British retailer Marks and Spencer (M&S) is aiming to strengthen the profitability of its fashion, home and beauty operations, targeting operating margins of more than 10% across both its online and physical store channels. The strategy forms part of its wider growth plans, supported by continued investment, operational improvements and cost efficiencies.
The company is outlining its next stage of development at its Capital Markets Day on 10 November, where it is reviewing progress under its Reinvesting for Growth transformation programme and presenting its medium-term business priorities.
Building on the improvements achieved in recent years, M&S is targeting mid-to-high single-digit sales growth over the medium term, with profits expected to increase at a faster pace than revenue. The retailer believes that stronger operating performance, improved productivity and a more efficient business structure will support these objectives.
A central element of its M&S fashion, home and beauty growth strategy is to expand digital sales while improving the productivity of its physical retail network. Across its three accountable business divisions, the company aims to increase online sales participation towards 50%, alongside operating a network of 180 highly productive stores.
M&S also intends to strengthen its market position and achieve operating margins above 10% in both online and store operations. Beyond the UK, the retailer plans to expand its international brand presence through capital-light business models, allowing it to pursue overseas opportunities without requiring significant investment in physical infrastructure.
To support these ambitions, M&S will continue investing in its product offering, customer proposition and end-to-end operating model. The transformation is designed to improve efficiency, increase productivity and generate greater operating leverage as sales expand.
Cost management remains another important priority. The retailer is accelerating its structural cost reduction programme and remains on course to deliver £600 million in savings by FY28. Further investment in operational transformation is also expected to create additional opportunities for efficiency improvements.
M&S has made considerable progress in strengthening its financial position over the past four years, restoring its balance sheet to investment-grade status and moving into a net funds position with strong liquidity. With positive free cash flow anticipated over each of the next three financial years, the company expects to have greater financial flexibility to support expansion while delivering improved shareholder returns.
Maintaining a robust balance sheet and investment-grade credit rating will remain central to its financial strategy. As part of its plans to enhance shareholder distributions, M&S intends to double its full-year 2026/27 dividend to 8.4p per share, compared with 4.2p previously. Beyond that, the company expects dividend growth to broadly track earnings over the longer term.
Fashion and home sales record strong first-half growth
The latest strategic ambitions follow encouraging first-half financial results for the fashion, home and beauty division. During H1, the business reported a 17.5% increase in sales to £1.99 billion, while like-for-like sales advanced 17.3%.
However, the performance has also attracted a more cautious assessment from industry analysts. Louise Deglise-Favre, lead apparel analyst at GlobalData, said M&S’s fashion, home and beauty operations still had considerable room to realise their potential.
She noted that the headline sales increase was partly supported by a relatively weak comparison period. Online sales surged 84.6%, whereas store sales declined 2.0%, with unusually high temperatures during the second quarter affecting store footfall.
The longer-term comparison also presents a more mixed picture. Against the first half of FY2024/25, sales remained below earlier levels, suggesting that the latest growth figures should be considered alongside the business’s recovery trajectory.
For M&S, the challenge now is to convert recent sales momentum into sustainable and profitable growth. Achieving stronger digital participation, improving store productivity and maintaining cost discipline will be critical to delivering its medium-term financial ambitions.
