Marks And Spencer Group Plc · LSE:MKS
Marks And Spencer — Investor Day (November 2023)
155 slides from Marks And Spencer's investor day presentation, November 2023
Slide 1: Capital Markets Day November 2023
CAPITAL MARKETS DAY NOVEMBER 2023 1
Slide 2: Stuart Machin, Chief Executive Officer
STUART MACHIN Chief Executive Officer 2
Slide 3: Where we are today
WHERE WE ARE TODAY As our Chairman Simon Marks said in 1935, “no business can escape change” Last year we set out our strategic priorities to reshape M&S for growth, with a clear framework for our plans and investments To help all of us understand what we stand for, who we want to be, and how we nee
Slide 4: What we want to be
OUR M&S VISION WHAT WE WANT TO BE The most trusted retailer, doing the right thing for our customers, where products are at the heart of everything we do 4
Slide 5: Why do we exist?
OUR M&S PURPOSE WHY DO WE EXIST? To bring the magic of M&S, through exceptional quality, value, service and innovation to every customer, whenever, wherever and however they want to shop with us 5
Slide 6: Our M&S investment case
OUR M&S INVESTMENT CASE What makes M&S unique is the By delivering value for lengths we go to in innovating, customers, we deliver value designing, developing, and for our shareholders sourcing our products We make change happen We are rigorous in focusing on execution and maximising return performa
Slide 7: Our five-year financial ambition to FY28
OUR FIVE-YEAR FINANCIAL AMBITION TO FY28 SALES MARGINS COSTS RETURNS Food market share Food operating margin Structural Disciplined +1% >4% reduction of capital allocation C&H market share C&H operating margin c.£400m framework and clear hurdle rates +1% >10% 7
Slide 8: Our strategic priorities
OUR STRATEGIC PRIORITIES EXCEPTIONAL PRODUCT, STRUCTURALLY LOWER TRUSTED RETAILER COST BASE CUSTOMER CENTRIC BUSINESSES HIGH PERFORMANCE CULTURE EXPANDED GLOBAL REACH DELIVER IMPROVE PROFITABLE SALES OPERATING DISCIPLINED DRIVE INVESTMENT SHAREHOLDER ACCELERATING STORE DISCIPLINED CAPITAL ROTATION A
Slide 9: Our strategic priorities
OUR STRATEGIC PRIORITIES EXCEPTIONAL PRODUCT, STRUCTURALLY LOWER TRUSTED RETAILER COST BASE CUSTOMER CENTRIC BUSINESSES HIGH PERFORMANCE CULTURE EXPANDED GLOBAL REACH DELIVER IMPROVE PROFITABLE SALES OPERATING DISCIPLINED DRIVE INVESTMENT SHAREHOLDER ACCELERATING STORE DISCIPLINED CAPITAL ROTATION A
Slide 10: We said: invest in trusted value and broaden appeal
EXCEPTIONAL PRODUCT, TRUSTED RETAILER WE SAID: INVEST IN TRUSTED VALUE AND BROADEN APPEAL Invest £200m by FY28 in Food and C&H to grow market share and volume Broaden appeal through category resets to grow larger baskets in Food Drive market share across Womenswear, Menswear, Lingerie and Kidswear 1
Slide 11: We've done: volume growth in core categories driving share
EXCEPTIONAL PRODUCT, TRUSTED RETAILER WE’VE DONE: VOLUME GROWTH IN CORE CATEGORIES DRIVING SHARE M&S FOOD GROWTH ACROSS ALL DEMOGRAPHICS Contribution to sales growth Food invested over £50m - Remarksable & Price Lock. School uniform prices frozen M&S 1.8% 3.5% 3.3% 1.4% 2.9% +13% Market 1.9% 2.5% 1.
Slide 12: We said: drive online participation and personalise experience
CUSTOMER CENTRIC BUSINESSES WE SAID: DRIVE ONLINE PARTICIPATION AND PERSONALISE EXPERIENCE Grow C&H online to 50% by FY28, through increased frequency and conversion Integrate the digital and store experience leveraging the power of omni-channel Grow active Sparks members and personalise every custo
Slide 13: We've done: initial improvements, more opportunity ahead
CUSTOMER CENTRIC BUSINESSES WE’VE DONE: INITIAL IMPROVEMENTS, MORE OPPORTUNITY AHEAD Grown ahead of online market, but sales participation and conversion down 90% of estate with digital Click & Collect hubs, but experience not fully integrated Active Sparks members up, but growth plateaued – more wo
Slide 14: Early stages of reset at Ocado Retail
CUSTOMER CENTRIC BUSINESSES EARLY STAGES OF RESET AT OCADO RETAIL Reset proposition Deliver on service Reduce costs and drive and grow M&S improvements through sales to increase Ocado ‘perfect execution’ retail profitability 14
Slide 15: We said: capital light growth driving sales and profitability
EXPANDED GLOBAL REACH WE SAID: CAPITAL LIGHT GROWTH DRIVING SALES AND PROFITABILITY Grow partner retail sales by more than £500m by FY28 Double International operating profit by FY28 Drive omni-channel growth through capital-light franchise partnerships 15
Slide 16: We've done: positive indicators, more to do on global model
EXPANDED GLOBAL REACH WE’VE DONE: POSITIVE INDICATORS, MORE TO DO ON GLOBAL MODEL International Retail sales (excl Russia) up c.£50m in H1 Operating profit up 11%, with cost savings in supply chain and central support Limited omni-channel growth, working with partners on model to improve offer 16 M&
Slide 17: Our strategic priorities
OUR STRATEGIC PRIORITIES EXCEPTIONAL PRODUCT, STRUCTURALLY LOWER TRUSTED RETAILER COST BASE CUSTOMER CENTRIC BUSINESSES HIGH PERFORMANCE CULTURE EXPANDED GLOBAL REACH DELIVER IMPROVE PROFITABLE SALES OPERATING DISCIPLINED DRIVE INVESTMENT SHAREHOLDER ACCELERATING STORE DISCIPLINED CAPITAL ROTATION A
