked to its investment in Ocado Retail Limited (ORL). Food sales rose 8.7% to GBP 9.0 billion, generating an adjusted operating profit of GBP 484.1 million with a margin of 5.4%. The Fashion, Home & Beauty segment recorded sales of GBP 4.2 billion, up 3.5%, and an adjusted operating profit of GBP 475.3 million, reflecting an 11.2% margin. International constant currency sales decreased 7.1% to GBP 0.7 billion, with an adjusted operating profit of GBP 46.3 million.

Adjusted return on capital employed increased to 16.4% from 14.1% a year earlier. The Group reported free cash flow from operations of GBP 443.3 million and net funds of GBP 437.8 million, excluding lease liabilities.

Strategic Initiatives and Growth

Marks & Spencer continues to pursue its “Reshaping M&S” strategy to drive sustainable growth. The Group has achieved three consecutive years of growth in both Food and Fashion, Home & Beauty, with like-for-like sales increasing 8.6% and 4.4% respectively in FY25. Structural cost reductions of approximately GBP 120 million were realised as part of a cumulative target exceeding GBP 500 million by FY27/28.

New Food and full-line stores opened in the past three years have generated paybacks better than hurdle rates. Capital investment of GBP 600–650 million is planned for 2025/26, net of disposals, to support continued growth and business resilience.

Cyber Incident and Outlook

During early FY26, the Group managed a sophisticated cyber incident affecting Food and Fashion, Home & Beauty operations. The estimated impact on operating profit is approximately GBP 300 million before mitigation efforts involving cost controls, insurance, and trading actions. Management expects trading momentum to recover in the second half, with stabilization of systems and operations.

The full-year dividend has been shot up by 20% to 3.6p.