European investment bank Berenberg has struck a positive tone on Marks & Spencer (M&S) ahead of the retailer's fiscal first-half results, due on November 4. The bank forecasts adjusted pretax profit of £394 million for the period, a figure that suggests the company is steadily moving past the disruption caused by last year's cyber incident.
Berenberg's outlook is notably upbeat, especially given the challenges M&S has faced over the past year. The cyberattack, which hit the company in 2023, disrupted operations and weighed on sales, particularly in its online channels. However, the bank believes the worst is over and that M&S is now back on a more stable footing.
What's driving the recovery?
According to Berenberg, the recovery is not uniform across the business. The bank sees particular strength in M&S's Food division, which has long been a reliable performer for the company. Food sales have remained resilient even as consumers have tightened their spending, thanks to M&S's focus on quality and its loyal customer base.
Progress is also being made at Ocado Retail, the online grocery joint venture between M&S and Ocado Group. The venture has been a key part of M&S's strategy to expand its online presence, and Berenberg notes that it is showing signs of improvement. Online sales across the wider M&S business are also picking up, which is crucial as the company looks to compete in an increasingly digital retail environment.
That said, the recovery is uneven. While Food and online are performing well, other parts of the business, such as clothing and home, may still be feeling the effects of the cyber incident and the broader cost-of-living pressures that have hit UK consumers. Berenberg's forecast of £394 million in adjusted pretax profit is a signal that the company is on the mend, but it also acknowledges that not all divisions are firing on all cylinders.
Why the cyber incident mattered
The cyber incident that struck M&S last year was a significant disruption. It forced the company to temporarily shut down parts of its online operations and caused delays in order fulfilment. For a retailer that relies heavily on e-commerce, such an event can have a lasting impact on customer trust and sales momentum.
Berenberg's view is that M&S has managed to stabilize since then, but the road to full recovery has been gradual. The bank's forecast suggests that the company has absorbed the shock and is now returning to a more normal trading pattern. For investors, this is an encouraging sign, as it implies that the worst of the disruption is behind the company.
What it means for investors
For everyday investors, Berenberg's forecast offers a glimpse into what to expect when M&S reports its results on November 4. An adjusted pretax profit of £394 million would represent a solid performance, especially given the headwinds the company has faced. Adjusted pretax profit is a key metric because it strips out one-off items, giving a clearer picture of the underlying profitability of the business.
However, investors should keep in mind that this is just one analyst's view. The actual results could differ, and the market's reaction will depend on a range of factors, including how the company's various divisions performed and what management says about the outlook for the rest of the year.
Berenberg's positive stance on M&S is part of a broader pattern of the bank's coverage of European retailers and automakers. Recently, Berenberg has also weighed in on Stellantis, BMW, and Porsche, showing a keen interest in consumer-facing companies that are navigating similar challenges.
For M&S specifically, the key questions investors will be asking are: How quickly is the online business recovering? Is the Food division maintaining its momentum? And can the company sustain its profit growth in a tough economic environment? Berenberg's forecast suggests the answers are broadly positive, but the November 4 report will provide the definitive picture.
As always, it's important for investors to do their own research and consider their own financial situation. Analyst forecasts are useful guides, but they are not guarantees. The retail sector remains volatile, and M&S's recovery could still face bumps along the way.
