Marks & Spencer cyberattack to cost $403 million in operating profit

By Katie Linsell

 

Marks & Spencer Group Plc is facing a £300 million ($403 million) hit to operating profit this fiscal year from a cyberattack that’s still disrupting the company’s sales and operations.

 

The British retailer will try to mitigate the impact with cost savings and insurance payouts, it said Wednesday. Online clothing and home orders, which account for more than £3 million of sales a day and have been suspended for more than three weeks, will be disrupted into July.

 

It is a major setback for a business that was delivering on Chief Executive Officer Stuart Machin’s turnaround plan, recording the highest pretax profit in 15 years last fiscal year that ended before the attack. Shoppers have been buying more groceries and the brand has shaken off its reputation for dowdy clothes. 

 

While M&S called it a “bump in the road” on Wednesday, the repercussions have grown since it first said it was facing a cyber incident on April 22, forcing it to halt contactless payments and creating gaps on shelves as it took some IT systems offline. Last week it said some personal customer data was stolen.

 

Food sales have been impacted by reduced availability, although this is improving. The business also incurred additional waste and logistics costs as it switched to manual processes, impacting profit.

 

Marks & Spencer’s shares have fallen 10 per cent since the attack, though they are still up 34 per cent over the past year through Tuesday’s close.  

 

A cybercrime gang known as “DragonForce” has taken credit for the M&S hack, as well as other attempts to infiltrate grocer Co-op Group and luxury department store Harrods Ltd. The group told Bloomberg it carried out the attacks with partners to extort money from victims and plans to hit the UK’s retail sector again, saying the recent breaches were “just a start.” 

 

M&S reported £876 million in pretax profit for the financial year ending in March, beating analyst estimates. The company said it’s confident in prospects for medium-term growth, and is increasing its dividend by 20 per cent.