Marks and Spencer faces a tough annual general meeting on Tuesday as shareholders prepare to scrutinise the retailer’s recovery from a devastating cyber attack.
The FTSE 100 retailer, trading under the ticker MKS, saw its profit slump by 29 per cent to £365m in the year to March, despite growing revenue, after taking a £131m hit from the incident.
The cyber attack struck in April last year, shutting down the M&S website for 12 weeks and leaving some shelves empty across its store network.
Chairman Archie Norman described the incident as “traumatic,” and the company subsequently chose to slash bonuses for every single member of staff in a bid to shore up its finances.
Chief executive Stuart Machin confirmed that the bonus freeze would extend to all 63,000 staff, including himself and Norman, in a decision he defended publicly earlier this year.
“I was part of this decision and I think it’s the right one. It does not, however, take away from the fact that everyone worked harder than ever during a very challenging period and I am very grateful to them for doing so,” Machin said.
Duncan Ferris, an analyst at investment platform Freetrade, said the executive team will be expected to demonstrate that lessons have been learned and that the business has strengthened resilience against future hacks.
“It’s fair to say the executive team may face scrutiny,” Ferris said, adding that while the bonus freeze showed “some contrition,” investors “will want to know this accountability has been paired with decisive action.”
The online blackout caused by the attack hit M&S’s fashion arm hardest, with sales in the fashion, home and beauty division declining by nearly eight per cent in the year to March due to “the temporary pause in online trading and systems access.”
Dan Coatsworth, head of markets at stockbroker AJ Bell, warned that rival fashion retailer Next “pinched” a large number of customers from M&S while it was suffering from stock shortfalls caused by the incident.
“Investors will want to know what’s being done to win these customers back. Next has really upped its game with clothing and M&S might find its recovery efforts are going to take longer than previously expected,” Coatsworth said.
By contrast, M&S Food delivered a buoyant performance, with sales jumping seven per cent to £9.7bn, supported by million-pound investments in warehouse infrastructure.
Food is now the company’s “core strength,” accounting for more than half of its revenue, and shareholders will want proof that this business “can keep growing volume,” according to retail analyst Nicholas Found.
Separately, M&S faces scrutiny over its decision to allow board member bonuses to be paid entirely in cash rather than in 50 per cent shares, with leading shareholder advisory Institutional Shareholder Services raising concerns over the “regressive” move.
Shares in M&S have risen more than 16 per cent so far this year and closed flat at 381p on Monday ahead of the meeting.