- Disruption to last until July
- Third year of market share gains
- Dividend increased 20%
High street stalwart Marks & Spencer (MKS) guided to a profit hit of around £300 million from a recent crippling cyber-attack and warned the disruption to the business was set to continue ‘throughout June and into July’.
The FTSE 100 retailer has lost a significant amount of sales after temporarily halting online orders. Disruption to supplies meant gaps on the shelves and more lost sales in-store, and the company has also incurred extra waste and logistics costs which has all had a negative impact on profit.
The disappointing news, which sent shares 0.5% lower to 366p in early dealings, overshadowed otherwise excellent full-year results from Marks & Spencer, which has made real progress in rejuvenating its brand, broadening the appeal of its food arm and bringing its laggard clothing division up to speed in recent years.
The figures revealed a third consecutive year of growth in sales, market share and profits, and in a show of confidence, Marks & Spencer lifted the dividend by 20% to 3.6p per share.
£300 MILLION HIT
Led by chief executive Stuart Machin, Marks & Spencer’s current estimate is the cyber incident will swipe ‘around £300 million’ from year-to-March 2026 operating profits, before any mitigation from cost management, insurance and other trading actions.
The retailer will now need to win back customers’ trust following the cyber-attack, which has prompted it to bring forward investment into upgrading its infrastructure.
REASONS TO BE CHEERFUL
Results for the year ended 29 March 2025 showed a forecast-beating 22.2% surge in adjusted pre-tax profit to £875.5 million, the highest in over 15 years, although statutory pre-tax profit was down 23.9% at £511.8 million after a £248.5 million write-down for the firm’s investment in the loss-making Ocado Retail joint venture.
During the year, Marks & Spencer gained market share in Food, where like-for-like sales grew by 8.6% as ‘more customers chose to fill their trolleys with M&S food, more often’, to quote Machin.
Like-for-like sales rose 4.4% in Fashion, Home and Beauty, although sales fell 7.1% year-on-year in the International business as it rests for future growth.
Since the cyber incident, Food sales have been impacted by reduced availability, although Marks & Spencer insisted this was ‘already improving’.
In Fashion, Home & Beauty, online sales and trading profit have been heavily impacted by the decision to pause online shopping, although store sales have remained resilient.
‘We expect online disruption to continue throughout June and into July as we restart, then ramp up operations,’ explained Marks & Spencer. ‘This will also mean increased stock management costs in the second quarter.’
A BUMP IN THE ROAD?
‘Over the last few weeks, we have been managing a highly sophisticated and targeted cyber-attack which has led to a limited period of disruption,’ lamented Machin. ‘We have tackled this head-on with incredible spirit, teamwork and deep sense of responsibility as we prioritised serving our customers.’
He added: ‘Over the last 140 years, M&S has overcome many challenges - testament to the longevity of this brand. This incident is a bump in the road, and we will come out of this in better shape, and continue our plan to reshape M&S for customers, colleagues and shareholders.’
Dan Coatsworth, investment analyst at AJ Bell, said despite a somewhat chaotic backdrop and more demands on cash in the business, the company’s decision to raise dividends by 20% ‘shows it is confident about the outlook. The overall tone of the results is one of a business determined to show the hackers it has the strength and skills to fight back.’
Coatsworth continued: ‘Marks & Spencer has been through multiple challenges in its long history, and each time it has overcome them and emerged triumphant. Machin will be hoping that people say the same thing in a year’s time. He just needs to stabilise the ship in the interim and get back on top.’
Begbies Traynor’s (BEG:AIM) Julie Palmer conceded the cyber-attack had cast a shadow over this otherwise stellar performance for M&S. ‘Insurance measures will help mitigate the financial damage, but the impact of the incident will extend far beyond the numbers as it will impact customers’ confidence when they are shopping online.’
Palmer added: ‘M&S’ recent travails should serve as a wake-up call for the retail sector though. No matter how strong a business’s fundamentals may be, cyber-attacks are an ever-present threat that can immediately halt any well-deserved momentum.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell. James Crux has a personal investment in Marks & Spencer.
