Marks And Spencer Group Plc · LSE:MKS
Marks And Spencer — Investor Day (October 2019)
157 slides from Marks And Spencer's investor day presentation, Oct 1, 2019
Slide 1: Far Reaching Change at M&S
FAR REACHING CHANGE AT M&S TRANSFORMATION UPDATE 1 October 2019 1
Slide 2: Chairman's Welcome
CHAIRMAN’S WELCOME ARCHIE NORMAN CHAIRMAN 2
Slide 3: M&S Transformation Update
M&S TRANSFORMATION UPDATE STEVE ROWE CHIEF EXECUTIVE 3
Slide 4: Far Reaching Change at M&S: Objectives
FAR REACHING CHANGE AT M&S OBJECTIVES Update on transformation Welcome to Waterside Support Centre Change programmes Meet the team 4
Slide 5: Update on our transformation
M&S TRANSFORMATION UPDATE UPDATE ON OUR TRANSFORMATION STEP THREE MAKING STEP TWO M&S SPECIAL STEP ONE SHAPING THE FUTURE RESTORING THE BASICS 2018 2019 2020 2021 2022 5
Slide 6: Brexit
M&S TRANSFORMATION UPDATE BREXIT ▪ Prepared for a deal or no-deal Brexit on 31 October Management of our operations TARIFFS COMPLIANCE CONTINUITY Imports under Packaging, documentation Border delays temporary regime and certification Stock build Export to EU as third country Approved economic operat
Slide 7: M&S is changing faster than it has ever done
M&S TRANSFORMATION UPDATE M&S IS CHANGING FASTER THAN IT HAS EVER DONE Leadership and Culture 1 Accountable 2 3 Transformation Businesses Digital First Restoring Style, Fit and Value 4 Magic Again 5 Rebuilding Profitable Growth 6 in Clothing in Food in International Store Estate Fit 7 Modernised 8 C
Slide 8: This is where we are
M&S TRANSFORMATION UPDATE THIS IS WHERE WE ARE Leadership and Culture Accountable Transformation Businesses Digital First Restoring Style, Rebuilding Fit and Value Magic Again Profitable Growth in Clothing in Food in International Store Estate Fit Modernised Cost Savings of for the Future Supply Cha
Slide 9: M&S is changing faster than it has ever done
M&S TRANSFORMATION UPDATE M&S IS CHANGING FASTER THAN IT HAS EVER DONE Leadership and Culture 1 Accountable 2 3 Transformation Businesses Digital First Restoring Style, Fit and Value 4 Magic Again 5 Rebuilding Profitable Growth 6 in Clothing in Food in International Store Estate Fit 7 Modernised 8 C
Slide 10: This morning's agenda
M&S TRANSFORMATION UPDATE THIS MORNING’S AGENDA 09:00 Organisation and culture change Victoria McKenzie-Gould C&H – Restoring the basics Steve Rowe C&H – Restoring style, fit and value in Menswear Wes Taylor C&H – Buying with confidence in Womenswear Jill Stanton Digital and data opportunity Jeremy
Slide 11: Organisation and Culture Change
ORGANISATION AND CULTURE CHANGE VICTORIA MCKENZIE-GOULD DIRECTOR OF COMMUNICATIONS 11
Slide 12: A business is only as good as its people
A business is only as good as its people - Marcus Sieff 12
Slide 13: When we were at our best – the opportunity
ORGANISATION AND CULTURE CHANGE WHEN WE WERE AT OUR BEST – THE OPPORTUNITY “Good goods will sell arse upwards” Leaders close to Every colleague Culture of plain Focus on data Trust and the front line valued speaking and trading integrity A unique customer promise that every colleague shared: To sell
Slide 14: How our culture was lost
ORGANISATION AND CULTURE CHANGE HOW OUR CULTURE WAS LOST FROM TO Professional Management Plain Speaking Speak Leadership close to the Leadership detached and front line and customer defensive Fast-pace, responsive, Bureaucratic organisation commercial business Collaboration to drive Collaboration a
Slide 15: What we're doing to get it back
ORGANISATION AND CULTURE CHANGE WHAT WE’RE DOING TO GET IT BACK Transforming our organisational design Empowered, responsive and commercial leaders Involving, engaging culture Store voice back at the centre Data-driven decision making Plain-speaking 15
Slide 16: Creating a family of accountable businesses
ORGANISATION AND CULTURE CHANGE CREATING A FAMILY OF ACCOUNTABLE BUSINESSES P&L accountability Halved central Headcount in Corporate functions and business boards offices London reduced slimmed down 16
Slide 17: An empowered, responsive and commercial leadership team
ORGANISATION AND CULTURE CHANGE AN EMPOWERED, RESPONSIVE & COMMERCIAL LEADERSHIP TEAM LEADERSHIP TEAM TOTAL MANAGEMENT 51 Colleagues 4,500 Colleagues New New 27% 40% 47% 60% 26% Existing Existing Promotion Since 2016 Since 2016 17
Slide 18: An involving, engaging culture where everyone can get on
ORGANISATION AND CULTURE CHANGE AN INVOLVING, ENGAGING CULTURE WHERE EVERYONE CAN GET ON 11,000 hours a week 18
Slide 19: Store voice back at the centre of the business
ORGANISATION AND CULTURE CHANGE STORE VOICE BACK AT THE CENTRE OF THE BUSINESS Weekly buyers and sellers calls Business wide programmes started in store ‘Operator knows best’ 19
Slide 20: Clear, relatable behaviours
ORGANISATION AND CULTURE CHANGE CLEAR, RELATABLE BEHAVIOURS 20
Slide 21: What's next
ORGANISATION AND CULTURE CHANGE WHAT’S NEXT Transforming our More efficiencies in the centre organisational design Clarity on what we expect from leaders; Empowered, responsive and transparent colleague feedback; robust commercial leaders performance management Improving end-to-end colleague experie
