M&S' slow recovery from cyberattack puts it at risk of lasting damage
Two chief executives of UK retailers, a former retail CEO and other retail and cyber industry sources told Reuters that all companies were urgently reviewing their security systems.
For M&S, which had traded strongly before the cyberattack, the concern will not only be lost business and stock market value, but the risk of lasting damage to a brand that YouGov ranked as Britain's best last year.
CUSTOMER FRUSTRATION
Tracey Woolf, a 62-year-old interior designer, said on Wednesday she was looking for trousers for her father at rival Next as she could not order them online from M&S and staff had been unable to say whether they were available in stores.
"I just think a big company like that, that's been going all those years, should be on it by now," she said outside a large M&S store in Stratford, east London.
M&S, which has about 64,000 staff and 565 stores, has declined to quantify the financial impact so far as it misses out on sales of new season ranges. Online sales usually contribute around one-third of clothing and home sales.
One UK retail CEO gave an insight into what M&S might be thinking. He told Reuters, M&S had likely believed it could restore data and rebuild its systems without incurring too big a financial hit. But a month in, that gamble was now "getting interesting".
He said the risk would be, if M&S now decided to pay the ransom, the hacker would know M&S is in trouble and could raise the price. And when dealing with criminals, there is no guarantee systems would be restored.
The retail CEO said he knew of one hacked UK retailer he did not name who paid a 10 million pound ransom and got systems back.
PROBLEMS MOUNT
As the crisis drags on, M&S' problems will mount.
Analysts said store staff had worked hard to keep the business trading, but morale would suffer unless management can give them some timescale for a return to normal business.
M&S may have also made commitments to brands that trade on its website that it may not be able to keep.
As of Tuesday, Investec analyst Kate Calvert estimated about 68 million pounds of online orders would have been lost and another 17 million pounds if online ordering is still down on May 21 when M&S reports annual results.
Given the need for M&S to revert to more manual processes, labour costs and food wastage costs are also likely to have jumped, and the group faces the prospect of a larger than normal end of season clothing sale with deeper discounts to clear stock, potentially damaging profit margins.
Analysts at Deutsche Bank estimate a profit hit run rate of about 15 million pounds a week. They said cyber insurance would likely cover most of the impact but that is generally time limited.
Other British retailers just hope they will not be the next.
"If it can happen to M&S, it can happen to anyone," Thacker said.
(Reporting by James Davey and Sarah Young; additional reporting by Raphael Satter; editing by Barbara Lewis)
Content Original Link:
" target="_blank">
