Cyber Hack Nearly Devastates M&S: A Retailer's Recovery Journey

M&S faced a devastating cyber-attack that nearly obliterated its profits, with a staggering 99% drop in pre-tax profit, plunging from £391.9m to £3.4m. This incident crippled online sales and disrupted in-store inventory, leading to bare shelves as customers were unable to order online for nearly two months and click-and-collect services were suspended for almost four months. M&S’s CEO, Stuart Manchin, expressed hopes for a recovery during the upcoming Christmas season, but noted that current sentiment among UK shoppers was cautious due to economic uncertainties, specifically concerning potential tax hikes in the upcoming budget.

Despite the chaos, M&S reported receiving £100m in insurance compensation related to the cyber attack, covering initial costs incurred. The company’s food segment performed surprisingly well, increasing sales by 7.8%, while total profit minus extraordinary costs stood at £184m, down from £413m the previous year. Analysts observed the resilience of M&S’s core businesses in homewares and fashion, which experienced a modest 16% decline in sales despite being offline during the critical trading period.

Mr. Machin confirmed recognition of the long-term impact, estimating a total cost of the cyber incident around £300m for the fiscal year, which includes increased staffing costs and food wastage. Nonetheless, M&S is optimistic for the second half of the year, anticipating profits to rebound to 2024 levels as the effects of the attack gradually diminish. M&S is eager for a successful holiday season, with promising sales of products like rose mulled wine and washable tuxedos. In a competitive landscape, while M&S struggled, other retailers like Next benefited from M&S’s disruption, showing notable sales growth of 10.5%.