M&S interim profits drop 55% as it takes £136m hit from cyber attack

(Sharecast News) - Marks & Spencer posted a 55.4% drop in first-half adjusted pre-tax profit on Wednesday as it took a hit from a recent cyber attack. In the 26 weeks to 27 September, adjusted pre-tax profit declined to £184.1m from £413.1m in the same period a year earlier.

The retailer pointed to a £101.6m charge in relation to the incident, with further charges of around £34m expected in the second half of the year, taking total costs to about £136m. In May, it estimated that the incident would cost it about £300m in operating profits for the year.

M&S also said it had claimed £100m from insurance for the cyber attack.

Sales during the period rose 22.1% to £8bn, driven by the consolidation of Ocado Retail Limited, which generated revenue of £1.5bn.

Chief executive Stuart Machin said: "The first half of this year was an extraordinary moment in time for M&S. However, the underlying strength of our business and robust financial foundations gave us the resilience to face into the challenge and deal with it. We are now getting back on track. Change, on the other hand, is not a moment. Change is constant and that is why we are resolute in our ambition to reshape M&S for growth.

"In the second half, we expect profit to be at least in line with last year. This should give us a springboard into the new financial year and set M&S up for further growth. The retail sector is facing significant headwinds - in the first half, cost increases from new taxes were over £50m - but there is much within our control and accelerating our cost reduction programme will help to mitigate this .

"Our plan to reshape M&S for long -term sustainable growth is unchanged, our ambitions are undimmed, and our determination to knuckle down and deliver is stronger than ever. To date we have achieved meaningful progress, but what's exciting is that there is so much more to do and so much opportunity ahead of us."

At 1605 GMT, the shares were flat at 384.50p.

Dan Coatsworth, head of markets at AJ Bell, said: "Marks & Spencer has laid bare the full impact of a gruelling cyber-attack on its earnings. Profits have nosedived as shoppers were unable to buy everything they wanted during a catastrophic summer for the retailer.

"A £100 million insurance payout will help to soften the blow, yet there are bigger issues at hand which need to be resolved.

"Its rivals made hay while the sun shone, with Next among the names luring customers away from M&S during the lengthy period of disruption. M&S says the recovery in trading for clothing has been slower than food, suggesting that some people who tasted the flavours of rival retailers might not necessarily come back quickly.

"M&S will need some brights ideas to get its tills ringing as much as pre-cyber-attack times, which means clever marketing and ensuring its autumn/winter ranges are positioned as must-have items.

"The timing of the cyber incident couldn't have been any worse. A sunnier than usual summer period in the UK got people out of the home and into the shops, helping to stimulate demand in what's been a tough year for retailers.

"M&S was unable to fully capitalise on this tailwind as it suffered stock availability issues. Even those who prefer to shop online suffered the headache of a transactional website not accepting orders for a period.

"While M&S' shops and websites are now back to normal, there is still a lot of work to do to put the company back on top."