Slide 18: We said: reduce costs permanently to underpin margin targets
STRUCTURALLY LOWER COST BASE WE SAID: REDUCE COSTS PERMANENTLY TO UNDERPIN MARGIN TARGETS £400m of structural cost reduction by FY28, with over £150m in FY24 Colleague costs <10% sales and savings in energy More efficient logistics in C&H and Food Simplified support centre - more accountability and
Slide 19: We've done: on track with savings, need to permanently embed
STRUCTURALLY LOWER COST BASE WE’VE DONE: ON TRACK WITH SAVINGS, NEED TO PERMANENTLY EMBED H1 COST SAVINGS OF £115M DELIVERED £115m delivered in H1, on track for more than £150m in FY24 £M £34 £31 £30 £20 Colleague costs 10% sales in first half. Initial savings made from LED / refrigeration Retail Su
Slide 20: We said: simpler & faster, performance focused business
HIGH PERFORMANCE CULTURE WE SAID: SIMPLER & FASTER, PERFORMANCE FOCUSED BUSINESS Closer to Colleagues - getting out there to ask questions and deliver change Closer to Customers - to listen, to improve and to deliver brilliant service Raising the bar on talent - clearer objectives and development pl
Slide 21: We've done: starting to create new routines and rituals
HIGH PERFORMANCE CULTURE WE’VE DONE: STARTING TO CREATE NEW ROUTINES AND RITUALS Colleague listening, Straight to Stuart – over 10,000 ideas! Support centre colleagues working 7 days in store as a bonus objective Clear targets for performance, developing and promoting internal talent >3,000 managers
Slide 22: Our strategic priorities
OUR STRATEGIC PRIORITIES EXCEPTIONAL PRODUCT, STRUCTURALLY LOWER TRUSTED RETAILER COST BASE CUSTOMER CENTRIC BUSINESSES HIGH PERFORMANCE CULTURE EXPANDED GLOBAL REACH DELIVER IMPROVE PROFITABLE SALES OPERATING DISCIPLINED DRIVE INVESTMENT SHAREHOLDER ACCELERATING STORE DISCIPLINED CAPITAL ROTATION A
Slide 23: We said: a more productive estate positioned for growth
ACCELERATING STORE ROTATION WE SAID: A MORE PRODUCTIVE ESTATE POSITIONED FOR GROWTH Reduce full line estate to 180 stores and open 100 new Food stores by FY28 Invest in renewal format to deliver bigger, fresher Food stores Plan to deliver store rotation programme in five years, but aim to complete i
Slide 24: We've done: good year of delivery, but need to build the pipeline
ACCELERATING STORE ROTATION WE’VE DONE: GOOD YEAR OF DELIVERY, BUT NEED TO BUILD THE PIPELINE Before 8 new stores (full line and Food) and 5 full line closures in H1 92 stores now in renewal format, delivering M&S Liverpool Church Street healthy sales uplifts After More work needed to build store pi
Slide 25: We said: integrate Gist and develop long term network plan
MODERNISED FOOD SUPPLY CHAIN WE SAID: INTEGRATE GIST AND DEVELOP LONG TERM NETWORK PLAN Savings of £50m over 5 years from management fee and cost savings Immediate action to reduce Food cost to serve Develop longer term plan for an efficient logistics network 25
Slide 26: We've done: integration on track, starting to fix the backbone
MODERNISED FOOD SUPPLY CHAIN WE’VE DONE: INTEGRATION ON TRACK, STARTING TO FIX THE ‘BACKBONE’ GIST BENEFITS OF >£50M ALREADY DELIVERED £M Benefits of £60m from Gist in first year Management Fee £37 Value creation £19 3rd party profit £5 Cost to serve down 60bps and improved operational KPIs GIST PRO
Slide 27: We said: improve end to end stock flow
MODERNISED C&H SUPPLY CHAIN WE SAID: IMPROVE END TO END STOCK FLOW Improve flow of stock, to increase availability and reduce working capital Slim and automate the C&H DC network Leverage stores for fulfilment and improve returns process 27
Slide 28: We've done: initial changes reducing C&H cost to serve
MODERNISED C&H SUPPLY CHAIN WE’VE DONE: INITIAL CHANGES REDUCING C&H COST TO SERVE Holding more stock at suppliers, improving C&H COST-TO-SERVE REDUCING availability and reducing cover 21.2% 15.3% 14.8% 13.7% 13.9% Invested in omni-channel capacity at Stoke and Ollerton. Closed West Thurrock DC Laun
Slide 29: We said: invest in technology to improve customer experience
DATA, DIGITAL AND TECHNOLOGY WE SAID: INVEST IN TECHNOLOGY TO IMPROVE CUSTOMER EXPERIENCE Grow M&S App to 10m users in two years and enhance experience New planning systems to improve E2E supply chain in Food and C&H Digitally enabled stores and technology to support colleagues serving customers Inv
Slide 30: We've done: refocusing plans to improve execution
DATA, DIGITAL AND TECHNOLOGY WE’VE DONE: REFOCUSING PLANS TO IMPROVE EXECUTION App users grown from 4m to 5m – requires a further 5m users to achieve target New Food forecasting system on track. C&H planning system contracted with partner Trialling new Food space planning system, more to do to lever
Slide 31: Our strategic priorities
OUR STRATEGIC PRIORITIES EXCEPTIONAL PRODUCT, STRUCTURALLY LOWER TRUSTED RETAILER COST BASE CUSTOMER CENTRIC BUSINESSES HIGH PERFORMANCE CULTURE EXPANDED GLOBAL REACH DELIVER IMPROVE PROFITABLE SALES OPERATING DISCIPLINED DRIVE INVESTMENT SHAREHOLDER ACCELERATING STORE DISCIPLINED CAPITAL ROTATION A
