Marks & Spencer has forecast a return to profit growth this year after profits slumped following the cyber attack that disrupted its fashion and home business.

The retailer said group adjusted profit before tax fell 23.8 per cent to £671.4m in the year to 28 March 2026, down from £881.1m the year before, while statutory profit before tax dropped 28.8 per cent to £364.6m.

M&S said adjusting items of £292.1m included £131.3m of costs linked to the cyber incident, which forced the retailer to suspend online clothing orders for seven weeks and click-and-collect services for nearly four.

However, the high street giant said second-half adjusted profit rose 4.1 per cent year on year, as stronger trading in food helped offset weakness across fashion, home and beauty.

M&S chief executive Stuart Machin said it had been an “extraordinary year” for the business.

“We were laser focused on our customers, worked incredibly hard to recover our business, and we came out stronger,” he said.

“A resilient balance sheet supported by the hard work done on our cash position in recent years allowed us to absorb the cost of disruption without compromising our financial health.”

Food remained the retailer’s standout performer, with sales up seven per cent as customer numbers and market share increased. The division delivered adjusted operating profit of £444.5m, although this was down from £491.8m last year, reflecting higher markdown and waste in the first half.

Freetrade investment writer Duncan Ferris said food was now “M&S’s crown jewel” and the clear engine of the retailer’s recovery.

“Sales growth of 7 per cent and increased market share firmly mark the segment as the retailer’s recovery engine,” he said.

“A slight dip in margins may give some investors pause, however. The business has momentum here, but can it translate this into improved profitability?”

Fashion, home and beauty sales fell 7.7 per cent, with M&S blaming the temporary pause in online trading and systems access, which disrupted stock flow and restricted availability.

Adjusted operating profit in the division dropped to £213.4m from £478m the year before, as the retailer marked down and cleared excess seasonal stock linked to the cyber attack.

Machin said recovery in fashion, home and beauty had “taken longer” but insisted the division still had “strong growth potential”.

Ferris said the category had “borne the brunt” of M&S’s digital disruption, making delivery on growth targets for 2026 and 2027 a key priority.

“For now, Food is still doing the heavy lifting,” he said.

Across the wider business, M&S said it had maintained its transformation programme, opening 12 new food stores and three full-line stores during the year.

The retailer is also increasing investment in digital and technology, including improvements to its online platform, planning systems, checkout and payments. It said AI was being used selectively where it could reduce costs or improve decision-making, including pricing, waste reduction and personalised customer offers.

M&S also relaunched Sparks with wallet-based rewards, which it said would support greater personalisation and engagement.

The retailer said it enters 2026 and 2027 with a “clear plan and a strong balance sheet”, and expects profit growth to resume compared with 2024 and 2025.

However, it warned that higher fuel, freight and input costs, alongside tax and regulatory pressures, would continue to weigh on the sector.

Machin said retailers were facing a “triple whammy of headwinds” from increased taxation, greater regulation and ongoing global conflict.

“At M&S we are unshaken by short-term events,” he said.

“We have a clear plan and there is much within our control as we reinvest in value and quality for our customers.”

The retailer increased its full-year dividend by 16.7 per cent to 4.2p, which Ferris described as “a sweetener, without being too dramatic”.

“M&S has the balance sheet to boost shareholder payouts and step up investment efforts, even after a challenging year,” he said.