M&S Reports Lower Profit Despite Revenue Growth and Dividend Hike

M&S sees profits dip 24% while revenue rises 6%. Adjusted EPS grew, and dividends increase by 20%. Investors should watch for future impacts from cyber incident costs.

Date: 21-05-2025

AI Rating: 6

M&S reported decreased net income for fiscal 2025, with profit before tax dropping 24% and profit after tax down 31.3%. This decline is attributed to a significant non-cash impairment charge relating to its investment in Ocado. Specifically, the total impairment was 248.5 million pounds, which negatively impacted the company’s net earnings and represents a red flag for potential investors due to heightened operational risks.

Earnings Per Share (EPS)
The basic EPS fell to 14.6 pence, a drop of 33.3% from the previous year. However, adjusted EPS surged by 29.7% to 31.9 pence, signaling that despite the headline loss in earnings, core operations may be improving and the company's efforts to restructure are yielding better underlying profitability.

Revenue Growth
The company reported revenue growth of 6% year-over-year, culminating in total revenues of 13.82 billion pounds. This increase, alongside a rise in sales to 13.91 billion pounds, indicates resilience amid challenges, suggesting that M&S has been able to maintain customer demand despite its profit challenges.

Dividend Policy
Marks and Spencer raised its dividend by 20%, proposing a final dividend of 2.6 pence per share, which reflects a commitment to returning value to shareholders in light of improved adjusted profitability. This may positively influence investor sentiment, emphasizing a potentially stable financial future.

Outlook
While the company expects a £300 million hit to operating profits due to a cyber incident reported in April, management maintains confidence in their long-term strategy, indicating resilience and a focus on growth in the upcoming periods. This outlook is crucial for investors weighing their options in the stock.

Stocks: MAKSY MAKSF MKS