Slide 32: We said: focus on cash, the number one priority
DISCIPLINED CAPITAL ALLOCATION WE SAID: FOCUS ON CASH, THE NUMBER ONE PRIORITY Focus on cash generation and a strong balance sheet Invest for growth and structural cost reduction Target of investment grade metrics in the medium term 32
Slide 33: We've done: clear targets driving improved free cash flow
DISCIPLINED CAPITAL ALLOCATION WE’VE DONE: CLEAR TARGETS DRIVING IMPROVED FREE CASH FLOW NET DEBT CONTINUES TO REDUCE £4.0 £3.5 Stronger free cash flow and balance sheet £2.7 £2.6 £1.4 £1.1 £0.4 £0.4 Net Debt Net Debt excl Leases 19/20 20/21 21/22 22/23 Investing with clear hurdle rates and a discip
Slide 34: Our M&S behaviours
OUR M&S BEHAVIOURS SOMETIMES TODAY… M&S MOVING FORWARD… WE ARE CLOSE TO CUSTOMERS AND CLOSE We aren’t curious enough and look inwards too much TO COLLEAGUES We avoid making the tough decisions WE SAY IT, WE DO IT We believe our own hype and avoid criticism WE TELL IT AS IT IS We accept average perfo
Slide 35: Summary: lots done, lots to do, lots of opportunity
SUMMARY LOTS DONE. LOTS TO DO. LOTS OF OPPORTUNITY. 35
Slide 36: Sacha Hannah Richard
13:45 14:15 14:30 15:00 /15:20 FOOD AND OCADO BREAK C&H CASE STUDY: C&H RETAIL SUPPLY CHAIN Richard Alex ONLINE, DATA, DIGITAL & TECHNOLOGY Hannah Katie Mark 15:00 /15:20 15:40 15:50 16:10 CASE STUDY: BREAK CAPITAL ALLOCATION Q&A WITH TEAM STORE ROTATION AND STRUCTURAL AND CLOSE COST REDUCTION Sacha
Slide 37: Alex Freudmann, Managing Director, Food
ALEX FREUDMANN Managing Director, Food 37
Slide 38: Our ambition
OUR AMBITION TO BUILD A REMARKABLE FOOD BUSINESS, PROTECTING THE MAGIC AND MODERNISING THE REST Delicious, great quality M&S Food, available where, when and how you want it 1 2 3 Leveraging exceptional Driving profitable Improving operating products and a growth across margins through fixing trusted
Slide 39: Our ambition
OUR AMBITION TO BUILD A REMARKABLE FOOD BUSINESS, PROTECTING THE MAGIC AND MODERNISING THE REST Delicious, great quality M&S Food, available where, when and how you want it 1 2 3 Leveraging exceptional Driving profitable Improving operating products and a growth across margins through fixing trusted
Slide 40: The M&S magic is what makes us unique
THE M&S MAGIC IS WHAT MAKES US UNIQUE The MOST LOVED brand in the UK because… 40
Slide 41: The M&S magic is what makes us unique
THE M&S MAGIC IS WHAT MAKES US UNIQUE The MOST LOVED Rated by Rated #1 for quality Deep, Ranked #1 on brand in the UK customers as by customers longstanding animal welfare because… #1 for new & supplier & environment distinctive product partnerships 41
Slide 42: Starting to see the beginnings of a virtuous circle
STARTING TO SEE THE BEGINNINGS OF A VIRTUOUS CIRCLE MAINTAINING & WIDENING IMPROVING VALUE GROWING QUALITY GAP PERCEPTION VOLUME Absolute NPS Difference to Market - Index M&S Volume Growth vs. Market 80 +12%vs. 2018 160 +30% 30% 70 vs. 2018 20% 140 60 10% 50 120 0% 40 100 30 -10% 20 80 -20% 2018 201
Slide 43: Constantly improving product
CONSTANTLY IMPROVING PRODUCT RANKED #1 BY RSPCA 1,400 NEW LINES OVER 1,000 QUALITY FOR ANIMAL WELFARE LAUNCHING THIS YEAR UPGRADES THIS YEAR 303 RSPCA Assured Products 20% of total range 15% of total range 43
Slide 44: Continuing to invest in trusted value
CONTINUING TO INVEST IN TRUSTED VALUE Great everyday Our occasion led Giving customers price Leading value on fresh value on M&S solution for certainty on family seasonal produce quality products dinner tonight basket items 44
Slide 45: Our ambition
OUR AMBITION TO BUILD A REMARKABLE FOOD BUSINESS, PROTECTING THE MAGIC AND MODERNISING THE REST Delicious, great quality M&S Food, available where, when and how you want it 1 2 3 Leveraging exceptional Driving profitable Improving operating products and a growth across margins through fixing trusted
Slide 46: Three building blocks to deliver sales growth
THREE BUILDING BLOCKS TO DELIVER SALES GROWTH Growing share across New, LARGER, FRESHER Expanding reach through our CATEGORIES M&S Food stores CONVENIENCE 46 M&S Leeds White Rose M&S Liverpool ONE M&S Waterloo Station
Slide 47: Encouraging early signs from main basket category resets
ENCOURAGING EARLY SIGNS FROM MAIN BASKET CATEGORY RESETS HOMECARE BISCUITS SOFT DRINKS HOT BEVERAGES +63% sales vs LY +43% sales vs LY +13% sales vs LY +18% sales vs LY 47
Slide 48: Invest to win customers in the spine of the basket
INVEST TO WIN CUSTOMERS IN THE SPINE OF THE BASKET Maximise seasonal British product and introduce new varieties to differentiate in Produce Invest in price and protect quality difference to competition in Meat, Fish & Poultry Extend and transform offer in pre-packed Bakery and optimise availability
Slide 49: Gaining share with more to do
GAINING SHARE WITH MORE TO DO Absolute Market Share 6.7% 6.3% 6.0% 5.9% 5.7% 5.6% 5.2% 5.3% 5.4% Produce Meat, Fish & Poultry Bakery 2019 2021 2023 49 Source: iRi
Slide 50: Grow awareness of our great value main basket range
GROW AWARENESS OF OUR GREAT VALUE MAIN BASKET RANGE Close range gaps in Grocery to cover all customer main basket shop need states Invest in price and extend range in Frozen Increase customer awareness and penetration in Homecare 50
