Marks & Spencer’s profits have plunged as the full impact of the widely-reportedly cyber attack that it suffered earlier in the year has been revealed.
The company reported underlying profits of £184.1 million for the six months to the 27th September, less than half the £413.1m earned in the same period last year.
The disruption, which forced the retailer to suspend online clothing and homeware sales for more than six weeks, hit its non-food operations particularly hard, leaving the clothing and homeware division struggling to recover.
Sales in that arm fell 16.4% during the half year. M&S said the recovery in clothing and homeware had been “slower” than in food, adding that in-store fashion sales were “impacted by reduced availability and fewer visits linked to the absence of click and collect”.
The retailer also confirmed that warehouse systems had now been restored, with both its website and stores improving availability, and trading recovering.
While clothing and homewares remain under pressure, the company’s food business performed more strongly, delivering a 7.8% rise in sales over the same period.
That division is now largely recovered from the hack. Meanwhile, group sales climbed 22% to £7.96 billion and the business is confident that it will be recovered and back on track by the financial year end in March.
Profits were supported by a £100m insurance payout, but also hit by £50m in new costs from a packaging recycling levy and higher insurance premiums.
The FTSE 100 company has increased its annual cost-saving target to £600m, £100m more than previously planned, as it aims to hold full-year profits steady.
M&S recorded nearly £102m in one-off expenses linked to the cyber incident during the first half, covering legal, professional and recovery costs.
It also expects another £34m of related costs in the second half – higher than analysts had forecast.
The overall direct cost of the cyber attack is expected to reach about £136m, excluding lost sales.
Despite the financial hit, the retail giant has pressed ahead with expansion plans, opening six new stores in the first half and planning 12 more by March.
Chief executive Stuart Machin said: “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.”