Slide 22: Clothing & Home: Restoring the Basics
CLOTHING & HOME RESTORING THE BASICS STEVE ROWE CHIEF EXECUTIVE 22
Slide 23: Our market position
RESTORING STYLE AND FIT OUR MARKET POSITION #1 in the £35bn UK clothing market Over 23m customers YTD – up 425k on last year Major key categories – 37% market share in bras 20% of women in UK bought knitwear from M&S last year 25% of kids wear an M&S uniform 23
Slide 24: We know what matters to our customer
RESTORING STYLE AND FIT WE KNOW WHAT MATTERS TO OUR CUSTOMER Contemporary wearable style Best for wardrobe essentials Trusted value for great quality Easy shopping experience in our stores and online 24
Slide 25: We are clear on where we are and what to do
RESTORING THE BASICS WE ARE CLEAR ON WHERE WE ARE AND WHAT TO DO Poor planning processes upfront More to do on website Product insufficiently SEO; not seamless focused on family across channels customers Buying too many Store hard to shop options in too little depth Too many slow moving UPCs Not tra
Slide 26: Our biggest pain points in planning and stock visibility
RESTORING THE BASICS OUR BIGGEST PAIN POINTS IN PLANNING AND STOCK VISIBILITY 3 track approach to trading and planning Poor planning processes upfront New critical path – AW launch over 90% availability Inconsistent critical path management Reset PO process Lack of visibility over stock, location an
Slide 27: Initial progress on product and buying
RESTORING THE BASICS INITIAL PROGRESS ON PRODUCT AND BUYING Improved fit and size ratios Progress removing outdated styles Product insufficiently focused on family customers 10% reduction in options; starting to back our winners Buying too many options in too little depth 27
Slide 28: Starting to make progress on logistics
RESTORING THE BASICS STARTING TO MAKE PROGRESS ON LOGISTICS Closed 4 DCs and Welham Green open Warehouse Management System replacement Complex and high cost logistics network Roll out best of Vangarde Fuse in C&H Slow replenishment flow to stores 28
Slide 29: Making it easier for stores to manage stock
RESTORING THE BASICS MAKING IT EASIER FOR STORES TO MANAGE STOCK Rolled out tools to help stores trade more effectively Implemented dynamic RFID count rotas and improved delivery accuracy Complex and time-consuming processes for stores 29
Slide 30: Improving customer experience across channels
RESTORING THE BASICS IMPROVING CUSTOMER EXPERIENCE ACROSS CHANNELS Homepage speed in top quartile Delivery options improved More to do on website SEO; not seamless across channels Store change, work in progress Store hard to shop 30
Slide 31: Tactical actions to drive trade
RESTORING THE BASICS TACTICAL ACTIONS TO DRIVE TRADE Trade into success Adjust prices in season, shorten clearance periods Quicker replenishment for stores to drive availability Easy deliveries for stores Technical fixes to SEO Introduce instalment credit online 31
Slide 32: Where we will get to – a virtuous cycle
RESTORING THE BASICS WHERE WE WILL GET TO – A VIRTUOUS CYCLE ▪ Seamless customer experience across all channels ▪ Category led strategy PLAN SELL ▪ Clearly defined critical path ▪ Leverage multichannel estate ▪ Full end-to-end view ▪ Trade hard SELL PLAN ▪ Simple and efficient for ▪ A range focused
Slide 33: Clothing & Home: Restoring Style, Fit & Value in Menswear
CLOTHING & HOME RESTORING STYLE, FIT & VALUE IN MENSWEAR WES TAYLOR DIRECTOR OF MENSWEAR 33
Slide 34: Overcoming customer perception barriers in menswear
RESTORING STYLE, FIT & VALUE IN MENSWEAR OVERCOMING CUSTOMER PERCEPTION BARRIERS IN MENSWEAR Facing into declining 1 Currently perceived2 Need to be more 3 relevant for the market share as too old mainstream Reducing our dependence 4 Need to increase 5 Fit has been 6 on formal inspiration and style
Slide 35: Facing into declining market share
RESTORING STYLE, FIT & VALUE IN MENSWEAR FACING INTO DECLINING MARKET SHARE DRIVERS OF STORE M&S CHOICE FOR MENSWEAR POSITION Menswear market relatively flat at c.£10bn with growth of 0.7% CAGR over 5 years Make it easy 39% 5 Still market leaders but decline of Style (“Inspire me”) 21% 12 1.5% of ma
Slide 36: Currently perceived as too old
RESTORING STYLE, FIT & VALUE IN MENSWEAR CURRENTLY PERCEIVED AS TOO OLD cumbersome Formal NOT FOR EVERYONE presence unclear of path OLD FASHIONED BORING RELIABLE inconsistent shapeless Occasional surprise Dependable HESITANT slow STEADY big 36
Slide 37: Need to be more relevant for the mainstream
RESTORING STYLE, FIT & VALUE IN MENSWEAR NEED TO BE MORE RELEVANT FOR THE MAINSTREAM VOLUME COMTEMPORARY EARLY TREND AND UP TO PRACTICAL AND ADOPTERS AWARE DATE COMFORTABLE TIME 2.5% 13.5% 34% 34% 16% MAINSTREAM 37
Slide 38: Reducing our dependence on formal
RESTORING STYLE, FIT & VALUE IN MENSWEAR REDUCING OUR DEPENDENCE ON FORMAL MARKET GROWTH MARKET SHARE -7% 14% SUITS +1% 12% Shift to casual, ‘smart’ KNITWEAR and activewear Demand for value +6% 5% CASUAL TOPS Shift to online +6% 2% ACTIVEWEAR Source: Kantar 52 w/e 25 August 19 38
Slide 39: Reducing our dependence on formal
