M&S may pay its dividend again as soon as next year, hints chairman

Marks & Spencer has hinted it may reintroduce its pandemic-hit dividend sooner than expected after chairman Archie Norman said the food and clothing giant was ‘very confident about the year ahead’. 

The firm’s chief financial officer, Eoin Tonge, said it had initially hoped to reinstate the dividend within three years. But that could happen ‘sooner’ if a ‘stronger’ performance fulfilled the board’s ambitions, suggesting it may be as soon as next financial year. 

Norman said the company was ‘loving being able to trade again’ and was in a new phase which, ‘is about growth: growth in sales, growth in our market share’. 

Pocketing a return?: The firm cancelled its dividend in April last year to preserve cash as Covid-19 struck and stores were ordered to close by the Government

‘We think we’re going to surprise a few people – not just with our financial performance but with the things we do to demonstrate that M&S has really changed,’ he added.

In an ebullient assessment of the loss-making group’s prospects – delivered last week at the annual meeting, which was held online for the second year running – Norman added: ‘I want to be clear, we said from the beginning, we’re here to create a growing business. 

‘We’re absolutely not in the business of managing decline. We’re investing for the future. We sort of feel we’re emerging from the pandemic and lockdown like emerging from a chrysalis as a new and reshaped business led by a dynamic and talented team. We’re very confident about the year ahead. We’re really, really looking forward to it.’ 

He said the new phase followed ‘three years [of] hard pounding’. 

Three years ago, Norman said M&S stood on a ‘burning platform’ and warned staff and shareholders the 137-year-old group did not have ‘a God-given right to exist’. 

The shake-up has included an overhaul of its high street property portfolio, cementing a partnership with Ocado and launching new brands in stores and online. The board has also sought to correct a cultural malaise holding back the firm’s potential, which Norman has described as ‘corporate vanity’. 

‘Its been pretty tough stuff, fixing some really basic things about our business,’ he said at the AGM. 

The firm cancelled its dividend in April last year to preserve cash as Covid-19 struck and stores were ordered to close by the Government. The move saved M&S £210million and helped it stave off the worst effects of the pandemic. 

The company said in May that the dividend would not be reintroduced this financial year. When asked at the meeting about a return to paying the dividend, Tonge said the company had initially sketched out a plan to reintroduce payouts in the ‘medium term’ – which meant ‘three years’.

But he added: ‘There is a connection to the investment grade [of the company’s debt] – it’s a measure of bringing back strength to the business… When we’ve got visibility that we’re on track to doing that, we will reinstate the dividend. What I’ve said is that’s the medium term. We hope it to be nearer.

‘If we can come out of this crisis stronger – which we are feeling good about – if we come out feeling stronger, it will be sooner.’ 

Norman said: ‘Be under no illusion, we’d all love to get back to paying the dividend again.’ 

Norman also suggested the group may benefit from the demise of Debenhams and added that M&S is in the process of taking on seven of the collapsed chain’s shop sites. 

He said: ‘It’s not just Debenhams, we’ve seen a whole variety of business, Edinburgh Woollen Mill, the Arcadia Group, collapse. There’s no doubt the downturn brought forward some business failure amongst our competitors and that should enable us to emerge stronger.’