Slide 51: Increasing share but considerable headroom for growth
INCREASING SHARE BUT CONSIDERABLE HEADROOM FOR GROWTH Absolute Market Share 2.0% 1.6% 1.3% 1.3% 1.2% 0.9% 0.8% 0.7% 0.5% Grocery Frozen Homecare 2019 2021 2023 51 Source: iRi
Slide 52: Increase innovation in our heartland categories
INCREASE INNOVATION IN OUR HEARTLAND CATEGORIES Recover and grow share in On the Go by broadening offer to new need states Increase the pace of innovation in For Tonight through transforming Meals and Desserts Profitably increase share in Events outside of Christmas 52
Slide 53: On the go recovering; strong at Christmas
ON THE GO RECOVERING, RANGE EXTENSION STRONG AT CHRISTMAS, BUT MORE AND INNOVATION TO DRIVE GROWTH HEADROOM IN OTHER EVENTS Market Share 14.9% 13.7% 14.0% 9.5% 8.3% 8.7% 2019 2022 2023 Christmas Mother's Day Valentines Father's Day Volume Value 53 Source: IrI Source: IGD
Slide 54: New space and renewals delivering growth
NEW SPACE AND RENEWALS DELIVERING GROWTH Add 100 NEW, BIGGER, Continue to INVEST IN Accelerate GROWTH FRESHER, more STORE RENEWAL IN CONVENIENCE productive food stores 54 M&S Simply Food, Macclesfield M&S Oatlands Harrogate M&S Waterloo Station
Slide 55: Our ambition
OUR AMBITION TO BUILD A REMARKABLE FOOD BUSINESS, PROTECTING THE MAGIC AND MODERNISING THE REST Delicious, great quality M&S Food, available where, when and how you want it 1 2 3 Leveraging exceptional Driving profitable Improving operating products and a growth across margins through fixing trusted
Slide 56: Several levers to improve gross margin
SEVERAL LEVERS TO IMPROVE GROSS MARGIN FORTRESS BETTER WASTE & SUPPLY FACTORIES BUYING STOCK LOSS CHAIN 56
Slide 57: Improving availability and lowering cost
IMPROVING AVAILABILITY AND LOWERING COST DELIVERED IMPROVEMENTS IN KEY PERFORMANCE METRICS POST GIST ACQUISITION BUT MORE TO DO Improvement in operations year-on-year Next phase of Gist integration benefits +6% +5% +4% Warehouse Transport Improvement in Productivity Productivity Cost per Case Implem
Slide 58: Ocado Retail plays a valuable role in growing M&S Food
OCADO RETAIL PLAYS A VALUABLE ROLE IN GROWING M&S FOOD Ocado Retail as a GROWING, Why OCADO RETAIL Progress VALUABLE business for is VALUABLE to M&S of the RESET SHAREHOLDERS 58
Slide 59: Ocado Retail is already delivering value
OCADO RETAIL IS ALREADY DELIVERING VALUE Gives M&S Food an online route to market COGS synergies being delivered Ocado Retail delivers growth for M&S 59
Slide 60: Our missions are complementary
OUR MISSIONS ARE COMPLEMENTARY M&S FOOD AND OCADO RETAIL SHOPPING MISSIONS (% SPEND) Ma in Main Shop 7% Ba o K sk et G ey the Ev ents On Top Up 51% 66% Product Customers Love For For Tonight 42% 31% To T o ni g ht p Up 3% M&S Ocado Retail Source: Kantar 60
Slide 61: Ocado Retail has a unique proposition
OCADO RETAIL HAS A UNIQUE PROPOSITION TOTAL DIRECT LABOUR MINUTES TO FULFIL 50-ITEM ORDER Channel shift to online Typical In-store 70 Luton CFC 10 Source: Ocado Retail estimates Unique operating model HIGHEST ONLINE CUSTOMER NPS SCORES IN THE MARKET 41 35 24 19 Best online customer proposition 16 6
Slide 62: Recovery to growth and industry-leading profitability
RECOVERY TO GROWTH AND INDUSTRY-LEADING PROFITABILITY MATURE ACTIVE BASE GROWING POST COVID +13% Drive for ‘Perfect Execution’ Nov 21 Sep 23 Source: Ocado Retail Customer growth and access to M&S CAPACITY UTILISATION DRIVES PROFITABILITY c.75% 75-80% c.60% Profitable online model Hatfield & Luton Es
Slide 63: M&S and Ocado Retail working more collaboratively together
M&S AND OCADO RETAIL WORKING MORE COLLABORATIVELY TOGETHER NUMBER OF M&S SKU’s INCREASING ON OCADO.COM Resetting overall ways of working 87% 76% 77% 80% 69% 73% Increasing the addressable range May June July August Sept Today RECENT IMPROVEMENTS IN AVAILABILITY Improving availability +5ppt Joint mar
Slide 64: Thank you
THANK YOU 64
Slide 65: Richard Price, Managing Director, Clothing & Home
RICHARD PRICE Managing Director, Clothing & Home 65
Slide 66: Last year we told you our ambition
LAST YEAR WE TOLD YOU OUR AMBITION TO BECOME THE LEADING OMNI-CHANNEL RETAILER IN THE UK AN UNBEATABLE MIX OF STYLE, QUALITY AND VALUE, AVAILABLE WHEN AND WHERE I WANT IT 1 2 3 4 Leveraging Driving Improving Growing sales exceptional profitable operating across both products and a growth across marg
Slide 67: Since 2019, a new approach in Clothing & Home
SINCE 2019, A NEW APPROACH IN CLOTHING & HOME CUSTOMER PEOPLE PRODUCT 67
Slide 68: Starting to deliver results
STARTING TO DELIVER RESULTS 1st QUALITY 1st VALUE 3rd STYLE +4% 60% vs. Jan ‘20 45% +6% 35% +9% vs. Jan ‘20 vs. Jan ‘20 30% 40% 55% 25% 35% 20% 50% 30% 15% 2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023 Source: YouGov 68 Proportion of survey respondents that gave a positive response (tr
Slide 69: We've made structural changes to how we operate
WE’VE MADE STRUCTURAL CHANGES TO HOW WE OPERATE MORE FOCUSED FIRST PRICE, IMPROVED STEP CHANGED RANGES RIGHT PRICE STOCK FLOWS OMNI-CHANNEL OFFER 69