RESTORING STYLE, FIT & VALUE IN MENSWEAR REDUCING OUR DEPENDENCE ON FORMAL A/W OPTIONS Reduce options in formal departments BY CATEGORY -10% Total options Footwear & -13% accessories Modernise formal options -12% Nightwear & underwear to address gap in ‘Smart’ 4% Knitwear 12% Leisurewear Review mix
Slide 40: Need to increase inspiration and style
RESTORING STYLE, FIT & VALUE IN MENSWEAR NEED TO INCREASE INSPIRATION AND STYLE 40
Slide 41: Fit has been poorly perceived
RESTORING STYLE, FIT & VALUE IN MENSWEAR FIT HAS BEEN POORLY PERCEIVED CASUAL Mens Casual ranges by Fit type CASUAL Mens Casual ranges by Fit type TOPS % of Buy (value) TROUSERS % of Buy (value) 91% 80% 72% AW18 AW18 57% AW19 AW19 37% 23% 18% 9% 5% 0% 6% 2% Regular / New Reg Slim Relaxed Regular Sli
Slide 42: Buying in the right size ratios
RESTORING STYLE, FIT & VALUE IN MENSWEAR BUYING IN THE RIGHT SIZE RATIOS MENSWEAR TOPS BUY BY SIZE % 40% Market ratio 2019 ratio 2018 ratio 30% 20% 10% 0% XS S M L XL XXL XXXL 42
Slide 43: Improving customer experience
RESTORING STYLE, FIT & VALUE IN MENSWEAR IMPROVING CUSTOMER EXPERIENCE 43
Slide 44: Delivering clarity on Good, Better, Best
RESTORING STYLE, FIT & VALUE IN MENSWEAR DELIVERING CLARITY ON GOOD, BETTER, BEST Excellent opening price Simplifying the range Communicating points points in categories to create a clearer of difference in good, where it matters price hierarchy better, best 44
Slide 45: Recap – Restoring style, fit and value in menswear
RESTORING STYLE, FIT & VALUE IN MENSWEAR RECAP – RESTORING STYLE, FIT AND VALUE IN MENSWEAR Design more relevant, stylish clothing Increase mix of casual and smart Bring sizes in line with customers’ expectations OLI IN RUST GILET Deliver trusted value 45
Slide 46: How we aim to be perceived
RESTORING STYLE, FIT & VALUE IN MENSWEAR HOW WE AIM TO BE PERCEIVED 46
Slide 47: Clothing & Home: Buying with Confidence in Womenswear
CLOTHING & HOME BUYING WITH CONFIDENCE IN WOMENSWEAR JILL STANTON DIRECTOR OF WOMENSWEAR 47
Slide 48: Issues we have been facing into
BUYING WITH CONFIDENCE IN WOMENSWEAR ISSUES WE HAVE BEEN FACING INTO Frequently changing Sell out of key sizes strategy Too many changes resulting Range too wide in late deliveries Last minute changes to Designing for different layout/campaigns impacting customers buys and sales 48
Slide 49: We have redesigned our range, focusing on the sweetspot
BUYING WITH CONFIDENCE IN WOMENSWEAR WE HAVE REDESIGNED OUR RANGE, FOCUSING ON THE ‘SWEETSPOT’ AND SIMPLIFIED OUR SUB BRANDS 49
Slide 50: Refocusing our range and reducing options
BUYING WITH CONFIDENCE IN WOMENSWEAR WE ARE REFOCUSING OUR RANGE AND REDUCING OPTIONS WHERE… REDUCTION IN UPCS VERSUS LAST YEAR (W19) -12% Womens Clothing Low and / or declining rates of sale Womens Footwear -3% & Accessories -9% Kidswear Unnecessary complexity for customers -17% Lingerie REDUCTION
Slide 51: Making the big, bigger
BUYING WITH CONFIDENCE IN WOMENSWEAR MAKING THE BIG, BIGGER TOP 20 LINES Improved productivity putting (Value A19) volume behind top lines – top 100 +10% Womens Clothing +24% Womens Footwear Key lines deliver great value year-round & Accessories +21% Kidswear +11% No. of £1m lines +85% Lingerie +1%
Slide 52: Winning in our hero departments
BUYING WITH CONFIDENCE IN WOMENSWEAR WINNING IN OUR HERO DEPARTMENTS Number 1 market position Number 2 to joint number 1 market position Grown market share +0.3% Market share at 8.4% Grown volume and value Source: Kantar 52 w/e 25 August 19 52
Slide 53: Improving our fit and buying ratios
BUYING WITH CONFIDENCE IN WOMENSWEAR IMPROVING OUR FIT AND BUYING RATIOS Better availability in key sizes WOMENSWEAR SIZE RATIOS Volume per Size Market ratio 25% 10-14 = 58% AW19 ratio Consistent sizing 10-14 = 54% terminology 20% 15% 10% More testing 5% May 18 ratio 10-14 = 50% 0% New products base
Slide 54: Beginning to improve customer perceptions
BUYING WITH CONFIDENCE IN WOMENSWEAR BEGINNING TO IMPROVE CUSTOMER PERCEPTIONS EASE OF SHOP STYLE QUALITY Store On-line Total Total +4% +7% +6% +3% Source: Tell M&S customer ratings in September 2019 54
Slide 55: Recap - Buying with confidence in womenswear
BUYING WITH CONFIDENCE IN WOMENSWEAR RECAP - BUYING WITH CONFIDENCE IN WOMENSWEAR Attract more ‘sweetspot’ customers Make the big, bigger Win in hero departments Make it easier to shop 55
Slide 56: Digital and Data Opportunity
DIGITAL AND DATA OPPORTUNITY JEREMY PEE CHIEF DIGITAL & DATA OFFICER 56
Slide 57: M&S has a huge opportunity in digital and data
DIGITAL AND DATA OPPORTUNITY M&S HAS A HUGE OPPORTUNITY IN DIGITAL AND DATA Customer digital interactions Digital properties and Stores and Digital communication contact centre advertising 1bn+ 1bn+ 3bn+ 57
Slide 58: We have four important customer data sources
DIGITAL AND DATA OPPORTUNITY WE HAVE FOUR IMPORTANT CUSTOMER DATA SOURCES Sparks M&S.com Bank Ocado 7m 11m 3m 1m To nearest 1m 58
Slide 59: Our future competitive advantage is 1:1 personalisation
DIGITAL AND DATA OPPORTUNITY OUR FUTURE COMPETITIVE ADVANTAGE IS 1:1 PERSONALISATION Rich data sets Shift to predictive analytics Apply intelligence Automate execution 59
