Marks And Spencer Group Plc · LSE:MKS
Marks And Spencer — Q2 2022 Earnings Presentation
38 slides from Marks And Spencer's earnings presentation, Nov 10, 2021
Slide 1: Steve Rowe, Chief Executive
STEVE ROWE CHIEF EXECUTIVE M&S Maidstone Eclipse Park
Slide 2: Our Transformation Journey
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE OUR TRANSFORMATION JOURNEY STEP THREE MAKING STEP TWO M&S SPECIAL STEP ONE SHAPING THE FUTURE FIXING THE BASICS
Slide 3: Transformation and Covid Bounce Back Drives Results
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE TRANSFORMATION AND COVID BOUNCE BACK DRIVES RESULTS Adjusted PBT of £269.4m (2019/20 £176.3m) Group net debt down 22.6% Food sales up 10.4% (core Food up 16.9%) C&H sales down 1% (Full price sales up 17.3%) STRONG FINANCIAL RESULTS Ocado
Slide 4: Eoin Tonge, Chief Finance Officer
EOIN TONGE CHIEF FINANCE OFFICER M&S Leamington Spa
Slide 5: Half Year Financials at a Glance (vs. 2019/20)
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE HALF YEAR FINANCIALS AT A GLANCE (VS. 2019/20) £5.1bn £269.4m £187.3m +5.2% +52.8% +17.9% Profit before tax Group sales & adjusting items Profit before tax £287.6m £3.15bn £0.8bn +£292.3m reduced 22.6% reduced 46.8% Net debt Free cashflo
Slide 6: Food Performance
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE FOOD PERFORMANCE SALES % change to 19/20 Q1 Q2 H1 Sales 9.4 11.5 10.4 Sales exc. franchise and hospitality 17.0 16.8 16.9 OPERATING PROFIT £m 21/22 20/21 19/20 Change vs. 19/20 Sales 3,143.0 2,838.6 2,845.8 10.4% Operating profit before
Slide 7: Food Operating Profit Bridge
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE FOOD OPERATING PROFIT BRIDGE Operating profit margin before % adjusting items 19/20 3.2 Gross margin (0.4) Store staffing 1.5 Other store costs 1.0 Distribution and warehousing (0.8) Central costs 0.1 21/22 4.6 7
Slide 8: Ocado Contribution to M&S (vs. 2020/21)
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE OCADO CONTRIBUTION TO M&S (VS. 2020/21) Numbers need updating SHARE OF PROFIT 26 w/e 26 w/e £m Change % Picture needs updating – 29 Aug 21 30 Aug 20 Ocado website and Revenue warehouse 1,136.3 1,167.7 -2.7 EBITDA before exceptional items
Slide 9: Clothing & Home Performance
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE CLOTHING & HOME PERFORMANCE ONLINE METRICS % Change SALES 26 Weeks Ended 2 Oct 21 26 Sep 20 28 Sep 19 vs. 2019/20 Traffic (m) 182.9 173.7 142.4 28.4 % change to 19/20 Q1 Q2 H1 Active customers (m) 9.6 6.9 6.0 60.0 Conversion (%) 7.3 7.0
Slide 10: Clothing & Home Operating Profit
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE CLOTHING & HOME OPERATING PROFIT OPERATING PROFIT Change £m 21/22 20/21 19/20 vs. 19/20 Sales 1,534.6 917.2 1,550.4 -1.0% Operating profit/(loss) 156.2 (107.5) 109.6 42.5% before adjusting items Operating margin 10.2% -11.7% 7.1% +310bps
Slide 11: Clothing & Home Operating Profit Bridge
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE CLOTHING & HOME OPERATING PROFIT BRIDGE Operating profit margin before adjusting items % 19/20 7.1 Gross margin 0.9 Store staffing 2.7 Other store costs 2.2 Distribution and warehousing (2.4) Central costs (0.3) 21/22 10.2 11 M&S COLLECT
Slide 12: International
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE INTERNATIONAL REPORTED SALES 2 Oct 21 26 Sep 20 28 Sep 19 Change vs. Change vs. 26 Weeks Ended £m £m £m 19/20 (%) 19/20 (%)1 Clothing & Home 296.9 202.1 308.0 -3.6 0.8 Food 138.4 144.2 156.7 -11.7 -10.7 Total 435.3 346.3 464.7 -6.3 -3.2
Slide 13: International Operating Profit
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE INTERNATIONAL OPERATING PROFIT Operating profit margin before adjusting items % 19/20 12.0 Gross margin (0.8) Store staffing (0.3) Other store costs 1.3 Distribution and warehousing (2.2) Central costs (1.8) 21/22 8.2 13
Slide 14: Profit Bridge
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE PROFIT BRIDGE £m 0 269 28 (20) (14) 176 187 (82) Adjusted Food Ocado Clothing International M&S Net Adjusted Adjusting Profit PBT & Home Bank finance PBT items Before Tax 19/20 cost 21/22 21/22 OPERATING PROFIT 14 M&S Southampton M&S COL
Slide 15: Adjusting Items
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE ADJUSTING ITEMS 26 Weeks Ended 2 Oct 21 26 Sep 20 £m £m Strategic programmes UK store estate (58.1) (2.9) Organisation 1.9 (92.1) Ocado amortisation and deferred tax (25.4) (7.1) Hackney closed May 2021 Directly attributable to Covid 15.