Slide 70: We've made structural changes to how we operate
WE’VE MADE STRUCTURAL CHANGES TO HOW WE OPERATE MORE FOCUSED FIRST PRICE, IMPROVED STEP CHANGED RANGES RIGHT PRICE STOCK FLOWS OMNI-CHANNEL OFFER Options (#) Full price sales mix Stock cover (weeks) Online participation (%) 4205 90% 19.4 82% 32% 3375 80% 12.7 23% 1754 70% 66% 1532 60% 50% Womenswear
Slide 71: … and in our stores too
… AND IN OUR STORES TOO BIRMINGHAM LIVERPOOL ONE STEVENAGE PURLEY WAY BULLRING 71
Slide 72: Winning in Womenswear
WINNING IN WOMENSWEAR 72
Slide 73: What we will do next
WHAT WE WILL DO NEXT TO BECOME THE LEADING OMNI-CHANNEL RETAILER IN THE UK AN UNBEATABLE MIX OF STYLE, QUALITY AND VALUE, AVAILABLE WHEN AND WHERE I WANT IT 1 2 3 4 Leveraging Driving Improving Growing sales exceptional profitable operating across both products and a growth across margins channels t
Slide 74: Our 'magic formula' remains the same
OUR ‘MAGIC FORMULA’ REMAINS THE SAME STYLISH Never Sustaining A trusted products for the compromising leading VALUE & renewed modern mainstream on QUALITY perceptions BRAND 74
Slide 75: What we will do next
WHAT WE WILL DO NEXT TO BECOME THE LEADING OMNI-CHANNEL RETAILER IN THE UK AN UNBEATABLE MIX OF STYLE, QUALITY AND VALUE, AVAILABLE WHEN AND WHERE I WANT IT 1 2 3 4 Leveraging Driving Improving Growing sales exceptional profitable operating across both products and a growth across margins channels t
Slide 76: We will grow in all our categories
WE WILL GROW IN ALL OUR CATEGORIES Strengthen leadership Accelerate Grow our Increase sales in HEARTLAND development in THIRD-PARTY in HOME CATEGORIES KIDSWEAR BRANDS offer AND BEAUTY 76
Slide 77: Sustain #1 position
MODERN AND STYLISH WOMENSWEAR FOR EVERY OCCASION SUSTAIN #1 POSITION ‘Make the big bigger’ Play into key life moments Build own brands 77
Slide 78: Market share opportunities
MARKET SHARE OPPORTUNITIES Denim £0.6bn Knitwear £1.8bn Casual Tops £1.6bn Outerwear 8.0% £1.8bn M&S Dresses Womenswear £3.1bn share Footwear £2.3bn 0% 5% 10% 15% 20% Under-index Over-index Market Size 78 Source: Kantar 52 week ending 17 Sept 2023
Slide 79: Strengthen #1 position
THE NO.1 CHOICE FOR LINGERIE GLOBALLY STRENGTHEN #1 POSITION Improve and drive underwear Grow sleepwear and hosiery 79
Slide 80: Market share opportunities
MARKET SHARE OPPORTUNITIES Bras £0.8bn Knickers £0.5bn Hosiery £0.5bn 24.8% M&S Lingerie Sleepwear share £0.8bn 0% 5% 10% 15% 20% 25% 30% 35% 40% Under-index Over-index Market Size 80 Source: Kantar 52 week ending 17 Sept 2023
Slide 81: Drive to #1 position
THE UK’S LEADING MAINSTREAM MENSWEAR BRAND DRIVE TO #1 POSITION Refocus formal offer Grow smart/casual 81
Slide 82: Market share opportunities
MARKET SHARE OPPORTUNITIES Essentials £1.2bn Formal £0.9bn Mens' Outerwear £1.1bn Casual Tops 9.6% £1.8bn M&S Menswear share Footwear £2.3bn 0% 5% 10% 15% 20% Under-index Over-index Market Size 82 Source: Kantar 52 week ending 17 Sept 2023
Slide 83: The home of fun, style, trusted quality and great value
The home of fun, style, trusted quality and great value KIDS’ DAYWEAR 83
Slide 84: Market share opportunities
MARKET SHARE OPPORTUNITIES School Uniform £0.4bn Girls' Daywear £0.6bn 6.8% M&S Kidswear Boys' Daywear share £0.7bn 0% 5% 10% 15% 20% 25% Under-index Over-index Market Size 84 Source: Kantar 52 week ending 17 Sept 2023
Slide 85: Sportswear and third-party brands
Inspiring, curated SPORTSWEAR THIRD-PARTY BRANDS proposition 85
Slide 86: Home and Beauty
HOME Reinvigorated offer with select third party brands and style driving collaborations BEAUTY Trusted and curated destination for skincare, bath and body 86
Slide 87: What we will do next
WHAT WE WILL DO NEXT TO BECOME THE LEADING OMNI-CHANNEL RETAILER IN THE UK AN UNBEATABLE MIX OF STYLE, QUALITY AND VALUE, AVAILABLE WHEN AND WHERE I WANT IT 1 2 3 4 Leveraging Driving Improving Growing sales exceptional profitable operating across both products and a growth across margins channels t
Slide 88: Three main programmes to structurally reduce costs
THREE MAIN PROGRAMMES TO STRUCTURALLY REDUCE COSTS STRATEGIC SOURCING LEVERAGE EXISTING ONE BEST WAY PROGRAMME NETWORK ASSETS PROGRAMME IN STORES 88
Slide 89: Strategic sourcing savings underway for 24/25
STRATEGIC SOURCING SAVINGS UNDERWAY FOR 24/25 TIER 1 (DIRECT) SUPPLIERS ~200 ~90 NET ZERO COMMITMENTS FROM TO THIS YEAR TIER 2 (INDIRECT) ~1040 ~600 SAVINGS: £30M ON RAW MATERIALS MILLS FROM TO AND VOLUME LINES 89
Slide 90: We leverage existing network assets to reduce cost to serve
WE LEVERAGE EXISTING NETWORK ASSETS TO REDUCE COST TO SERVE System upgrades and investments in automation E-commerce capacity and modularity at Castle Donington and Bradford Improved and faster processing of returns 90
Slide 91: One Best Way to simplify processes and reduce cost to serve
“ONE BEST WAY” TO SIMPLIFY PROCESSES AND REDUCE COST TO SERVE Better stock accuracy and visibility (RFID) In-store efficiencies Simpler store operations (front and back of store) Improved store standards 91
Slide 92: What we will do next...
