Key Highlights
- M&S’s statutory profit before tax slumped 99% from £391.9m to £3.4m for the first half of the year due to a cyber-attack.
- The hack disrupted M&S’s online and in-store operations, leading to empty shelves and lost sales.
- Despite the setback, M&S forecasts recovery by Christmas as “the residual effects of the incident continue to reduce.”
- M&S CEO Stuart Machin warned that the Budget announcement might not inspire confidence among UK shoppers.
The Cyber Attack and Its Impact on M&S Profits
Mark & Spencer (M&S), a leading British retailer, has reported a significant hit to its profits following a cyber-attack that left the company’s shelves empty for several weeks. According to the latest financial results released by M&S on September 30th, the impact of the cyber-attack was severe, with statutory profit before tax dropping from £391.9 million in the previous year to just £3.4 million for the first half of this year.
This dramatic decline in profits can be attributed primarily to the disruption caused by the hack. The incident affected M&S’s online platform and supply chains, leading to a near-complete halt in online sales and forcing some physical stores to face empty shelves in the weeks following the attack. Stuart Machin, CEO of M&S, expressed his concerns about the incident, stating that it was “an extraordinary moment in time.” He further noted that profits should recover during the key Christmas period but warned that a later Budget announcement would not inspire much confidence among UK shoppers.
Financial and Operational Impact
The cyber-attack had far-reaching consequences for M&S. According to the company, it was forced to suspend online orders for almost two months and even longer periods of click-and-collect services. This disruption not only affected the company’s digital sales but also led to increased costs such as higher IT staffing and increased food wastage due to manual processing during the incident.
Despite the significant financial impact, M&S received £100 million in insurance money related to combating the cyber-attack.
This amount roughly matched the cost of the incident so far, though the company anticipates further costs in the coming months. In another measure of profit that strips out some unusual events, it made £184 million for the first half of the year compared to £413 million the previous year.
Industry Context and Analyst Perspectives
The cyber-attack on M&S is part of a broader trend affecting retail businesses in the UK. According to Judith MacKenzie, head of Downing Fund Managers, it was reassuring that the main part of M&S’s business—homewares and fashion—only saw sales decline around 16%. However, she noted that food sales were up by 7.8% over this period despite the “horrendous” impact on the company.
Other retailers have also been impacted differently in the aftermath of the cyber-attack.
Next, for instance, continued to see sales overperform with a 10.5% increase in October. However, this was not as strong as earlier in the year when it experienced “exceptional performance” due to the M&S hack.
M&S has forecast that profits will recover by Christmas as the residual effects of the incident continue to diminish. Stuart Machin is optimistic about a profitable Christmas period and highlighted positive sales trends for products like its rose mulled wine and men’s washable tuxedos.
Conclusion
The cyber-attack on M&S serves as a stark reminder of the potential impact such incidents can have on retail businesses. While the company is expected to recover, the incident underscores the need for robust cybersecurity measures in an increasingly digital business environment. As M&S looks towards the holiday season, it remains to be seen how consumer confidence and economic factors will influence its performance.
