Marks and Spencer shares profit shock after cyberattack disrupts trading and supply chain recovery stalls

Marks and Spencer has reported a dramatic 99 per cent fall in pre-tax profit for the first half of its financial year, as the high street stalwart continues to wrestle with the aftermath of a cyberattack that crippled its operations over the Easter weekend. The FTSE 100 retailer revealed that its clothing and home division has been particularly slow to recover, with underlying issues in logistics, stock management, and online sales undermining the group’s financial performance.

The hack forced Marks and Spencer to shut down its website and revert to manual ordering, at a cost of £324 million in trading profit for the first half, including a £101.6 million direct charge relating to the breach. The company has managed to recover £100 million through an insurance payout, but further expenses, including a £34 million spend to overhaul its IT workforce and bolster security measures, have weighed heavily on results.

Online trading only resumed fully in the middle of August, leading to a 42.9 per cent decline in digital sales while in-store sales dropped by 3.4 per cent, predominantly owing to reduced availability and the absence of key services such as click and collect. Overall, sales in the clothing, home, and beauty division tumbled by 16.4 per cent, and division profits plunged 80 per cent to £46.1 million as operating margins slipped from 12 per cent to just 2.7 per cent.

Chief executive Stuart Machin has candidly acknowledged the company’s difficulties, describing the recovery as “slower than we would like” and noting that operations have lagged behind the relatively resilient food business. Marks and Spencer’s food arm bucked the trend, growing sales by 7.8 per cent over the half year, despite waste and stock loss caused by manual allocation processes.

As part of a mitigation strategy, the retailer has increased its cost-saving target from £500 million to £600 million over the next two and a half years, with planned efficiencies focused on the supply chain and not on redundancies. The chief executive remains confident that profits will stabilise “at least in line with last year”, even as consumer sentiment has softened following signals of potential tax increases in the upcoming Chancellor’s budget.

Markets have responded with a slight uptick in Marks and Spencer’s share price, though analysts remain split on the company’s outlook. Industry figures have emphasised the critical importance of cyber resilience in the modern retail environment, urging both business and government leadership to focus on security and support for UK enterprises as digital threats intensify.

Marks and Spencer continues to modernise its estate, invest in online growth, and trial new formats including the fashion-only store at Battersea Power Station, although its main strategic direction remains focused on core full-line shops and digital expansion.