The impact of Marks and Spencer's (LSE:MKS) cyber attack will be one of the main questions investors want answered when the food and clothing retailer releases full-year results next Wednesday, 21 May.
Disruption to online operations and concerns about potential fines and profit downgrades have been on investors minds since the attack first emerged a month earlier.
Two weeks in, the chain was calculated to be facing a profit hit of around £15 million per week from the attack, analysts at Deutsche Bank calculated, adding that cyber insurance might not cover all of the impact.
A week ahead of the results, UBS estimating that a four-week disruption could reduce earnings per share (EPS) by 6-15%, with a moderate scenario suggesting a £83 million dent to profits, with the Food division expected to bear the brunt of the impact due to complex supply chains and wastage risks.
M&S has filed a £100 million cyber insurance claim, which UBS said could largely offset the financial damage, including any potential fines from the Information Commissioner’s Office (ICO). Past UK data breach cases suggest fines are typically less than 0.5% of revenue, and any resolution may take over a year.
Despite these risks, analysts believe the long-term growth story remains intact.
There is "no long lasting damage to the brand" expected, said Deutsche analysts, with the FTSE 100 retailer "handling its suspected ransomware cyber attack with best-in-class communications".
UBS said: "We still believe that the long-term thesis of structural market-share gains remains valid and expect to see evidence return once M&S resumes online operations."
The cyber attack came after the FTSE 100 group's March year end, so full-year results will be unaffected, though M&S was already having trouble with its International business.
Fourth-quarter like-for-like sales growth will be the main element in focus, with analysts expecting resilient performance in Food, where LFL sales rose 8.9% in Q3, but Clothing & Home saw a 1.9% increase.
International sales fell 2.8%, adding pressure to the turnaround plan for that division.
The company’s food delivery venture with Ocado will also be examined, with first-half sales having risen 14%, with the unit reducing losses by a third to £16 million.
M&S products accounted for just under 30% of the total volume shipped, but the partnership has been a source of friction between the two companies.
Overall, analysts expect group sales to rise 5% to £13.8 billion, with adjusted pre-tax income of £850 million.
The cyber-attack may complicate the outlook for FY26, where consensus previously forecast £14.3 billion in sales and £900 million in adjusted pre-tax income, but UBS warned that profit downgrades are possible if online operations remain disrupted.
While the market expects 6% profit growth, UBS sees a downside risk of up to £14 million in lost weekly profits.
M&S’s previous guidance had been for sustainable long-term growth, with plans to achieve a 4%-plus operating margin in Food and a 10%-plus return on sales from Clothing & Home.
The company has also committed to significant technology investments, with digital and technology (D&T) spending set to rise to £500 million in FY25, up from £360 million in FY24.