WHAT WE WILL DO NEXT... TO BECOME THE LEADING OMNI-CHANNEL RETAILER IN THE UK AN UNBEATABLE MIX OF STYLE, QUALITY AND VALUE, AVAILABLE WHEN AND WHERE I WANT IT 1 2 3 4 Leveraging Driving Improving Growing sales exceptional profitable operating across both products and a growth across margins channel
Slide 93: Katie Bickerstaffe, Co-Chief Executive
KATIE BICKERSTAFFE Co-Chief Executive 93
Slide 94: Progress in a tough market but more to do
PROGRESS IN A TOUGH MARKET BUT MORE TO DO ONLINE PENETRATION GROWTH FULL PRICE SALES GROWTH OPERATING 2019-23 (KANTAR) ONLINE 2019-23 PROFIT % 105% 9.0% 55% 44% 6.9% 58% M&S Market M&S Market H1 2022 H1 2023 94
Slide 95: Actions to drive growth ahead of the market
ACTIONS TO DRIVE GROWTH AHEAD OF THE MARKET Headroom in key categories, with new customers Driving conversion in the shopping funnel Leveraging our store estate Combining the power of Sparks and the App 95
Slide 96: Levers to increase profitability
LEVERS TO INCREASE PROFITABILITY Category and promotional mix Optimising fulfilment routing Investment in our logistics network Modernising the tech stack 96
Slide 97: Headroom in key categories
HEADROOM IN KEY CATEGORIES MENSWEAR KIDSWEAR THIRD PARTY BRANDS #4 in market #3 in market Items in basket 5.2% share 7.9% share 3.4 vs 2.6 97 Market share data source: Kantar
Slide 98: Focused on conversion through the funnel
FOCUSED ON CONVERSION THROUGH THE FUNNEL ATTRACT ENGAGE RETAIN CONVERT 98 .
Slide 99: Focused on conversion through the funnel
FOCUSED ON CONVERSION THROUGH THE FUNNEL ▪ Improving the quality of our traffic ▪ More traffic via owned channels e.g. App ATTRACT ENGAGE RETAIN CONVERT 99 .
Slide 100: Focused on conversion through the funnel
FOCUSED ON CONVERSION THROUGH THE FUNNEL ▪ Improving the quality of ▪ Delivering richer content our traffic ▪ Personalised content by ▪ More traffic via owned ATTRACT ENGAGE leveraging Thread channels e.g. App RETAIN CONVERT 100 .
Slide 101: Focused on conversion through the funnel
FOCUSED ON CONVERSION THROUGH THE FUNNEL ▪ Improving the quality of ▪ Delivering richer content our traffic ▪ Personalised content by ▪ More traffic via owned ATTRACT ENGAGE leveraging Thread channels e.g. App ▪ Remove the friction from purchasing RETAIN CONVERT ▪ Flexible and fast delivery options
Slide 102: Focused on conversion through the funnel
FOCUSED ON CONVERSION THROUGH THE FUNNEL ▪ Improving the quality of ▪ Delivering richer content our traffic ▪ Personalised content by ▪ More traffic via owned ATTRACT ENGAGE leveraging Thread channels e.g. App ▪ Remove the friction from purchasing ▪ Reduced customer RETAIN CONVERT ▪ Flexible and fas
Slide 103: Leveraging our store estate
LEVERAGING OUR STORE ESTATE 45% of menswear and Omni sales are womenswear ~22% higher collections lead when a store is to an additional nearby clothing purchase 24m orders placed NPS at 76 vs 47 Click & Collect c.20% online and collected in store for home delivery lower cost to serve 103
Slide 104: Combining the power of Sparks and the App
COMBINING THE POWER OF SPARKS AND THE APP KNOWING OUR POWER OF SPARKS CUSTOMERS THE APP RE-IMAGINED 17.7m £981 pa 34% Sparks members (+2.6m) Avg. M&S spend of App Scan rate today customer (+ £550 non-App) 104 Total Sparks members across UK and ROI
Slide 105: Focused on driving profitability
FOCUSED ON DRIVING PROFITABILITY CATEGORY AND OPTIMISE NETWORK DATA, DIGITAL & TECH PROMOTIONAL MIX FULFILMENT ROUTING INVESTMENT MODERNISATION Removing unprofitable Growing % of orders Lowering cost to serve Investing to remove lines and categories collected through complexity and Click & Collect I
Slide 106: To recap
TO RECAP Headroom in key categories Category and promotional mix Driving conversion Optimising fulfilment routing Leveraging our store estate Investment in our logistics network Combining the power of Sparks and the App Modernising the tech stack Driving growth ahead Further improvements of the mark
Slide 107: Sacha Berendji, Operations Director
SACHA BERENDJI Operations Director 107
Slide 108: Our strategic priorities
OUR STRATEGIC PRIORITIES EXCEPTIONAL PRODUCT, STRUCTURALLY LOWER TRUSTED RETAILER COST BASE CUSTOMER CENTRIC BUSINESSES HIGH PERFORMANCE CULTURE EXPANDED GLOBAL REACH DELIVER IMPROVE PROFITABLE SALES OPERATING DISCIPLINED DRIVE INVESTMENT SHAREHOLDER ACCELERATING STORE DISCIPLINED CAPITAL ROTATION A
Slide 109: Agenda
AGENDA Progress on our journey Case study on Liverpool ONE Outstanding challenges and approach 109 M&S Liverpool ONE
Slide 110: What we've done
WHAT WE’VE DONE Began to tackle legacy store estate in 2017 FY17 Openings Closures HY24 Net Change FULL LINE 305 19 -80 244 -61 Closing lower productivity No. of Stores full line stores SIMPLY FOOD 253 88 -22 319 +66 Expanding our Food estate C&H 10.9 0.7 -2.0 9.6 -1.3 Space (m sq. ft.) FOOD 5.7 0.7
Slide 111: Guided by clear principles
GUIDED BY CLEAR PRINCIPLES RIGHT MARKET RIGHT SITE RIGHT DEAL RIGHT RETURN Informed by Including accessibility, Appropriate flexibility Strong cash rotation strategy and pitch, car parking, size and shorter leases paybacks that drive complemented with and configuration shareholder returns market and
