Marks & Spencer’s cyber-trauma is bad, but clearly manageable
You can tell Marks & Spencer is recovering from its cyber-attack trauma because Stuart Machin, the chief executive, now has time to indulge in some chancellor-baiting,Rachel Reeves’ pre-budget speech on Tuesday was a “nothing” announcement, said Machin, that will just make consumers more worried,Even his mum had been calling him to debate what it meant,He makes a fair point,The warmup to the budget has been far too drawn-out and the chancellor’s clunky exercise this week in trying to manage expectations, even if it was primarily aimed at the bond market, only added to the sense of confusion.
The budget should have happened a month ago.Still, back in the day job, Machin can reasonably claim “the incident” – the Easter cyber-attack that took out the website for six weeks and had M&S employees resort to pen and paper for stock-keeping – will be viewed as just “an extraordinary moment in time”.The food side of operation has been quicker to recover, which always seemed likely because its supply chains are more UK-focused and move faster anyway.Food sales in the half were up 7.8%, maintaining the multi-year run of outpacing inflation.
The cyber-pain showed in lower profit margins as manual stock control meant more waste.The clothing and home division has been a slower slog in restoring availability – and slower than expected, conceded Machin.Losing data for weeks means losing forecasting ability, which affects everything from ordering garments to the personalisation of emails to Sparks loyalty card holders.Sales declined by 16.4% in the half, with the website obviously being the major drag.
But May’s preliminary estimate of the trading damage to profits has proved roughly accurate.Machin suggested £300m-ish back then; now he’s talking £324m, of which £100m is covered by insurance.The City viewed that as reassuring.The lingering hangover should clear fully by early next year.At that point, everybody can look again at the story of more expansion in food, where the aim is to double sales over the long term, and the churn in the estate of “full line” stores.
The latter is an exercise in closing smaller units and opening a few bigger, and more efficient, stores and still has many more laps to run.So it feels highly likely that, after this year’s whack to profits, M&S’s numbers for the 2026-27 financial year should be what it would have achieved anyway.The round number of £1bn of pre-tax profits may follow the year after, think City analysts.The stock market was never overly worried by the cyber-attack, it should be said.It took the clinical view that, ultimately, one lost year of profit progress does not seriously alter the value of a business worth £8bn if the medium-term trajectory is intact, which it is, and if the balance sheet is conservative, which is also the case.
Over the course of the year, M&S’s shares have gone roughly sideways.In the cyber-damage stakes, the severity was not at Jaguar Land Rover levels.Reeves’ budget, as it affects the spending power of consumers, does indeed loom larger.
‘A lifeline’: how fashion designers came to love the high street collab
When the boss of Marks & Spencer reported a drop in clothing sales in its latest half-year results on Wednesday, he was keen to stress the problems were down to spring’s devastating cyber-attack and “not due to lack of demand”.Stuart Machin said the once-staid retailer had been “inundated with requests” for its fashion range, which has been revitalised in recent years and was again lifted by last year’s collaboration with designer Bella Freud.On Thursday last week, M&S launched a fresh tie-up, this time with London fashion label 16Arlington. With sequin dresses, statement evening coats and tops with feather detail, it’s set for the festive party season.It came on the same day H&M unveiled a similar venture with Glenn Martens, the Belgian designer about to take over at Maison Margiela
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M&S boss says Reeves made customers more worried with pre-budget speech
The boss of Marks & Spencer has said Rachel Reeves has made his customers “more worried” about rising costs with her pre-budget speech as retailers prepare for the key Christmas trading period.Stuart Machin said his shoppers were “worried about rising costs and they did get more worried” after the chancellor failed to rule out breaking manifesto pledges not to raise key taxes in her speech on Tuesday.The M&S chief executive suggested Reeves’s lack of detail in spelling out her plans had left shoppers and businesses unsure about what new costs they could face in the months ahead.“Shoppers are planning for a good Christmas, but planning for the worst with the budget and hoping for the best,” he said.Expressing frustration about the timing of the fiscal event – just two days before Black Friday on 28 November, the US-inspired discount day which has become one of the year’s busiest shopping days – Machin said: “We are all sitting here waiting for the 26th”
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