Profits at Marks & Spencer have more than halved after the retailer suffered a damaging cyber-attack, which is still affecting its struggling clothing and homeware business.
The retailer said underlying profits more than halved to £184.1m in the six months to 27 September from £413.1m a year before, after it had to halt online orders of clothing and homewares for more than six weeks.
The company’s clothing and homeware sales slumped 16.4% in the half year. The retailer said the division had been “slower” to recover from the hack than its food arm.
M&S said sales of fashion in stores had been “impacted by reduced availability and fewer visits linked to the absence of click and collect”, but warehouse systems were now restored so “both our website and stores are improving availability, and trading is recovering”.
Food sales rose by a slightly better than expected 7.8% in the half year and the retailer said it was “largely recovered” from the effects of the attack. Group sales rose 22% to £7.96bn.
“We are confident we will be recovered and back on track by the financial year end [in March],” it said in a statement.
M&S said profits had been helped by a quick recovery of £100m in cyber insurance but hit by £50m on a new packaging recycling levy and additional insurance costs. It is looking to make £600m in cost savings this year as it battles to keep annual profits steady – £100m more than previously planned.
Despite the cost-cutting, M&S opened six stores in the six months to the end of September and plans 12 more by March.
Stuart Machin, the chief executive of M&S, 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.”
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Last week, M&S’s rival Next raised hopes that UK consumers were still willing to spend despite pressures on household budgets, as it revealed sales and profit growth “materially above” expectations.
M&S said in May that it expected to take an estimated £300m hit to profits this year from the damaging cyber-attack. However, it said it expected to halve that financial impact of the attack to about £150m through insurance, cost reductions and other actions.
The attack on M&S’s IT systems over the Easter weekend forced the retailer to stop orders via its website, through which it sells fashion, homeware and gifts, for more than six weeks.
Deliveries of food and fashion into stores and some deliveries to its online food partner, Ocado, were also disrupted.
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