Marks & Spencer warns on Budget price hikes amid bumper Christmas sales

Boss Stuart Machin said he will pass on ‘as little as possible’ in costs to consumers but that mitigating rising employment taxes is ‘not easy’.

The boss of Marks & Spencer has warned of passing on increased costs to customers through price rises, as the retail giant’s sales surged over the Christmas period.

Stuart Machin said on Thursday that he wants to pass on “as little as possible” in costs to consumers, but that the company had been forced to “rework” its plan for the coming years.

He said the company “didn’t plan” for Chancellor Rachel Reeves’s decision to raise national insurance contributions (NICs) for companies in the Budget.

Any cost inflation “will be small and it will be behind the market”, he said, adding mitigating it is “not easy”.

Shares in the group plunged as much as 8% on Thursday morning as it warned that the economic picture “remained uncertain” for the coming year, with stock recovering to about 6% down by mid morning.

The NICs increase was one of a string of tax rises announced in October designed to help pay for improving public services like the NHS.

But it has come in for criticism from some businesses, with M&S warning before Christmas that combined with a rising minimum wage it would cost the company £120 million.

Mr Machin said on Thursday: “Our suppliers are also feeling the pinch, and that comes through straight to retail.”

He added that the company would take measures including finding supply chain savings and attempt to make the business more efficient to mitigate rising costs.

When asked whether M&S would cut jobs as a result of the Budget measures, he said: “This is going to be a challenge for us.

“I do not see in M&S big job losses. We’re a growing business. We’ve got lots to do.”

But he added the company would have to be “really diligent” on where it recruits new employees.

“Does it make us look at how we recruit? Of course it does, and that does mean we have to think about where we invest,” he said.

It comes after M&S’s Christmas sales surged, driven largely by its food division, which enjoyed its biggest ever trading day during the period.

The retailer made £4.06 billion in sales during the three months to December 28, up 5.6% compared to the same period the year before.

M&S food sales grew 8.7% year-on-year, and the department made up just under two-thirds of total sales.

In contrast, the company saw 1% sales growth across its clothing, home and beauty departments.

Mr Machin has led a turnaround in the business since joining in 2022, which has included spending money on larger food stores to bolster its most profitable line.

However, its clothing division also saw its best ever online weekly sales total, marking a striking comeback from being seen as unfashionable for much of the last decade.

Mr Machin said: “Sales records were broken across the business, with food recording its biggest day and clothing, home and beauty online its biggest week, but we’re not complacent – as a growth business it’s our job to break records.

“The external environment remains challenging, with cost and economic headwinds to navigate, but there is much within our control.”

By Press Association