Retailer Criticizes Government Proposal
Marks & Spencer chief executive Stuart Machin has strongly criticized a government proposal for voluntary price caps on essential food items, calling the idea “completely preposterous”. He argued that ministers should focus instead on reducing tax and regulatory burdens on retailers.
The comments came after officials reportedly discussed with supermarkets the possibility of stocking at least one version of basic products such as bread, milk and butter at a fixed low price, in exchange for easing some regulations on areas such as packaging and healthy food.
Machin Says Margins Are Already Thin
Machin said M&S already loses money on some essential items, including milk, bread and baked beans. He added that the company makes only very slim profits on other basic products such as eggs and sugar.
“I don’t think government should be trying to run business,” he said. “They should try to understand business better.” In his view, the government has more effective tools available, including reducing taxation and regulation to free up retailers operating in a highly competitive market.
Retailers Face A Triple Pressure
Machin said retailers are facing a “triple whammy” of higher taxes, heavier regulation and ongoing global conflict. He warned that these pressures limit the ability of companies to grow, invest and hire.
Among the biggest cost increases, M&S faces £40m from the new packaging levy introduced in April, with a possible additional £10m this year. The company also expects £50m in extra costs from national insurance changes, rising to as much as £100m when supplier cost increases are included.
Middle East Conflict Adds New Costs
Although M&S had anticipated many of the tax and regulatory increases, Machin said the Middle East conflict created unexpected pressure. Some suppliers have already asked for higher prices, adding a few million pounds to the retailer’s costs.
Machin said M&S has been able to absorb or offset most of those increases so far. However, the comments underline how global conflict, fuel prices and supply chain costs are feeding into the financial outlook for UK retailers.
Cyber-Attack Hits Annual Profits
M&S made the comments as it revealed that underlying profits fell 23.8% to £671m in the year to 28 March. Sales rose only 1.9% to £14.2bn, despite inflation above 3%, while profits were hit by £131.3m in costs linked to last year’s cyber-attack.
The incident disrupted stock flow, pressured the supply chain and hurt product availability through the year. Chief financial officer Alison Dolan said the disruption left M&S with excess stock, forcing the retailer to discount more heavily than planned in the second half.
Food Growth Offsets Weakness Elsewhere
Food sales rose 7%, helping M&S reach a record 4.1% market share. Including sales through its Ocado online grocery joint venture, that share would rise to 4.6%.
However, fashion, homewares and beauty sales fell 7.7%, while international sales declined 7.2%. M&S also sold £1bn of goods through Ocado for the first time, helping the online grocer return to operating profit with £15.2m after several years of losses.
Investment Plans Continue Despite Headwinds
M&S plans to invest in technology, automated distribution centres, refurbished clothing departments and 18 new food stores. The company also intends to use AI to improve marketing and product sourcing.
Machin said the year ahead will be one of the most important in the company’s history, while chair Archie Norman said the retailer is ready to move on from the cyber incident as product availability improves. Still, analysts warned that profit guidance for the year ahead is weaker than expected, with M&S pointing to higher fuel, freight, input costs, taxes and regulatory pressure as ongoing headwinds.