Slide 16: Cash Flow and Change in Net Debt Since Start of Year
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE CASH FLOW AND CHANGE IN NET DEBT SINCE START OF YEAR £m 617 112 LEASE DEBT Decrease in lease obligations £108m (36) New lease commitments £(38)m Other £6m (173) 76 362 (126) WORKING CAPITAL Increase in payables £253m (53) 286 (26) Increa
Slide 17: Outlook for 2021/22
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE OUTLOOK FOR 2021/22 CAPITAL ALLOCATION MODEL Recent trading consistent with second quarter Invest in transformation to return to sustainable profit growth Supply chain cost pressures in the second half and beyond Recover balance sheet me
Slide 18: Steve Rowe, Chief Executive
STEVE ROWE CHIEF EXECUTIVE M&S Leamington Spa
Slide 19: A Reshaped M&S Emerging from the Pandemic Period
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE A RESHAPED M&S EMERGING FROM THE PANDEMIC PERIOD A repositioned OCADO RETAIL set Omni-channel Good progress on INTERNATIONAL FOOD business for rapid capacity CLOTHING & HOME rotation of the focused on strong delivering growth expansion b
Slide 20: Broadening the Appeal of the M&S Food Range
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE BROADENING THE APPEAL OF THE M&S FOOD RANGE IMPROVED CHOICE IN CORE DRIVING MARKET SHARE New product development focused on family Vegetables 5.6% to 6.3% favourites Meat 6.6% to 7.3% Improved choice across everyday categories Groceries
Slide 21: Delivering Trusted Value Everyday
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE DELIVERING TRUSTED VALUE EVERYDAY M&S PROMO PARTICIPATION Average monthly % sales 30% Investing in every day prices and reducing promotions 20% 10% 0% Remarksable, Fresh Market Specials and better Jan-18 Jan-19 Jan-20 Jan-21 Sep-21 value
Slide 22: Bigger, Fresher Food Halls
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE BIGGER, FRESHER FOOD HALLS NEW RENEWAL STORES IN STRONG GROWTH VS. 2019/20 % change vs 2019/20 Renewal format designed for new and prime 60% 61% sites which can carry a fuller range 45% 44% 34% 32% 19% 17% 18% 14% 3% 6% Stores aim to com
Slide 23: Multi-Year Efficiency Programme Underway
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE MULTI-YEAR EFFICIENCY PROGRAMME UNDERWAY Vangarde process now launched across 75% of stores – less backstage stock and ‘ready to trade’ Rollout of comprehensive new forecasting, order and space planning system – enables better cataloguin
Slide 24: Ocado Retail Set for Rapid Growth
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE OCADO RETAIL SET FOR RAPID GROWTH ONLINE SHARE AS % OF TOTAL MARKET STABILISING AT C.12% Rolling 4 week data Substantial opportunity from greater online 16% grocery penetration 12% 8% New CFC Purfleet New CFCs open at Purfleet, Andover a
Slide 25: Re-engineering the C&H Product Engine
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE RE-ENGINEERING THE C&H PRODUCT ENGINE INCREASING RATE OF SALE PER OPTION % vs. 2019/20 Training academy for 1300 colleagues 56% alongside new tools to support accurate 37% 36% 25% planning and ranking -29% -28% -22% -33% Denim Women’s Me
Slide 26: Through Better Buying and Improved Value
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE THROUGH BETTER BUYING AND IMPROVED VALUE STOCK INTO SALE DOWN OVER 50% IN H1 £m at full price selling value Operating with less stock – down 219 3 weeks compared with 2019/20 92 102 87 54 55 Objective to place orders closer to date of Ju
Slide 27: MS2 Beginning to Prove Power of Omnichannel
