M&S targets returns costs with dedicated Sheffield warehouse
Marks & Spencer is investing in a new, dedicated returns warehouse in Sheffield after online growth pushed fulfilment and returns volumes up faster than sales, eroding margins in its Fashion, Home & Beauty (FH&B) business.
THE RETAILER said in its half-year results that online demand had shifted towards categories with higher return rates, adding operating costs and complexity. The Sheffield site is expected to significantly reduce the time and cost of handling returns.
Online now accounts for 35% of FH&B sales, up from 33% two years ago, with online sales rising 84.6% to £705.7m as the business recovered from last year’s cyber incident. However, online margin was 6.0%, compared with 8.4% in stores. Logistics costs alone took 0.9 percentage points off the FH&B operating margin, which stood at 7.5% against 12.0% in the same period of 2024/25.
Alongside Sheffield, M&S has acquired the Lichfield distribution centre for FH&B and is improving capacity at its Castle Donington site to raise operational efficiency. Chief executive Stuart Machin said the business was resetting its backbone “from sourcing to supply chain”, adding that the end-to-end transformation was still “in the foothills”.
In Food, the new Avonmouth regional distribution centre is expected to be supporting volumes through the Christmas peak. Together with the Daventry national distribution centre, it should provide more than 30% additional capacity while reducing cost per case. Temporary warehouse space has been leased to support growth until both sites are fully up and running. Food volumes grew 11.9% in the half.
Supply chain capital expenditure more than tripled to £145.7m (H1 2025/26: £41.7m), within a full-year investment programme of around £750m, two-thirds of which is directed to Food. Lease liabilities for offices, warehouses and other sites rose to £601.1m from £502.6m, driven by additional office and warehouse obligations.
Elsewhere, the International business is moving online fulfilment from M&S to Zalando’s Zeos platform, which is already cutting delivery times and costs. Ocado Retail opened a new delivery spoke in Gateshead during the period, with higher throughput at its customer fulfilment centres helping it into profit.
M&S expects more than £120m of structural cost savings this year, with logistics one of the areas targeted.
Group sales rose 16.2% to £9.26bn in the 26 weeks to 26 September, while adjusted profit before tax more than doubled to £403.2m.
