M&S gets City backing for cyber attack recovery

Cyber insurance mitigation and the City’s ongoing support today helped the shares of hacking victim Marks & Spencer Group (LSE:MKS) to recover lost ground ahead of next week’s annual results.

Now into the fourth week of disruption, M&S is estimated by one analyst to be losing more than £40 million in weekly sales due to the impact on its online and food store operations.

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Shares were 411.3p prior to the attack over the Easter holiday, falling to last night’s close of 345.4p. The de-rating means M&S has gone from trading at an approximate 10% valuation premium against the wider European food retail sector to a 10% discount currently.

Morgan Stanley pointed out earlier this week that M&S had underperformed the average of Tesco (LSE:TSCO) and Next (LSE:NXT) by 16%, equivalent to a £1 billion market cap hit in absolute terms.

However, the stock rallied to 360p earlier today after the Financial Times reported that the retailer could be in a position to claim for up to £100 million from its cyber insurers.

Details on the extent of insurance cover and the weekly sales hit are likely to emerge with annual results next Wednesday, when another strong year for the resurgent retailer will be overshadowed by uncertainty over current year guidance.

Bank of America estimates a 6-10% impact on 2026 earnings if the issue is not resolved by the time of results, although for now it has left its numbers unchanged.

With 33% online exposure in clothing and home, it notes that each week of zero online sales carries a £26 million impact based on its current estimates. Assuming 10% disruption to in-store food sales would result in an additional £17 million sales impact per week.

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The bank does not expect the attack to derail the group’s recent progress in clothing and food, adding that the events should not result in too significant an increase in tech spending given it was already an area of increased focus under the current strategy.

It has a price objective of 445p.

Counterparts at Morgan Stanley are also supportive after staying Overweight on a 12-month view, as the City firm expects M&S’s strong fundamentals will resume post the cyber attack.

The bank has made no change to its price target of 427p, which is based on 2027 estimates.

Near-term, Morgan Stanley is more cautious after cutting its current-year earnings forecast for clothing by 9.5% and for group earnings per share by 5%, although this does not include any potential insurance mitigation.

Looking to the mid-term, the bank is concerned about the potential risk of a slowdown in the strategic transformation if too much management and staff time is taken up by the attack.

It said a key part of the bull case is built around back-end and supply chain efficiencies, such as automation in distribution centres and a better App experience to drive market share gains.

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The bank said: “With the ongoing challenges, and depending on the length of time for which the attack persists, there is a risk that the pace of transformation slows somewhat, as the business experiences overhang.

“There are also customer loyalty risks to consider - however for now, given M&S is one of the most loved/trusted brands in the country, we think customers are supporting the retailer and we do not expect any lasting damage on this front.”