Marks & Spencer Shares (LON:MKS) Downgraded on Rising Execution Risks

Marks & Spencer shares (LON:MKS) are under pressure today, down 1% following a downgrade by RBC Capital, who lowered their rating to Sector Perform from Outperform whilst simultaneously raising the price target to 400p from 375p.

This decision reflects concerns over heightened execution risks following the recent cyber disruption that significantly impacted the company’s operations.

The market reacted negatively to the news, with investors reassessing their positions in light of the potential challenges M&S faces in recovering from the cyberattack. The stock's performance is closely tied to the company's ability to restore confidence and mitigate the financial fallout from the incident.

The cyberattack, attributed to the “Scattered Spider” hacking group, involved the deployment of DragonForce ransomware and resulted in the suspension of online orders and click-and-collect services. M&S estimates a substantial £300 million reduction in operating profit for the 2025/26 fiscal year due to this incident. The company's market value experienced a decline of over £1 billion in the wake of the breach, underscoring the severity of the impact on investor confidence.

While M&S has gradually restored its online operations, beginning with the relaunch of its website on June 10, 2025, the phased recovery process is aimed at rebuilding customer trust and stabilizing sales. The company reported stronger-than-expected full-year earnings for the fiscal year ending in 2025, posting a profit before tax of £876 million, which surpassed consensus expectations. However, the anticipated £300 million impact from the cyberattack led to a cautious outlook, resulting in a share price decline exceeding 3% following the earnings announcement.

In response to these challenges, M&S has taken several strategic steps, including extending Chairman Archie Norman's tenure by three years to ensure leadership continuity as the company navigates its “Reshaping for Growth” strategy and recovers from the cyberattack. Furthermore, the company is proceeding with store closures, specifically the closure of 11 cafes within its smaller food stores, as part of its ongoing transformation efforts to modernize its food business and enhance customer offerings.

The cyberattack on M&S highlights a broader trend of increasing cyber incidents affecting critical sectors in the UK. The National Cyber Security Centre has reported a 50% rise in “highly significant” cyber incidents over the past year, underscoring the growing importance of robust cybersecurity measures for businesses.