Marks & Spencer (LSE:MKS) shares are down 13% over 12 months.
That means £10,000 invested in the FTSE 100 retailer a year ago would be worth around £8,700 today. Not the result investors were hoping for from one of Britain’s most beloved high street names.
The hack
The culprit? A devastating cyberattack that sent shockwaves through the business and the broader retail sector.
The hack — which disrupted M&S’s online operations, paused contactless payments, and forced the company to pull its click-and-collect service — was one of the most significant cyber incidents to hit a UK retailer in recent memory.
At its peak, the disruption was costing the company an estimated £43m a week in lost online sales.
The market reacted accordingly.
Shares that had been riding high on the back of a genuine operational turnaround — strong food sales, a resurgent clothing division, improving margins — suddenly found themselves under pressure from a threat that had nothing to do with M&S’s underlying business fundamentals.
A Gulf crisis
More recently, the conflict in the Gulf has held the shares back despite the company trading at some of the lowest multiples we’ve seen in the last decade.
What’s the Gulf link? It’s because higher natural gas prices feed directly into fertiliser costs — natural gas is the primary feedstock for nitrogen fertiliser production — and that upstream pressure inevitably works its way through the supply chain, squeezing supermarket margins at exactly the wrong moment.
A protracted conflict remains one of the biggest risks to the business.
An opportune moment
Sometimes the best time to invest is when the chips are down.
For M&S, the cyberattack disruption is behind it. The Gulf crisis is a live risk, but geopolitical shocks of this nature tend to have a shorter shelf life than markets initially price in — and energy prices have a well-documented habit of retreating sharply from their peaks. The 2008 oil spike and subsequent collapse is the textbook example.
Neither issue looks permanent.
The interesting part of the equation is the valuation. Personally, I don’t believe there has been a more attractive time to buy Marks & Spencer shares over the past decade.
It’s currently trading at just 10 times forward earnings. But earnings growth remains really strong over the medium term. The forward dividend yield sits around 2% — covered five times by earnings — and net debt is manageable around £2.5bn.
Forecasts point to the price-to-earnings (P/E) ratio falling to around 9.3 times in 2028 and this represents a huge discount to peers in the grocery segment. Tesco is currently around 15.4 times forward earnings, moderating sightly into 2028.
The bottom line
UK businesses can take a lot longer than their US counterparts to reach fair value. This is even the case outside of tech. For example, I bought an overlooked defence stock in November (ISSC), it was up 200% in three months.
In the UK, I spent years waiting for Barclays and Lloyds to come good. Eventually I was rewarded, but it took time.
I believe Marks & Spencer might be another example. So I’m building my holding and hoping the market will realise the value proposition here sooner rather than later.
It’s certainly worth considering.
