M&S boss says Reeves made customers more worried with pre-budget speech

The boss of Marks & Spencer has said Rachel Reeves has made his customers “more worried” about rising costs with her pre-budget speech as retailers prepare for the key Christmas trading period. Stuart Machin said his shoppers were “worried about rising costs and they did get more worried” after the chancellor failed to rule out breaking manifesto pledges not to raise key taxes in her speech on Tuesday. The M&S chief executive suggested Reeves’s lack of detail in spelling out her plans had left shoppers and businesses unsure about what new costs they could face in the months ahead. “Shoppers are planning for a good Christmas, but planning for the worst with the budget and hoping for the best,” he said. Expressing frustration about the timing of the fiscal event – just two days before Black Friday on 28 November, the US-inspired discount day which has become one of the year’s busiest shopping days – Machin said: “We are all sitting here waiting for the 26th”. “I most fear anything that is going to hit our customers’ pockets and the everyday economy,” he added, and called for “no more taxes on everyday economy. That wouldn’t be a growth strategy.” Machin also revealed that M&S profits for the first half of its financial year had more than halved after a damaging cyber-attack that is still affecting its clothing and homeware business. The retailer said underlying profits fell to £184.1m in the six months to 27 September, from £413.1m a year before, after it had to halt online orders of clothing and homewares for more than six weeks. Total sales for the M&S business, which has 230 full-line stores and almost 800 food-only stores, fell 0.6% to £6.5bn in the half year. Clothing and homeware sales were down 16.4% in the half-year, while food sales rose by a slightly better than expected 7.8%. Machin said the division had been “slower than we would like” in recovering from the hack. He said it had taken time to reboot stock ordering and distribution, with overseas online orders restarting only last month. He admitted operations would not be fully recovered until the spring. However, he said a £324m hit to profits caused by trading disruption from the cyber incident – £24m more than previously warned of for the full year – was “broadly in line” with expectations. Machin added the problems were “not due to lack of demand” and said the company had been “inundated with requests” for clothing. M&S said profits had been helped by a quick recovery of £100m in cyber-insurance but hit by £50m on the new packaging recycling levy and additional insurance costs. The retailer is hoping to make £600m in cost savings this year as it battles to keep annual profits steady – £100m more than previously planned. Machin said these savings would be made by improving the efficiency of its supply chain, online business and stores with the help of technology. “There won’t be a jobs impact,” he added. The company recorded almost £102m in one-off costs related to the cyber-incident, such as legal and professional support and the cost of bringing its tech team in-house in the first half of the year and said it expected a further £34m in the second half – more than analysts had expected. Despite the cost-cutting, M&S opened six stores in the six months to the end of September and plans 12 more by March. Machin said: “In the second half, we expect profit to be at least in line with last year. This should give us a springboard into the new financial year and set M&S up for further growth.” Last week, M&S’s rival Next raised hopes that UK consumers were still willing to spend despite pressures on household budgets, as it revealed sales and profit growth “materially above” expectations. The attack on M&S’s IT systems over the Easter weekend forced the retailer to stop orders via its website, through which it sells fashion, homeware and gifts, for more than a month and a half. Deliveries of food and fashion into stores and some deliveries to its online food partner, Ocado, were also disrupted.