Slide 60: We see three major problems to focus on
DIGITAL AND DATA OPPORTUNITY WE SEE THREE MAJOR PROBLEMS TO FOCUS ON Sparks is not Data delivers Organisation is not effective insufficient value digitally joined up 60
Slide 61: Sparks has huge potential as a channel
DIGITAL AND DATA OPPORTUNITY SPARKS HAS HUGE POTENTIAL AS A CHANNEL… SPARKS RELATIVE PERFORMANCE Spend 4x more annually 4x Click through rate 50% higher 1.5x Foundational Spend Engagement customer data Sparks Non-Sparks 61
Slide 62: But has many issues that need fixing
DIGITAL AND DATA OPPORTUNITY BUT HAS MANY ISSUES THAT NEED FIXING Confusing and hard to use No clear value exchange Outstanding points accumulation 62
Slide 63: Our data delivers insufficient value
DIGITAL AND DATA OPPORTUNITY OUR DATA DELIVERS INSUFFICIENT VALUE Difficult to find Quality is inconsistent Lack of agility 63
Slide 64: Our organisation is not digitally joined up
DIGITAL AND DATA OPPORTUNITY OUR ORGANISATION IS NOT DIGITALLY JOINED UP Overlapping High dependence on Focus on channels audiences and targeting manual processes over journeys 64
Slide 65: We have started to build for our digital future
DIGITAL AND DATA OPPORTUNITY WE HAVE STARTED TO BUILD FOR OUR DIGITAL FUTURE 1 Rebuild our data estate 2 Relaunch Sparks 3 Implement personalisation across digital touchpoints 4 Build teams and capabilities 65
Slide 66: Rebuild our data estate
WHAT 1. Rebuild our data estate HOW Make data available in the cloud Improve data quality Develop future state data products Connect data and Engaging our people make it available 66
Slide 67: Relaunch Sparks
WHAT 2. Relaunch sparks HOW Simplify and reduce frustrations Offer fair value exchange Improve personalisation Create foundation for Address points balance personalisation and engagement 67
Slide 68: Implement personalisation across digital touchpoints
WHAT 3. Implement personalisation across digital touchpoints HOW Establish Data Science capabilities Build models and segments across ecosystem Create personalised and Embed across digital touchpoints seamless experiences 68
Slide 69: Build teams and capabilities
DIGITAL AND DATA OPPORTUNITY BUILD TEAMS AND CAPABILITIES Customer Growth Loyalty & Sparks Digital Product Management & Experience Business Development Data Data Science & Innovation 69
Slide 70: Closing thoughts
DIGITAL AND DATA OPPORTUNITY CLOSING THOUGHTS Pleased with progress At the beginning of a journey Look forward to sharing further updates 70
Slide 71: Protecting the Magic and Modernising the Rest
PROTECTING THE MAGIC AND MODERNISING THE REST STUART MACHIN MANAGING DIRECTOR OF FOOD 71
Slide 72: M&S Food was in a circle of decline for many years
PROTECTING THE MAGIC AND MODERNISING THE REST M&S FOOD WAS IN A CIRCLE OF DECLINE FOR MANY YEARS WHICH RESULTED IN DECLINING LFL SALES AND PROFITS CUSTOMER EXPERIENCE ▪ Confusing customer experience in stores ▪ Room to improve store standards PEOPLE Customer ▪ Large variation of formats Experience ▪
Slide 73: M&S Food needed reinvention and modernisation
PROTECTING THE MAGIC AND MODERNISING THE REST M&S FOOD IS A BRITISH INSTITUTION WHICH WAS NEED OF REINVENTION, RE-EXPRESSION AND MODERNISATION PROTECT THE MAGIC MODERNISE THE REST Brand Product innovation Disappointing our Customers Ineffective Promotions Heritage Colleagues Marketing not product le
Slide 74: Early stages of transformation
PROTECTING THE MAGIC AND MODERNISING THE REST EARLY STAGES OF TRANSFORMATION – STABILISING THE BUSINESS & STARTING TO DEAL WITH THE MOST CRITICAL ISSUES Today STEP THREE MAKING STEP TWO M&S SPECIAL STEP ONE SHAPING THE FUTURE RESTORING THE BASICS 2018 2019 2020 2021 2022 74
Slide 75: We have a clear plan in place
PROTECTING THE MAGIC AND MODERNISING THE REST WE HAVE A CLEAR PLAN IN PLACE OUR PLAN TO PROTECT THE MAGIC & MODERNISE THE REST OUR CORE PURPOSE What we Internal for colleagues – Creating delicious quality food that doesn’t cost the earth want to be famous External to customers – This is not just Foo
Slide 76: We have a clear plan in place
PROTECTING THE MAGIC AND MODERNISING THE REST WE HAVE A CLEAR PLAN IN PLACE OUR PLAN TO PROTECT THE MAGIC & MODERNISE THE REST OUR CORE PURPOSE What we Internal for colleagues – Creating delicious quality food that doesn’t cost the earth want to be famous External to customers – This is not just Foo
Slide 77: Nine strategic priorities for Food
PROTECTING THE MAGIC AND MODERNISING THE REST 1 2 3 Deliver Create Loved Products Lower Our Costs Trusted Value 4 5 6 Modernise End to End Transform Categories Supply Chain Build Winning Teams 7 8 9 Develop Great & Grow M&S Rebuild Brand & Efficient Shops Online & Digitally Customer Engagement 77
Slide 78: Create Loved Products
PROTECTING THE MAGIC AND MODERNISING THE REST 1 Create Loved Products OPPORTUNITY IF WE WHERE WE ARE ON CHALLENGE WE FACE EXECUTE THE STRATEGY THE JOURNEY Competitors attempting to Stronger differentiation Obsessed with quality copy our quality and innovation Lead the market on provenance and More p
