M&S cyberattack post-mortem: low half-year profits continue to haunt the business

Marks & Spencer (M&S) has reported a sharp decline in half-year profits amid a business-crippling cyberattack in April that disrupted its online and in-store operations.

Although the company has recovered from the cyberattack and has been fully operational since August 11th, its financial results remain entangled in a web of consequences.

Scattered Spider’s attack on Marks & Spencer in April is now fully reflected in the company’s losses. The retailer said its adjusted pre-tax profit fell to £184.1m, which is 55% lower than £413.1m in the same period last year.

“The first half of this year was an extraordinary moment in time for M&S,” claims Stuart Machin, M&S CEO.

One of the most significant costs (£101.6m) M&S has reported is linked to system recovery and extra staff, which came to £101.6m.

In June, the company removed all vacancy ads from its webpage and proceeded to hire extra staff by organizing walk-ins. It also returned to using pens and paper to not only ensure a smooth recruitment process but also to track inventory and logistics. These actions normally imply extra labour hours.

Other factors that contributed to its profit-sinking results were waste, as the stock was also manually managed. And while food sales have grown, the increase was only 7.8%.

Fashion, Home & Beauty took the hardest hit, with sales down 16.4%. In the weeks following the cyberattack, M&S was forced to temporarily suspend services such as home delivery and click-and-collect, which slowed its financial recovery.

In the meantime, other retailers such as Next have reported growing profits, partially due to the cyberattack on M&S.

“In Food, we continue to outperform the market, with three years of consecutive monthly volume growth,” said Machin.

“In Fashion, Home & Beauty, the recovery curve has been slower than Food, but we are making progress every day,” he added, suggesting that M&S will “continue to lead the market” during the Christmas shopping season as well through the second half of the year.

The company expects its profits to at least match last year’s levels by performing better in food sales and by implementing some cost-saving measures, which M&S has been vocal about since May. At the time, the business claimed to cushion the profit fall by "management of costs, insurance and other trading actions."

“For the remainder of the year, our focus will be ensuring operational resilience, cost control and building new applications that support growth. Delivery timelines for the new Fashion, Home & Beauty planning platform have been fast tracked, and we are investing in capabilities including personalisation and loyalty,” said Machin.

Cybernews has previously reported that M&S started taking action to safeguard its IT system earlier this summer, when a contract for managing the service desk was not renewed with Tata Consultancy Services.

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