Slide 112: Liverpool Church Street background
LIVERPOOL CHURCH STREET BACKGROUND City centre store trading since 1928 Store in poor condition, expensive to maintain No direct parking access 112 M&S Liverpool Church Street
Slide 113: Liverpool ONE - right market
LIVERPOOL ONE - RIGHT MARKET Retaining presence in the city centre Major market No out-of-town regional shopping centre 113 M&S Liverpool ONE
Slide 114: Liverpool ONE - right site
LIVERPOOL ONE - RIGHT SITE Former Debenhams unit within major shopping centre Trading space reduced 35% 160 car parking spaces directly accessible 114 M&S Liverpool ONE
Slide 115: Liverpool ONE - right deal
LIVERPOOL ONE - RIGHT DEAL 10-year lease Attractive commercial terms Standard M&S rent review terms 115 M&S Liverpool ONE
Slide 116: Right returns – how we appraise
RIGHT RETURNS – HOW WE APPRAISE Sales and contribution run rate KEY APPRAISAL METRICS “Do nothing” capex requirement EXISTING STORE Payback Closure/exit/dark costs Disposal proceeds (where applicable) NPV IRR Sales and contribution uplift Net debt : EBITDA NEW STORE New store capex requirements Defl
Slide 117: Liverpool ONE contains key elements of our renewed stores
LIVERPOOL ONE CONTAINS KEY ELEMENTS OF OUR RENEWED STORES Digital Click & Collect hubs Fresh look and feel throughout Enhanced Bakery, Produce and Multiple payment options Flower areas >40% estimated reduced Fit for purpose backstage and energy emissions colleague areas 117 M&S Liverpool ONE
Slide 118: Encouraging early financial results so far
ENCOURAGING EARLY FINANCIAL RESULTS SO FAR LIVERPOOL LEGACY LIVERPOOL NEW Old store New store Actuals to date 79.0 -39% C&H Space (k sq.ft.) £316 +47% C&H RPF 22.8 -18% Food and Café Space (k sq. ft.) £912 +20% Food & Café RPF <3yrs Payback 118
Slide 119: Encouraging early customer results so far
ENCOURAGING EARLY CUSTOMER RESULTS SO FAR LIVERPOOL LEGACY LIVERPOOL NEW Old store New store Actuals to date 64k 79k Number of C&H customers Number of C&H customers £36.63 £38.55 C&H average basket value C&H average basket value 65k 68k Number of Food customers Number of Food customers £12.25 £13.30
Slide 120: New store sales versus business case
PURLEY WAY LEEDS WHITE ROSE STEVENAGE (YEAR 2) Sales +6% vs business case Sales +10% vs business case YOY growth of 13% (26 weeks) (21 weeks) (excluding opening period) COLCHESTER CHESTERFIELD LLANDUDNO (YEAR 2) Sales +19% vs business case Sales +29% vs business case YOY growth of 13% 120 (52 weeks)
Slide 121: New store sales versus business case
LONDON COLNEY OATLANDS HARROGATE CARDIFF Sales +8% vs business case Sales +1% vs business case Sales +8% vs business case (46 weeks) (46 weeks) (46 weeks) VICTORIA CARDINAL PLACE KINGSTON YORK Sales +36% vs business case Sales +13% vs business case Sales +14% vs business case 121 (29 weeks) (47 week
Slide 122: Ambition remains the same
AMBITION REMAINS THE SAME HY24 FY28 Net Change Aim to have all stores we are proud of FULL LINE 244 180 -64 No. of Stores SIMPLY FOOD 319 420 +101 180 full line store estate in five years (aiming to deliver in three) C&H 9.6 8.2 -1.4 Space (m sq. ft.) FOOD 6.1 6.8 +0.7 Continued growth of Simply Foo
Slide 123: But there's more to do
BUT THERE’S MORE TO DO Fewer ‘white space’ opportunities in top priority food markets Fewer new full line stores being built by developers Continued need to balance pace of exits and align with new stores where possible 123 M&S Liverpool ONE
Slide 124: Pragmatic approach at different routes
PRAGMATIC APPROACH AT HOW WE LOOK AT NEW SPACE OPPORTUNITIES DIFFERENT RIGHT FORMAT ASSET ROUTES EXITS FLEXIBILITY MANAGEMENT Taking advantage of Exiting legacy stores at Delivering range of Releasing cash from all opportunities to the optimal time format sizes, including owned sites deliver new sto
Slide 125: A few final thoughts from me
A FEW FINAL THOUGHTS FROM ME WHAT I’M HAPPY WITH ISSUES TO CONSIDER Stronger culture of delivery Landlord access to capital Clear principles Quality of new sites Focus on returns Surrenders and exits Store environment fresher Sub-letting Positive customer response Asset management and planning proce
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Slide 128: Mark Lemming, C&H Supply Chain and Logistics Director
MARK LEMMING Clothing & Home Supply Chain and Logistics Director 128
Slide 129: Our strategic priorities
OUR STRATEGIC PRIORITIES EXCEPTIONAL PRODUCT, STRUCTURALLY LOWER TRUSTED RETAILER COST BASE CUSTOMER CENTRIC BUSINESSES HIGH PERFORMANCE CULTURE EXPANDED GLOBAL REACH DELIVER IMPROVE PROFITABLE SALES OPERATING DISCIPLINED DRIVE INVESTMENT SHAREHOLDER DISCIPLINED CAPITAL ALLOCATION MODERNISED SUPPLY
Slide 130: Key messages
KEY MESSAGES Moving from a network that used to store stock to a network that flows stock Ambition is to reduce the cost-to-serve in the medium term We have a low risk plan 130
Slide 131: We've moved from a network that stored stock to flowing stock