Slide 79: Protecting the magic and becoming innovators again – new product launches
PROTECTING THE MAGIC AND MODERNISING THE REST PROTECTING THE MAGIC AND BECOMING INNOVATORS AGAIN – NEW PRODUCT LAUNCHES Plant Kitchen Upgraded Halloween Offer Bakery Business Street Market of the Year 2019 Number of lines launched UK Retailer of the Year Our Best Ever The International Beer Steak Pi
Slide 80: Lower Our Costs
PROTECTING THE MAGIC AND MODERNISING THE REST 2 Lower Our Costs OPPORTUNITY IF WE WHERE WE ARE ON CHALLENGE WE FACE EXECUTE THE STRATEGY THE JOURNEY Cost price inflation Able to offer trusted value with values Cost saving programme underway Need to invest in value and drive profitable growth We see
Slide 81: Deliver Trusted Value
PROTECTING THE MAGIC AND MODERNISING THE REST 3 Deliver Trusted Value OPPORTUNITY IF WE WHERE WE ARE ON CHALLENGE WE FACE EXECUTE THE STRATEGY THE JOURNEY Price perception is M&S quality with improved value Halved amount of promotions significantly higher than reality perception is a compelling and
Slide 82: Transform Categories
PROTECTING THE MAGIC AND MODERNISING THE REST 4 Transform Categories OPPORTUNITY IF WE WHERE WE ARE ON CHALLENGE WE FACE EXECUTE THE STRATEGY THE JOURNEY Operate in very narrow customer Grow market share by becoming Reset of price and promotions missions, price bands, categories a stronger competito
Slide 83: Modernise End to End Supply Chain
PROTECTING THE MAGIC AND MODERNISING THE REST 5 Modernise End to End Supply Chain OPPORTUNITY IF WE WHERE WE ARE ON CHALLENGE WE FACE EXECUTE THE STRATEGY THE JOURNEY High cost to serve supply chain built More efficient supply chain Working in partnership with for much simpler store estate Better av
Slide 84: Build Winning Teams
PROTECTING THE MAGIC AND MODERNISING THE REST 6 Build Winning Teams OPPORTUNITY IF WE WHERE WE ARE ON CHALLENGE WE FACE EXECUTE THE STRATEGY THE JOURNEY Lack of clear accountability, Create a successful Fully accountable Food business empowerment and relevant ‘One Team’ Food business led by new Lead
Slide 85: Develop Great & Efficient Shops
PROTECTING THE MAGIC AND MODERNISING THE REST 7 Develop Great & Efficient Shops OPPORTUNITY IF WE WHERE WE ARE ON CHALLENGE WE FACE EXECUTE THE STRATEGY THE JOURNEY Large variation of formats including Market share growth through Bigger, Reset property strategy lots of small stores Better, Fresher,
Slide 86: Hempstead Valley
PROTECTING THE MAGIC AND MODERNISING THE REST HEMPSTEAD VALLEY Frozen Chilled 75% more freezer space New black fridges that in new freezer cases. use less energy (10% Largest Frozen in energy savings), (17% the business cost reduction). Maintain strength in chilled BWS In-store Bakery New equipment
Slide 87: Grow M&S Online & Digitally
PROTECTING THE MAGIC AND MODERNISING THE REST 8 Grow M&S Online & Digitally OPPORTUNITY IF WE WHERE WE ARE ON CHALLENGE WE FACE EXECUTE THE STRATEGY THE JOURNEY Not present in the UK’s fastest growing Successful online business through Launched JV with Ocado – channel, online, except for a small Oca
Slide 88: Rebuild Brand & Customer Engagement
PROTECTING THE MAGIC AND MODERNISING THE REST 9 Rebuild Brand & Customer Engagement OPPORTUNITY IF WE WHERE WE ARE ON CHALLENGE WE FACE EXECUTE THE STRATEGY THE JOURNEY Seen as premium and only for special Customers see us as having delicious Now more focussed on product occasions, not relevant for
Slide 89: Opportunity to grow market share particularly in ambient
PROTECTING THE MAGIC AND MODERNISING THE REST OPPORTUNITY TO GROW MARKET SHARE PARTICULARLY IN AMBIENT M&S share of spend by basket size – market size (£m) Fresh Ambient Meals 4,933 Bakery 5,747 Desserts 1,155 Biscuits & Snacks 7,034 Fish 1,000 Confectionery 2,738 Deli 4,714 Poultry 3,708 BWS 13,557
Slide 90: Positioned to capture growth – stores and online
PROTECTING THE MAGIC AND MODERNISING THE REST POSITIONED TO CAPTURE GROWTH – STORES AND ONLINE 90
Slide 91: Deep dives
PROTECTING THE MAGIC AND MODERNISING THE REST DEEP DIVES Modernising Our Supply Chain Lawrence Christensen and Ryan Lemon Lower Our Costs to Deliver Trusted Value Paul Willgoss and George Wright Improving Our Customer Experience Sharry Cramond Create Loved Products Lunch April Preston 91
Slide 92: Modernising Our Supply Chain
MODERNISING OUR SUPPLY CHAIN LAWRENCE CHRISTENSEN CBE SUPPLY CHAIN CHAIR RYAN LEMON VANGARDE PROJECT LEAD 92
Slide 93: Supply chain challenges faced by Vangarde team
MODERNISING OUR SUPPLY CHAIN SUPPLY CHAIN CHALLENGES FACED BY VANGARDE TEAM Weak availability Inconsistent gap resulting in lost sales scans create stockfile inaccuracy Excessive stock Deliveries not backstage leading timed to enable to high waste out-of-hours fill Too much colleague time backstage
Slide 94: Vangarde programme
MODERNISING OUR SUPPLY CHAIN VANGARDE PROGRAMME Understand Understand Customers Plan Customers Plan Sell Waste Forecast Sell Waste Forecast Deliver Transport Deliver Transport to stores to DCs to stores to DCs House & Pick House & Pick 94
Slide 95: Transforming the end-to-end food supply chain – our virtuous circle
