The announcement to exit Russia came alongside M&S reporting a jump in pre-tax profits to GBP392m (US$489.84m) for the year to 2 April, adding its clothing & home performance has significantly improved.

Marks & Spencer had been engaged in a franchise model in Russia which meant while it had suspended deliveries to its franchisee back in March, M&S stores in the country remained open.

Today (25 May) the retailer said it is recognising a charge of GBP31m in adjusting items representing the full exit costs from Russia and business disruption in Ukraine.

It is also working with its partner in Ukraine to reopen in the region when possible.

In the UK, the retailer’s plan to exit legacy stores and reduce clothing & home space due to the success of those categories online is set to continue. M&S explains that 68 legacy full line stores and 19 smaller food stores have closed so far and 32 will go over the next three years.

The retailer has already opened 13 of what it describes as ‘more efficient full line’ stores out of town as part of its town centre to out of town relocation programme and plans to open 15 more over the next three years, including seven in former Debenhams sites. 

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M&S Clothing & Home on track for a more profitable model

  • Online C&H sales: Up 55.6% year-on-year.
  • Store sales C&H : Down 11.2%
  • Operating profit before adjusting items of GBP330.7m, as compared to GBP223.9m in 2019/20 – reflected the benefits of sales growth combined with an increased full-price sales mix.
  • Womenswear has driven good growth in the “big three” departments of denim, knitwear and casual tops. A focus on simple, repeatable styles in dresses, supported by popular collaborations with brands such as Ghost, has resulted in a very strong performance. The Goodmove activewear brand has grown to over GBP65m in two years.
  • Lingerie has seen a recovery over the past year in core areas such as sleep, underwear and bras. A focus on sharper value through multi-packs at opening price points has combined with new stretch offers such as “Boutique” and the launch of the “Neutrals” range.
  • Menswear was impacted in the pandemic by its high formal and office-wear shares. We saw good growth in jersey, knitwear and underwear, although following reopening availability in formal categories was below target.
  • Kidswear’s increased focus on daywear has combined with growth in schoolwear to deliver double-digit sales growth. The growth of M&S Kids provides an important entry point to the brand for family-age customers.

Group FY results

  • Statutory revenue up 6.9% vs 2019/20 to GBP10.9bn
  • Operating profit before adjusting items up 7.1% to GBP709m
  • Profit before tax and adjusting items up 29.7% to GBP522.9m
  • Profit before tax GBP391.7m
  • Profit after tax GBP 309m

Steve Rowe, CEO, who departs the business today, said: “When I took over the reins at M&S six years ago, I committed to tackling the underlying issues that had eroded the strength of the business and building the foundations for future growth. For me, what is important about these results is not just the restoration of profit and strong cash flow; it is that they demonstrate that M&S has fundamentally changed. While there is much more to do, the business has moved beyond proving its relevance and has the opportunity for substantial future growth. It has been my privilege to be the steward and shopkeeper of this fantastic business and extraordinary brand at such an important stage in its history. The changes we have delivered are down to the commitment and hard work of colleagues across the business, and I am delighted to hand the baton on to Stuart, Katie and Eoin to lead the next phase.”

Steps taken to improve profitability over the last year

  • Option count has reduced by c.20% vs 2018/19.
  • Shift to “trusted value approach” and everyday low price meaning fewer promotions/clearance – leading to improvement in value perception.
  • Introduction of new brand partnerships with Jaeger, Nobody’s Child and The Sports Edit. These brand partnerships bring broader choice, premium price points and additional expertise to M&S. In total, third-party brands across Clothing, Home and Beauty, including Jaeger, generated c.GBP100m of orders in 2021/22.

But more work needed in improving Clothing & Home at M&S

M&S is working on further developing its legacy systems, supply chain and stores to enable a more responsive business with faster speed to market, an improved returns process, lower stock levels and a lower cost to operate.

In the current system, less effective systems configuration and interface makes planning and tracking slow and labour intensive. Teams have limited visibility to create accurate channel plans, and stock journeys from port to customer via multiple stock holding and consolidation points are lengthy and can be hard to track. The reconfiguration of systems is likely to take a number of years to implement.

The supply chain picking model can be slow and high cost to operate, resulting in a risk of trapped stock. The opportunity is to reconfigure the network to support omni-channel needs better. In addition, the returns channel remains slow, creating excess handling cost and margin loss.
M&S says it has already identified multiple ways of reducing this; for instance preparing returns for resale in the store of return or nearby stores to enable further improvements in omni-channel availability.

The pattern and rhythm of product flow will be further reshaped over the next few years. This reshaping will be underpinned by a commitment to fewer, deeper strategic supplier relationships to support a faster, more flexible sourcing model which has already proved comparatively resilient during the pandemic.


In M&S Clothing & Home, factory cost prices, transport and freight costs, combined with continued supply issues in China, are driving pressures. Consequently, customers’ spending capacity is under pressure.

“We expect these pressures to increase as the year progresses. We are therefore planning for an adverse impact on volumes due to price inflation, slowing the rate of sales growth,” M&S said.

Overall trading in the first six weeks of the financial year has been ahead of the comparable periods in 2021/22, including the period from 12 April 2021 when non-essential retail reopened, with a particularly strong performance in M&S clothing & home and growth in the total food business continuing to outperform the overall market.

“While encouraging, we expect the impact of declining real incomes to sharpen in the second half and endure for at least the remainder of the financial year. There is no current sign of inflation abating, although we believe the rate of cost growth will subside by the third quarter,” the retailer added.

“In addition, we are taking specific steps to support performance in this environment and offset inflation. In clothing & home we are taking a more flexible approach to trading and currently retain a substantial proportion of open to buy for H2.”

Analyst reaction – M&S value approach leaves it well-positioned to weather inflation storm

Chloe Collins, apparel lead at GlobalData commented: M&S has pleased investors with its FY2021/22 performance, with sales growth beating expectations and delivering solid improvements versus pre-pandemic, and the performance of its clothing & home division in the last year has been the real surprise, with sales up 3.8% on FY2019/20, despite its flailing market share in the years leading up to Covid. This is a result of reduced discounting, onboarding of third-party brands, and a much-needed digital turnaround, driving online growth of 55.6% and a penetration of 34%. M&S will have also benefitted from the closure of Debenhams, and some John Lewis stores, with strong shopper crossover between these retailers

Despite a challenging year ahead, M&S is well placed to battle the impacts of inflation. As long as it continues to exhibit value for money in food, it could benefit from consumers choosing to cut costs through dining in rather than eating out. In terms of clothing, it will be somewhat protected by its older shopper base, with GlobalData’s UK April survey finding that 41.5% of over 45s do not expect their spending habits on clothing & footwear to change as a result of rising prices, compared with just 17.5% of under 45s. However, the remaining 58.5% do intend to buy fewer or cheaper items, or stop purchasing clothing & footwear altogether, so new CEO Stuart Machin and co-CEO Katie Bickerstaffe, must ensure that M&S remains competitive in the branded-sphere and develop compelling inhouse ranges to convince shoppers to still purchase.

M&S has finally announced that it is permanently exiting Russia, with its franchise licensee in the country initially preventing it from being able to close its stores at the beginning of the crisis, despite stopping stock shipments. Though Russia and Ukraine generated GBP102.5m of retail sales in FY2021/22, this is only 1% of M&S’ total business, so the impact is relatively minimal, however it will still hit profits this year, as will squeezed margins at Ocado due to post-pandemic normalisation and immature capacity.”