WE’VE MOVED FROM A NETWORK THAT STORED STOCK TO FLOWING STOCK VANGARDE PERMISSION TO SHIP UNLOCKING CAPACITY Flowing stock into stores Controls to manage stock More efficient operations more efficiently from supply base 131
Slide 132: Supporting our omnichannel ambition
RESPONSE TO SUPPORTING OUR OMNICHANNEL AMBITION Stoke NDC Bradford NDC 3rd Party Brands Stoke and expansion automation (Thorncliffe) Ollerton now omnichannel DCs Invested in capability Ollerton Bradford In-store fulfilment Returns e-commerce capacity increased Hub capacity
Slide 133: We've been able to rationalise the network
AS A RESULT, WE’VE BEEN ABLE TO RATIONALISE THE NETWORK 2018 Bradford 2023 Bradford Castle Donington Castle Donington Hardwick Hardwick Hyde Park (NI) Hyde Park (NI) Leeds Leeds Long Eaton Long Eaton Lutterworth Lutterworth Neasden Neasden Ollerton Ollerton Peterborough (Transport) Peterborough (Tra
Slide 134: We've made good progress
WE’VE MADE GOOD PROGRESS OVER £45M SAVINGS DELIVERED NUMBER OF OMNI-CHANNEL END-TO-END COST FROM RATIONALISATION CAPABLE SITES TO SERVE IMPROVING No. of sites 4 21.2% 16 15.3% 14.8% 13.7% 13.9% 9 1 2019 2023 2019 2023 19/20 20/21 21/22 22/23 23/24 Est. 134
Slide 135: But there's more to do
BUT THERE’S MORE TO DO Capacity hotspots in areas More work on stock flow Cost to serve still high, especially online 135
Slide 136: Planned investment over the next four years
PLANNED INVESTMENT OVER THE NEXT FOUR YEARS CASTLE DONINGTON BRADFORD CLICK AND COLLECT BOXED UPGRADE HANGING EXPANDED BOXED AUTOMATION AUTOMATION CAPABILITY AUTOMATION 136
Slide 137: Modular investments improving efficiency and capacity
MODULAR INVESTMENTS IMPROVING EFFICIENCY AND CAPACITY UK LOGISTICS CAPITAL INVESTMENT ~£120M UK LOGISTICS STEADY STATE RETURNS ~£50M 51 15 15 10 28 30 TOTAL 8 TOTAL ~£120m ~£50m 11 FY24 FY25 FY26 FY27 FY24 FY25 FY26 FY27 Payback <5 years IRR of 50% 137
Slide 138: We have clear targets in the medium term
WE HAVE CLEAR TARGETS IN THE MEDIUM TERM Increase in Click and collect drop-off locations Opens up more delivery cut-off times Network automation increasing End-to-end cost to serve reduced 138
Slide 139: Recap of key messages
RECAP OF KEY MESSAGES Moving from a network that stored stock to a network that flows stock Ambition is to reduce the cost-to-serve in the medium term We have a low-risk plan 139
Slide 140: Thank you
THANK YOU 140
Slide 141: Jeremy Townsend, Chief Finance Officer
JEREMY TOWNSEND Chief Finance Officer 141
Slide 142: Capital allocation framework
CAPITAL ALLOCATION FRAMEWORK FOCUS ON BALANCE SHEET INVESTMENTS AND CASH HURDLE RATES INVESTMENT RETURNS TO GRADE SHAREHOLDERS 142
Slide 143: Focus on cash
FOCUS ON CASH Generating FREE Optimise WORKING More work to do to DRIVE CASH FLOW CAPITAL and STOCK CASH GENERATION 143
Slide 144: Priorities for capital investment
PRIORITIES FOR CAPITAL INVESTMENT c.£450m c.£450m Growth and Stores cost out 300 300 Supply Chain 100 Maintenance 200 Data, Digital 100 & Technology Asset Disposals -50 -50 144
Slide 145: Minimum hurdle rates
MINIMUM HURDLE RATES STORE ROTATION COST OUT GROWTH M&A 5 year payback 5 year payback 4 year payback 4 year payback 15% IRR 15% IRR 20% IRR 20% IRR 145
Slide 146: Benefits of investment grade
BENEFITS OF INVESTMENT GRADE FINANCE COSTS FLEXIBILITY CULTURE Reduction of >£5m Access to credit markets Disciplined spending 146 M&S Leeds White Rose M&S Purley Way M&S Waterside
Slide 147: Value creation for shareholders
VALUE CREATION FOR SHAREHOLDERS Generation of free cash Invest for flow growth and structural cost HY 23/24 reduction VALUE CREATION FOR Proposed dividend SHAREHOLDERS Interim 1p Reducing net debt Returns on investment 147
Slide 148: Structural cost reduction
STRUCTURAL COST REDUCTION STORE SUPPORT ENERGY SUPPLY CHAIN CENTRE RETAIL DATA, DIGITAL PROPERTY AND OPERATIONS AND TECHNOLOGY STORE ESTATE 148
Slide 149: Cost savings over £100m delivered in H1
COST SAVINGS OVER £100M DELIVERED IN H1 STORE OPERATIONS SUPPLY CHAIN Reduction of £30m Reduction of £60m 149
Slide 150: More work required to make it stick
MORE WORK REQUIRED TO MAKE IT “STICK” SIMPLIFICATION STORE SUPPORT DATA, DIGITAL Need for a leaner and more OPERATIONS AND TECHNOLOGY flexible organisation Ways of working Efficiency of spend 150
Slide 151: Further opportunity in gross margin
FURTHER OPPORTUNITY IN GROSS MARGIN LOWERING COST WASTE AND STRATEGIC IN FOOD STOCK LOSS SOURCING IN C&H 151
Slide 152: A plan for growth and value creation
A PLAN FOR GROWTH AND VALUE CREATION EXCEPTIONAL PRODUCT, STRUCTURALLY LOWER TRUSTED RETAILER COST BASE CUSTOMER CENTRIC BUSINESSES HIGH PERFORMANCE CULTURE EXPANDED GLOBAL REACH DELIVER IMPROVE PROFITABLE SALES OPERATING DISCIPLINED DRIVE INVESTMENT SHAREHOLDER ACCELERATING STORE DISCIPLINED CAPITA
Slide 153: Questions
QUESTIONS 153
Slide 154: Stuart Machin, Chief Executive Officer
STUART MACHIN Chief Executive Officer 154
Slide 155: Lots done. Lots to do. Lots of opportunity.
LOTS DONE. LOTS TO DO. LOTS OF OPPORTUNITY. 155
Marks and Spencer Group — Investor Day (November 2023) on 6ix