Marks & Spencer’s first-half profit declines 55% after cyberattack disruption

Investing.com -- Marks & Spencer reported a sharp drop in first-half (H1) profit after a major cyberattack earlier this year disrupted its online operations for weeks and weighed heavily on margins.

The British retailer said adjusted pre-tax profit fell 55.4% to £184.1 million ($247.1 million) in the six months to September 27, from £413.1 million a year earlier. Statutory pre-tax profit plunged by more than 99%, collapsing to £3.4 million from £391.4 million.

Shares in Marks & Spencer fell nearly 1% in London trading.

The April hack forced M&S to suspend online clothing orders for seven weeks and halt click-and-collect services for nearly four, while also impacting food availability.

In May, the group warned the attack could wipe about £300 million off its operating profit for the year to March 2026 but said it aimed to halve the loss through insurance, cost controls, and trading actions. It has since received £100 million in insurance proceeds and booked £167.8 million in adjusting items, including £101.6 million of cyberattack-related costs.

“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," said CEO Stuart Machin.

"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.”

Machin added that profits in the second half are expected to match last year’s level despite an additional £50 million in costs from higher employer National Insurance contributions and a new packaging tax.

Jefferies analysts led by Frederick Wild said the print reflected lingering disruption from the earlier cyberattack, lasting longer than initially expected at the May full-year results but aligning with the firm’s more recent guidance.

"Nevertheless, we still see value here as the business continues to recover given a very attractive multiple. The set-up for H2 profit growth looks increasingly assured," they added. 

Food sales rose 7.8% year-on-year, or 2.8% in volume, but operating profit fell nearly 60% to £58.8 million. Marks said the decline was “largely due to higher markdown, waste and stock loss caused by temporary manual stock allocation. With systems now restored, these have reduced, and operational metrics have improved.”

The fashion and home division saw profits tumble more than 80% to £46.1 million from £243.4 million, with sales down 16.4% to just under £1.7 billion.

The company said it remains confident it will be “recovered and back on track by the financial year end.”