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE MS2 BEGINNING TO PROVE POWER OF OMNICHANNEL ACTIVE CUSTOMERS CONTINUING TO GROW OVER THE PERIOD Active customers (m) Grown to over 9.6m active customers and 3m 9.0 9.6 App users with online penetration over 34% 6.9 Sparks loyalty program
Slide 28: Investment in Fulfilment Providing Resilience
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE INVESTMENT IN FULFILMENT PROVIDING RESILIENCE INCREASE IN PEAK DAY SINGLES CAPACITY FOR ONLINE Peak day singles capacity (k) Castle Donington capacity increased In-store Bradford 571k alongside investment at Bradford fulfilment New Autom
Slide 29: Brand Platform Producing Encouraging Results
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE BRAND PLATFORM PRODUCING ENCOURAGING RESULTS AVERAGE ORDER VALUE OF BASKETS CONTAINING BRANDS DOUBLE AVERAGE Average order value, £ inc VAT Now trading with over 30 partner brands 112 broadening choice and relevance for core customers 67
Slide 30: Substantial Opportunities for Store Rotation
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE SUBSTANTIAL OPPORTUNITIES FOR STORE ROTATION PLANNING FOR C&H SPACE DOWN 4%, FOOD UP 10% OVER NEXT 3 FINANCIAL YEARS Selling space excluding outlets and franchise (sq ft, m) Stepping up rotation - pipeline now includes c.20 new full line
Slide 31: International: Strong Partners and Global Online
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE INTERNATIONAL: STRONG PARTNERS AND GLOBAL ONLINE ONLINE GROWTH DRIVEN BY MARKETPLACES AND IRELAND Sales ex VAT (£m) 67.6 Ambition to drive growth through strong ZALANDO partnerships and global online growth IRELAND 28.3 12.9 4.3 4.0 Very
Slide 32: Recap: Transformation Starting to Drive Results
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE RECAP: TRANSFORMATION STARTING TO DRIVE RESULTS Strong sales growth in Food; growing market share in core categories and larger baskets Over 50% planned growth in Ocado Retail capacity since M&S investment. Strong results and synergies f
Slide 33: Appendices
APPENDICES 33
Slide 34: Quarterly Sales Performance (vs. 2019/20)
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE QUARTERLY SALES PERFORMANCE (VS. 2019/20) % change to 19/20 Q1 Q2 H1 Food 9.4 11.5 10.4 Clothing & Home -4.2 2.0 -1.0 Total UK Sales 4.7 8.0 6.4 International -6.1 -0.3 -3.2 Group Adjusted Sales* 3.7 7.3 5.5 Memo M&S.com 52.6 57.3 55.0 C
Slide 35: Quarterly Sales Performance (vs. 2020/21)
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE QUARTERLY SALES PERFORMANCE (VS. 2020/21) % change to 20/21 Q1 Q2 H1 Food 11.8 9.7 10.7 Food LFL 8.9 7.9 8.4 Clothing & Home 148.8 29.6 67.3 Clothing & Home LFL 138.5 29.6 64.1 Total UK Sales 35.3 15.7 24.5 Total UK LFL 31.2 14.5 22.0 In
Slide 36: Depreciation and Amortisation
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE DEPRECIATION AND AMORTISATION HY 21/22 £m Food C&H Intl Other Group Group Adjusted operating profit 144 156 36 27 363 Depreciation Tangible asset 44 69 5 - 118 Right of use asset 42 29 12 - 83 Amortisation 20 26 5 - 51 Write off & dispos
Slide 37: Finance Lease Breakdown
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE FINANCE LEASE BREAKDOWN International 199.1 Office, Warehouse & Other 466.9 944.8 Full Line £2,330m HY 21/22 719.4 Simply Food 37
Slide 38: Stores and Selling Space
TRANSFORMATION AND COVID BOUNCE BACK DRIVES STRONG PERFORMANCE STORES AND SELLING SPACE NUMBER OF STORES UK Selling space (m sq ft) Sep 21 Mar 21 Openings Closures Change Shopping Centre 1.5 16 16 0 0 0 Retail Park 4.3 75 73 2 0 2 High Street – large 5.3 79 81 0 (2) (2) High Street 2.3 83 84 0 (1) (
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