MODERNISING OUR SUPPLY CHAIN TRANSFORMING THE END-TO-END FOOD SUPPLY CHAIN – OUR VIRTUOUS CIRCLE Great availability Understand Customers Plan Increased sales Sell Waste Forecast Reduced inventory Deliver Transport to stores to DCs Reduced waste House & Pick 95
Slide 96: Vangarde programme objective
MODERNISING OUR SUPPLY CHAIN TRANSFORMING THE END TO END FOOD SUPPLY CHAIN VANGARDE PROGRAMME OBJECTIVE Transforming our end to end Supply Chain, defining and implementing a new operating model that delivers a highly productive store environment with great customer service, low waste and great avail
Slide 97: What we changed at Vangarde
MODERNISING OUR SUPPLY CHAIN WHAT WE CHANGED AT VANGARDE NEW STORE CUSTOMER FORECASTING INBOUND DEPOT TRANSPORT OPERATING EXPERIENCE & ALLOCATION FLOW PROCESS OPTIMISATION MODEL & BENEFITS ▪ Improved low rate ▪ Now 4 waves of ▪ Segregation pre ▪ Increased ▪ Out of hours ▪ Store fill pre of sale avai
Slide 98: Vangarde operating model
MODERNISING OUR SUPPLY CHAIN VANGARDE OPERATING MODEL Store Closes Coldchain Store Carryover Opens Coldchain Ambient Fill Carryover 5am Ambient Delivery Fill Coldchain Frozen Fill Fill 2am Waste Inc Delivery Amb 98
Slide 99: 3 store operational models
MODERNISING OUR SUPPLY CHAIN 3 STORE OPERATIONAL MODELS Fill Type 18:00 19:00 20:00 21:00 22:00 23:00 24:00 01:00 02:00 03:00 04:00 05:00 06:00 07:00 Night Crew Fringe Hrs Store Closed / Locked Early Take Store Closed / Locked Night Crew Fringe Hrs Early Take Store Store Store Store Closes Coldchain
Slide 100: Store roll out
MODERNISING OUR SUPPLY CHAIN STORE ROLL OUT 100
Slide 101: Store results so far
MODERNISING OUR SUPPLY CHAIN STORE RESULTS SO FAR FOOD SALES AVAILABILITY WASTE VANGARDE 3% LY +1.3% Cold Chain 30% Reduction Gross waste 3ppt ahead vs like stores -0.4% Ambient 28% Reduction Net waste +5% full price FOOD SALES AVAILABILITY WASTE 6 STORES +3% improvement +0.8% Cold Chain 21% Reducti
Slide 102: Additional benefits
MODERNISING OUR SUPPLY CHAIN ADDITIONAL BENEFITS CUSTOMER EXPERIENCE COLLEAGUE IMPACT OPERATIONAL IMPACT ▪ Sustained positive ▪ Section Manager ▪ 50% reduction in cold chain improvement in customer empowerment backstage volumes metrics ▪ 98% Night Crew Engagement ▪ 35% LY reduction Ambient ▪ Store r
Slide 103: Next steps
MODERNISING OUR SUPPLY CHAIN NEXT STEPS ▪ Validate results across the further 85 trial stores ▪ Test & learn over Peak to shape Peak 2020 ▪ Post Peak our aim is to drive roll out by depot during 2020 19/20 Q1 19/20 Q2 19/20 Q3 19/20 Q4 20/21 Q1 20/21 Q2 Define, trial & scale Vangarde Pilot store out
Slide 104: Lower Our Costs to Deliver Trusted Value
LOWER OUR COSTS TO DELIVER TRUSTED VALUE PAUL WILLGOSS FOOD TECHNOLOGY DIRECTOR GEORGE WRIGHT FOOD COMMERCIAL DIRECTOR 104
Slide 105: Lower Our Costs
LOWER OUR COSTS PAUL WILLGOSS FOOD TECHNOLOGY DIRECTOR 105
Slide 106: We are taking a systemic approach to lower our costs
LOWER OUR COSTS TO DELIVER TRUSTED VALUE WE ARE TAKING A SYSTEMIC APPROACH TO LOWER OUR COSTS Simplified range, without proliferation Removed “hidden Reduced number costs” for suppliers of new lines and range churn Centralised Increased packaging buying volume per line LOWER COSTS Better factory fil
Slide 107: Cost benefits to date
LOWER OUR COSTS TO DELIVER TRUSTED VALUE COST BENEFITS TO DATE PROGRESSIVE (18/19 & 19/20 TO DATE) LOWERING COST Benefit Share by Project Type Product Specification Procurement Efficiency Packaging Specification Supply Chain Improvement Manufacturing Efficiency Other 107
Slide 108: A few cost saving examples
LOWER OUR COSTS TO DELIVER TRUSTED VALUE A FEW COST SAVING EXAMPLES PRODUCT PROCUREMENT PACKAGING SUPPLY CHAIN MANUFACTURING SPECIFICATION EFFICIENCY SPECIFICATION IMPROVEMENT EFFICIENCY Salmon Citrus Ready Meals Pies Flowers Changed salmon Reduced supply Rationalised the Moved pies from Now packing
Slide 109: Raw material sourcing is the next big opportunity
LOWER OUR COSTS TO DELIVER TRUSTED VALUE RAW MATERIAL SOURCING IS THE NEXT BIG OPPORTUNITY RETAIL PACK M&S own the RAW MATERIAL SUPPLIER relationship TRANSFORMING OUR RAW MATERIALS BUYING MODEL Buyers will now buy key raw FINISHED GOODS SUPPLIER materials on behalf of the business (Retail Pack & Fin
Slide 110: Top raw materials by value
LOWER OUR COSTS TO DELIVER TRUSTED VALUE TOP RAW MATERIALS BY VALUE Pork Butter Cheese Egg Beef Tuna Potato Cream Prawn Chocolate White fish Turkey (cocoa price) Chicken Salmon Lamb Milk 110
Slide 111: Deliver Trusted Value
DELIVER TRUSTED VALUE GEORGE WRIGHT FOOD COMMERCIAL DIRECTOR 111
Slide 112: Significant opportunity in medium and large fresh baskets
LOWER OUR COSTS TO DELIVER TRUSTED VALUE SIGNIFICANT OPPORTUNITY, PARTICULARLY IN MEDIUM AND LARGE FRESH BASKETS M&S share of spend (%) and Market value (£m) by basket size by category Small baskets Medium baskets Large baskets Desserts 333 412 410 Meals 2,228 1,011 1,694 Fish 276 337 386 Deli 1,234
Slide 113: Even bigger opportunity in medium and large ambient baskets
