Dear Shareholder,
It would be an understatement to say that this has been a roller coaster year for M&S.
The Cyber incident starting in April coloured the financial performance for the whole year put many of our financial ambitions into abeyance. It was also a huge pre-occupation for the management, one of those “all hands on deck” moments when leadership counts and the team is really tested. We owe a special thanks to our technology team but also colleagues at all levels who fought to keep the business going in the most difficult of times. The long tail of after-effects had a tapering impact on our trading and availability right up to year end. Of course there are many lessons learned but the leadership pulled together and fought hard to secure the business and we have emerged stronger for the experience.
Whilst the cyber incident distorted financial performance in the year we did not lose sight of our mission to reshape M&S into the business it can be. Indeed despite the distraction the strategic progress continued and in some areas picked up pace. Whereas to date much of the reshaping has involved fixing the basics and proving the potential in our product and formats we are now at an inflexion point where confidence in both the strategy and management means that we can accelerate investment. This includes not only new store formats but technology and supply chain. As a result we are now committing to a multi-year capital programme to drive growth at M&S for the next decade and beyond.
Success in retail businesses is always a talent game. So we are able to back our programme to invest in growth not just because of the confidence we have in high returns but also because in the last four years the management team has been substantially strengthened and there is now a faster pace, to disciplined process, and greater closeness to the customer across the business. The vast majority of the top 200 roles are now occupied by colleagues who joined the business in the last eight years. For the most part the old slow moving hierarchical attitudes of the past has been replaced by a performance led culture. The phrase “positively dissatisfied” coined by Stuart Machin increasingly reflects the way the business works day to day.
Our objective is to build a greater M&S for the decades to come, not always a fashionable idea in this era of short term shareholder returns. Our agenda is to invest to generate mid to high single digit growth in revenue and higher growth on profit and earnings per share. Because there have been so many false dawns in the history of M&S however it is important we keep our feet on the ground: our tone will remain factual and at times understated as we seek to establish confidence in our programme. Given our recent recovery of investment grade debt rating and the macro-economic and regulatory pressures we face it makes sense to keep a conservative balance sheet during this phase of accelerated growth and investment.
We have of course some headwinds: There has rarely in the history of M&S been a time where the regulatory environment has been less friendly to growth and investment and our tax burden increased substantially in the year. Our role is to sail into the wind and ride the waves. The impact has however been felt more keenly by smaller competitors and the result is reflected in the continued decline of many high streets and town centres across the country.
We continue to operate our engaged board model with a high frequency of meetings, a bias for in person attendance, and fluent interaction outside formal board events. As the executive team has increased in calibre and pace so the board has to evolve.
This year we said goodbye to two highly valued board members, Justin King who bought spark and colour to our board discussions along with enormous depth of knowledge and experience, and Ronan Dunne who provided great wisdom and comradery from a different industry background. We are fortunate to have two high calibre replacements Sean Doyle, the CEO of another great national brand, British Airways, and Roger Burnley, former CEO of Asda.
We enter the new financial year confident in our strategy but more conscious than ever of the strength we derive from having one of the most loyal, committed, and longstanding workforces in the industry. Our colleagues at every level went through some rough moments in 2025. Our culture is one where they are all valued and everyone can have their say and that is what keeps us strong. We are so grateful for their hard work and commitment.
Yours sincerely
Archie Norman