LONDON — Marks & Spencer reported a 23.8% drop in underlying profits to £671 million for the year to 28 March, as sales rose 1.9% to £14.2 billion despite inflation of more than 3%. Chief Executive Stuart Machin described a government proposal for voluntary price caps on essential food items as "completely preposterous" at the results presentation.

Government officials had raised the idea that supermarkets should stock at least one version of basic items such as bread, milk and butter at a set low price in exchange for an easing of regulations on packaging and healthy food. Chancellor Rachel Reeves is now not expected to mention the voluntary price cap in a speech addressing the cost of living on Thursday.

Marks & Spencer has already lost money on basic items such as milk, bread and baked beans, and made very slim profits on items such as eggs and sugar. "I don't think government should be trying to run business," Machin said. "My advice is to try to reduce tax and regulatory burden and free us up in a very competitive market."

The retailer faces £40 million in additional costs from April's new packaging levy, potentially a further £10 million this year, and £50 million higher costs from national insurance changes, or up to £100 million if suppliers' extra national insurance contributions are included. Machin said most of the taxes had been known about and the company had planned ways to cut costs and offset the impact, though the unexpected Middle East conflict had prompted some suppliers to ask for higher prices, adding "a few million" pounds to costs.

Profits were hit by £131.3 million of costs related to a cyber incident that began last Easter. Chief Financial Officer Alison Dolan said the flow of stock had been "materially disrupted" by the incident, putting pressure on the supply chain and hitting availability throughout the year, leaving the retailer with excess stock that it was forced to discount more than planned in the second half.

Food sales rose 7%, while fashion, homewares and beauty sales were down 7.7% and international sales fell 7.2%. Machin said food sales had helped M&S reach a 4.1% market share, its highest level ever, and that it would be 4.6% if sales via its Ocado online grocery joint venture were included. The company sold £1 billion of goods via Ocado for the first time this year, helping Ocado reach an operating profit of £15.2 million.

M&S pledged to invest in technology and 18 new food stores, and said the year ahead would be affected by "higher fuel, freight and input costs and continued government tax levies and regulatory headwinds." Analysts at Jefferies said the company is guiding to an expected annual profit of more than £876 million in the year ahead against expectations of £964 million.

Chair Archie Norman said, "Now is the time to shake the dust off our heels" as the effect on product availability after the cyber incident was "now tapering" and new ranges were "resonating well with customers." Machin said the year ahead would be "one of the most important in our history" as M&S adds automated distribution centres, refurbished clothing departments and uses AI to sharpen marketing and product sourcing.