LOWER OUR COSTS TO DELIVER TRUSTED VALUE EVEN BIGGER OPPORTUNITY IN MEDIUM AND LARGE AMBIENT BASKETS M&S share of spend (%) and Market value (£m) by basket size by category Small baskets Medium baskets Large baskets Bakery 1,478 2,350 1,919 Biscuits 2,989 2,465 1,581 & Snacks Confectionery 739 1,212
Slide 114: Three areas to address: Price, Promotions, Range
LOWER OUR COSTS TO DELIVER TRUSTED VALUE TO TAKE ADVANTAGE OF THIS OPPORTUNITY WE NEED TO ADDRESS THREE AREAS Price Promotions Range 114
Slide 115: Value perception is key to increasing share
LOWER OUR COSTS TO DELIVER TRUSTED VALUE VALUE PERCEPTION IS KEY TO INCREASING SHARE: THE ACTUAL IS MUCH BETTER THAN THE REALITY GOOD VALUE FOR MONEY PRICE PREMIUM VS ACTUAL PRICE DIFFERENTIAL M&S Customers (Tell M&S) UK Market (Kantar) Launched M&S Rating new lower prices Service 92% Quality 87% Ch
Slide 116: More competitive on price than we have ever been
LOWER OUR COSTS TO DELIVER TRUSTED VALUE MORE COMPETITIVE ON PRICE THAN WE HAVE EVER BEEN M&S Base Price Index vs Tesco 2019 (matched lines) Price Index Jan Feb Mar Apr May Jun Jul Aug Sep Sources: Internal reporting 116
Slide 117: Now investing in key categories
LOWER OUR COSTS TO DELIVER TRUSTED VALUE NOW INVESTING IN KEY CATEGORIES Bread Produce Target future investment in areas 14 August 18 September that improve value perception, e.g. areas more frequently bought where our differentiation and Milk 4 September 2 October market share is lower Mince 117 So
Slide 118: Three areas to address: Price, Promotions, Range
LOWER OUR COSTS TO DELIVER TRUSTED VALUE TO TAKE ADVANTAGE OF THIS OPPORTUNITY WE NEED TO ADDRESS THREE AREAS Price Promotions Range 118
Slide 119: Simplifying promotions and tailoring to customer needs
LOWER OUR COSTS TO DELIVER TRUSTED VALUE SIMPLIFYING PROMOTIONS AND TAILORING TO CUSTOMER NEEDS Best Better Good 119
Slide 120: Cut back on promotions and base sales now growing
LOWER OUR COSTS TO DELIVER TRUSTED VALUE CUT BACK ON PROMOTIONS AND BASE SALES NOW GROWING WE CUT BACK OUR PROMOTIONS AND DROVE GROWTH OF BASE SALES Number of lines on promotion (internal measure) Sales split by base and promo 12 w/c (Kantar) Base Sales Promotional Sales 03/18 05/18 07/18 09/18 11/1
Slide 121: Three areas to address: Price, Promotions, Range
LOWER OUR COSTS TO DELIVER TRUSTED VALUE TO TAKE ADVANTAGE OF THIS OPPORTUNITY WE NEED TO ADDRESS THREE AREAS Price Promotions Range 121
Slide 122: Range architecture by tier – dried pasta example
LOWER OUR COSTS TO DELIVER TRUSTED VALUE OPPORTUNITY TO ENSURE OUR RANGE ARCHITECTURE BETTER REFLECTS THE MARKET BY TIER - DRIED PASTA EXAMPLE Number of lines by retailer – 500g dried pasta Entry Low Mid Premium Special Occasion 46 M&S 45 Other retailers 39 28 29 26 21 17 16 15 15 13 11 9 8 6 6 6 4
Slide 123: Now planning to reset our range and price tiering
LOWER OUR COSTS TO DELIVER TRUSTED VALUE NOW PLANNING TO RESET OUR RANGE & PRICE TIERING – EXAMPLE COUNT ON US £3.50 Best • Highly differentiated Past • More premium protein/cuts • Trade customers up 3 for £10 Multibuy Price £3.50 £3.00 Better • Protein based • Everyday range Today No Multibuy New L
Slide 124: Improving Our Customer Experience
IMPROVING OUR CUSTOMER EXPERIENCE SHARRY CRAMOND FOOD MARKETING DIRECTOR 124
Slide 125: Our marketing communications need to address our challenges
IMPROVING OUR CUSTOMER EXPERIENCE OUR MARKETING COMMUNICATIONS NEED TO ADDRESS THE CHALLENGES WE FACE AS A BUSINESS Broaden our appeal to be more relevant for families Be top of mind for Fresh Protect quality but step change our value perception 125
Slide 126: Broaden our appeal to be more relevant for families
IMPROVING OUR CUSTOMER EXPERIENCE BROADEN OUR APPEAL TO BE MORE RELEVANT FOR FAMILIES Our celebrity panel launched in Autumn 2018 and has reached over 14 million people 126
Slide 127: Broaden our appeal to be more relevant for families
IMPROVING OUR CUSTOMER EXPERIENCE BROADEN OUR APPEAL TO BE MORE RELEVANT FOR FAMILIES 80% of viewers agreed that ‘M&S Food has options that encourage family meals’ after seeing the idents – Independent Research 127
Slide 128: Broaden our appeal to be more relevant for families
IMPROVING OUR CUSTOMER EXPERIENCE BROADEN OUR APPEAL TO BE MORE RELEVANT FOR FAMILIES 128
Slide 129: Broaden our appeal to be more relevant for families
IMPROVING OUR CUSTOMER EXPERIENCE BROADEN OUR APPEAL TO BE MORE RELEVANT FOR FAMILIES Develop and launched this market leading range of vegan meals, desserts and snacks in 4 months 129
Slide 130: Broaden our appeal to be more relevant for families
IMPROVING OUR CUSTOMER EXPERIENCE BROADEN OUR APPEAL TO BE MORE RELEVANT FOR FAMILIES Launched over 170 new lines – more to come 130
Slide 131: Be top of mind for Fresh
IMPROVING OUR CUSTOMER EXPERIENCE BE TOP OF MIND FOR FRESH 131
Slide 132: Be top of mind for Fresh
IMPROVING OUR CUSTOMER EXPERIENCE BE TOP OF MIND FOR FRESH 132
Slide 133: Protect quality but step change our value perception
IMPROVING OUR CUSTOMER EXPERIENCE PROTECT QUALITY BUT STEP CHANGE OUR VALUE PERCEPTION 133
Slide 134: Close
CLOSE STUART MACHIN MANAGING DIRECTOR OF FOOD 134
Slide 135: Stuart Machin - Close
