Marks & Spencer: Resilience tested but recovery story intact

When a retailer’s entire digital storefront vanishes in the middle of a critical transformation, alarm bells usually follow. But Marks and Spencer Group PLC (LSE:MKS), which delivered full-year results on Wednesday, has shown that its revival is built on more than just a functioning website.

Shares held steady after the group reported pre-tax profit of £716 million for the year to 30 March, 5% ahead of Bloomberg consensus and supported by robust Kantar market data.

UK operating profit rose 16% year on year, with clothing and home and food both delivering solid performances. Divisional margins are now tracking ahead of medium-term targets.

JP Morgan retained its overweight rating, pointing to “impressive exit rates” in both divisions. Food delivered continued volume gains and benefited from a sharper value proposition.

Clothing and home, long seen as the weaker link, saw improved full-price sell-through and a tighter promotional stance.

UBS also maintained its buy rating and described the results as “strong across the board”, noting particularly high conviction in management’s ability to deliver further self-help gains.

The broker flagged M&S’s leading market share momentum in food and improving fashion relevance as key drivers of the rerating.

Deutsche Bank, meanwhile, described the update as “reassuring” in the context of recent operational disruption. While DB expects the cyber attack to weigh on near-term earnings, it argued that the long-term investment case remains compelling.

It sees continued scope for margin expansion through estate optimisation and supply chain efficiencies, and reiterated its buy rating.

The cyber attack, which began earlier this spring, is expected to result in a £300 million hit to full-year profit, though some of this will be offset by insurance. JP Morgan models a larger impact, lowering its FY26 pre-tax profit forecast by 26% to £681 million, factoring in ongoing disruptions and the cost of recovery.

Chief executive Stuart Machin acknowledged that operations are still “running on limited systems”, and while the website is back online, a full recovery is expected to take several months.

Despite this, the company remains operationally resilient, with physical stores still accounting for the majority of sales, continuing to perform strongly.

The store renewal programme, now several years in, is paying off. Larger, better-located stores are delivering higher productivity and margins, while closures of underperforming sites continue to reduce drag on group profitability.

Meanwhile, a leaner cost base and improvements in logistics and product sourcing are supporting margin growth.

JP Morgan has held its price target at 440p, based on earnings to March 2027. UBS also remains positive, highlighting the strength of the management team and consistent delivery on strategic goals.

Valuation is no longer a bargain, but the quality of the recovery justifies the rerating. A few years ago, Marks & Spencer was a turnaround cliché. Now, it is among the few UK retailers delivering consistent profit growth, expanding returns and structural improvements — even in the face of a cyber crisis.