M&S CEO speaks out on £120m Budget ‘headwind’

Commenting for the first time on the Labour Party’s Budget, M&S CEO Stuart Machin said the business did “not expect” the “double whammy” of the raised NI employer contributions and minimum wage announced by chancellor Rachel Reeves last Wednesday (30 November).

The increases are expected to add £60m each in additional costs to the business next year, prompting Machin to explore cost-cutting initiatives to facilitate the total additional expense of £120m.

In a follow-up call to M&S’s interim financial results, which saw the retailer report a 4.7% year-on-year increase in sales for its clothing and home category in the six months to 28 September 2024, Machin ruled out increasing product prices:

“We are definitely not planning to increase prices, but it’s not easy and we will have to work incredibly hard.

“[The] clothing and home [division] is still leading in value, so I do not want to risk that. I also want to make sure we're looking at an overall structural cost reduction [of] £500m and trying to tackle this extra headwind.”

Machin also criticised the government for not delivering on the retail industry’s calls to reform the business rates system:

“We were hoping for some good news on business rates.

“We have talked about this with the previous government and the current government at length, and retail is 5% of the economy and pays 21% of [business] rates.

“If you look at last year, we paid £170m [in business rates]. Although there was some recognition [from the government] that retail and hospitality should pay less, I was disappointed that it's unclear what that will be and the impacts of that have been kicked into 2026,” he added.

Machin said he is “aware” of the Budget’s negative impact on consumer confidence ahead of the "golden quarter", but noted that M&S customer research shows shoppers anticipate spending "more this Christmas than last year”, with a growing number “planning to pre-order [online] and shop in advance”.

In the six months to 28 September, clothing and home product sales made through M&S’s online channels - including ecommerce website and mobile app - grew by 11.3% year on year, with growth increasing to 16.5% in the second quarter.

Machin attributed the rise to improved product imagery and digital customer experience, adding “there is so much more to do when it comes to online”, as M&S heads towards its target of 50% of its clothing sales being made online:

“We want to improve our proposition, our availability, our fulfilment and the app and web experience,” he said.

M&S clothing sales “outperformed the market and grew market share every month”, as value- and quality-driven consumers invested in full-price purchases. Womenswear was “the star of the show” in the first half of M&S’s financial year, with basics, lingerie, denim and casual outerwear all recording double-digit year-on-year growth in the period.

The category is continuing to perform well in the first weeks of the second half of the financial year. M&S’s knitwear collaboration with fashion designer Bella Freud, launched on 17 October, sold 9,000 jumpers in the first two hours and sold out on Tuesday (5 November). A second collection with actress Sienna Miller, launched on 31 October, has also been well-received by consumers.

As M&S’s clothing market share continues to grow, the retailer is set to open a store selling clothing and beauty at Battersea Power Station. Machin today confirmed the store will open in time for Christmas.