M&S food sales show resilience despite cyberattack, says NielsenIQ

Marks & Spencer's food sales grew 10.8% year-on-year in the 12 weeks to May 17, according to NielsenIQ data, despite a cyberattack that impacted availability and led to increased waste and logistics costs. While M&S's market share rose 20 basis points to 3.8%, sales growth slowed from 14.7% in the previous report, and the company anticipates a £300 million hit to operating profit due to the cyberattack's disruption to online services.

Analysis

Marks & Spencer (MKS.L) demonstrated resilience in its food division, with NielsenIQ data indicating a 10.8% year-on-year increase in food sales for the 12 weeks ending May 17, contributing to a 20 basis point rise in its UK grocery market share to 3.8%. This growth occurred despite significant operational headwinds from a cyberattack last month, which impacted product availability and led to increased waste and logistics costs. However, this sales growth represents a deceleration from the 14.7% reported in NielsenIQ's prior period. The cyberattack's financial repercussions are substantial, with M&S anticipating an approximate £300 million reduction in operating profit and expecting online service disruptions, particularly for clothing orders, to persist potentially until July. The broader grocery market, as reported by both NielsenIQ and Kantar, shows robust sales growth from discounters Aldi and Lidl, as well as established players like Tesco (TSCO.L), Sainsbury's (SBRY.L), and Ocado (OCDO.L), though M&S's full market share is not captured by Kantar's dataset. The overall situation for M&S is mixed, with underlying food sales strength being partially offset by the severe impact of the cyber incident.

Key Decisions for Investors

• Investors should closely monitor the actual financial impact of the cyberattack against the estimated £300 million operating profit loss and the timeline for full restoration of online services, as these are critical to M&S's near-term earnings.
• Consider the deceleration in M&S's food sales growth (from 14.7% to 10.8%) in the context of the cyberattack's impact and ongoing market competition, particularly from discounters.
• Evaluate M&S's ability to recover lost online sales and manage increased costs stemming from the cyberattack before making significant capital allocation decisions, given the negative sentiment (-0.3) associated with the stock following this news.