PROTECTING THE MAGIC AND MODERNISING THE REST STUART MACHIN - CLOSE ▪ Need to protect the magic and modernise the rest ▪ Facing into significant challenges - lots going on ▪ Strong Leadership Team in place ▪ Optimistic, but realistic, about what can be achieved by when ▪ Seeing some green shoots ▪ A
Slide 136: Store Technology and Efficiency
STORE TECHNOLOGY AND EFFICIENCY SACHA BERENDJI RETAIL AND PROPERTY DIRECTOR 136
Slide 137: M&S launches industry-leading store technology
STORE TECHNOLOGY AND EFFICIENCY M&S LAUNCHES INDUSTRY-LEADING STORE TECHNOLOGY TO INCREASE EFFICIENCY AND EMPOWER COLLEAGUES 1 2 3 One Seamless Insight-driven Platform M&S App Store stores 4 5 6 Empowered Colleagues In Digital Shop Floor Digital Store Voice Control 137
Slide 138: Where we have come from - frustrations for our managers
STORE TECHNOLOGY AND EFFICIENCY WHERE WE HAVE COME FROM - FRUSTRATIONS FOR OUR MANAGERS As a store manager I have no way of understanding my store’s full I often have to go P&L or easily compare my off the shop floor performance vs my peers to view reports on a desktop I have to look at several I ha
Slide 139: Where we have come from - frustrations for our colleagues
STORE TECHNOLOGY AND EFFICIENCY WHERE WE HAVE COME FROM - FRUSTRATIONS FOR OUR COLLEAGUES I can never There’s no simple process to get hold of feedback to the office or connect a hand held with peers in other stores terminal It’s difficult to know who is The Wifi never works doing which I cannot eas
Slide 140: One seamless platform across the whole of M&S
STORE TECHNOLOGY AND EFFICIENCY ONE SEAMLESS PLATFORM ACROSS THE WHOLE OF M&S 140
Slide 141: Built around our own M&S apps
STORE TECHNOLOGY AND EFFICIENCY BUILT AROUND OUR OWN M&S APPS 141
Slide 142: New suite of tools enabling managers to operate insight-driven stores
STORE TECHNOLOGY AND EFFICIENCY NEW SUITE OF TOOLS ENABLING OUR MANAGERS TO OPERATE INSIGHT-DRIVEN STORES TOOL ONE TOOL TWO TOOL THREE Drivers of Monthly Weekly Store Performance Operational Excellence store performance Management Every Day ▪ All managers can now ▪ Sales by department ▪ Performance
Slide 143: Tool one - Drivers of monthly store performance
STORE TECHNOLOGY AND EFFICIENCY TOOL ONE - DRIVERS OF MONTHLY STORE PERFORMANCE MONTHLY STORE SALES S a l e s Store Name 143
Slide 144: Tool one - Drivers of monthly store performance
STORE TECHNOLOGY AND EFFICIENCY TOOL ONE - DRIVERS OF MONTHLY STORE PERFORMANCE FORMAT VS STORE C&H PERFORMANCE Form at Sales Department Store Sales Department 144
Slide 145: Tool one - Drivers of monthly store performance
STORE TECHNOLOGY AND EFFICIENCY TOOL ONE - DRIVERS OF MONTHLY STORE PERFORMANCE FORMAT VS STORE WOMENSWEAR SALES Forma at Sales Store Sales Department 145
Slide 146: Tool two: Weekly store performance management
STORE TECHNOLOGY AND EFFICIENCY TOOL TWO: WEEKLY STORE PERFORMANCE MANAGEMENT Store Region 146
Slide 147: Tool three - Operational excellence every day
STORE TECHNOLOGY AND EFFICIENCY TOOL THREE - OPERATIONAL EXCELLENCE EVERY DAY 147
Slide 148: Tool three - Operational excellence every day
STORE TECHNOLOGY AND EFFICIENCY TOOL THREE - OPERATIONAL EXCELLENCE EVERY DAY 148
Slide 149: Tool three - Operational excellence every day
STORE TECHNOLOGY AND EFFICIENCY TOOL THREE - OPERATIONAL EXCELLENCE EVERY DAY 149
Slide 150: Digital shop floor to drive efficiency
STORE TECHNOLOGY AND EFFICIENCY DIGITAL SHOP FLOOR TO DRIVE EFFICIENCY - COLLEAGUE DATA WHERE IT MATTERS MOST WITH 16,000 HONEYWELLS 150
Slide 151: Digital store voice
STORE TECHNOLOGY AND EFFICIENCY DIGITAL STORE VOICE COLLEAGUE COMMS Stores connected in real time, creating flexible conversations and streamlining & COLLABORATION key communications Colleagues in control of the hours they SHIFTS are working, swap a shift and take up additional hours Colleagues know
Slide 152: Empowered colleagues in control
STORE TECHNOLOGY AND EFFICIENCY EMPOWERED COLLEAGUES IN CONTROL BEFORE TEAMS – 57% SCHEDULE ACCURACY AFTER TEAMS – 83% SCHEDULE ACCURACY 152
Slide 153: M&S launches industry-leading store technology
STORE TECHNOLOGY AND EFFICIENCY M&S LAUNCHES INDUSTRY-LEADING STORE TECHNOLOGY TO INCREASE EFFICIENCY AND EMPOWER COLLEAGUES 1 2 3 One Seamless Insight-driven Platform M&S App Store stores 4 5 6 Empowered Colleagues In Digital Shop Floor Digital Store Voice Control 153
Slide 154: Conclusion
CONCLUSION STEVE ROWE CHIEF EXECUTIVE 154
Slide 155: Far Reaching Change at M&S: Objectives
FAR REACHING CHANGE AT M&S OBJECTIVES Update on transformation Change programmes Meet the team 155
Slide 156: M&S is changing faster than it has ever done
CONCLUSION M&S IS CHANGING FASTER THAN IT HAS EVER DONE Leadership and Culture 1 Accountable 2 3 Transformation Businesses Digital First Restoring Style, Fit and Value 4 Magic Again 5 Rebuilding Profitable Growth 6 in Clothing in Food in International Store Estate Fit 7 Modernised 8 Cost Savings of
Slide 157: Far Reaching Change at M&S
FAR REACHING CHANGE AT M&S TRANSFORMATION UPDATE 1 October 2019 157
Marks and Spencer Group — Investor Day (October 2019) on 6ix