Marks And Spencer Group Plc · LSE:MKS
Marks And Spencer — FY2024 Earnings Presentation
49 slides from Marks And Spencer's earnings presentation, May 22, 2024
Slide 1: The Beginnings of a New M&S
FULL YEAR RESULTS THE BEGINNINGS OF A NEW M&S 22 MAY 2024 M&S COLLECTION Linen Cropped Blazer, £55 Linen Crew Neck Waistcoat, £35 M&S FOOD Linen Short, £25 King Blackberries 150g, £3
Slide 2: Stuart Machin, Chief Executive
STUART MACHIN Chief Executive M&S COLLECTION Cotton Rich Textured Knitted Midi Skirt, £35 M&S FOOD Cotton Rich Textured Knitted Top, £29.50 2 King Asparagus, £5 Leather Grab Bag, £55
Slide 3: Another Year of Strong Financial Performance
THE BEGINNINGS OF A NEW M&S ANOTHER YEAR OF STRONG FINANCIAL PERFORMANCE Profit before tax and adjusting items £716.4m, up 58% Food sales up 13%, adjusted operating profit of £395.3m and margin of 4.8% Clothing & Home sales up 5.3%, adjusted operating profit of £402.8m and margin of 10.3% Internatio
Slide 4: The Beginnings of a New M&S
THE BEGINNINGS OF A NEW M&S THE BEGINNINGS OF A NEW M&S Food delivers market-leading volume growth and strong innovation whilst broadening customer appeal C&H delivers market-leading share growth, with the transition to a new trading model delivering style, trusted value and lower markdowns Strong r
Slide 5: Jeremy Townsend, Chief Financial Officer
JEREMY TOWNSEND Chief Financial Officer M&S FOOD Zesty Guacamole 170g, £1.90 Seeded Sourdough, £4 Just Add British Piri Piri Chicken Slices, £3.75 Tangy Tomato Salsa, £1.75 M&S COLLECTION Tabbouleh Salad 340g, £4.25 5 D Frame Polarised Sunglasses, £15 Marinated Chili & Coriander King Prawns 80g, £3.
Slide 6: Full Year Financials at a Glance
THE BEGINNINGS OF A NEW M&S FULL YEAR FINANCIALS AT A GLANCE £13.1bn £716.4m £672.5m +9.4% +58.0% +41.4% Profit before tax Group sales and adjusting items1 Profit before tax £413.7m £45.7m £2.17bn +£243m better +£401m better +£0.47bn better Free cashflow Net funds Net debt from operations excluding
Slide 7: Food Performance
THE BEGINNINGS OF A NEW M&S FOOD PERFORMANCE Change 2023/24 2022/23 vs. 2022/23 Sales (£bn) 8.2 7.2 13.0% LFL Sales % 11.3 5.4 Operating profit before 395.3 248.0 59.4% adjusting items (£m) Operating margin % 4.8 3.4 1.4% pts M&S FOOD 7 Zoe Gut Shot, £2
Slide 8: Food Operating Profit Margin Bridge
THE BEGINNINGS OF A NEW M&S FOOD OPERATING PROFIT MARGIN BRIDGE Operating profit margin before adjusting items % Operating costs to sales % 22/23 3.4 Store staffing 0.3 Other store costs 0.0 Gross margin 0.7 Distribution and warehousing 0.2 Operating costs 0.7 Central costs 0.2 23/24 4.8 Total 0.7 G
Slide 9: C&H Performance
THE BEGINNINGS OF A NEW M&S C&H PERFORMANCE Change 2023/24 2022/23 vs. 2022/231 Sales (£bn) 3.9 3.7 5.3% Store Sales 2.6 2.5 4.1% Online Sales 1.3 1.2 7.8% LFL Sales % 5.2 11.2 Operating profit before 402.8 323.8 24.4% adjusting items (£m) Operating margin % 10.3 8.7 1.6% pts 1 % change calculated t
Slide 10: C&H Operating Profit Margin Bridge
THE BEGINNINGS OF A NEW M&S C&H OPERATING PROFIT MARGIN BRIDGE Operating profit margin before adjusting items % Operating costs to sales % 22/23 8.7 Store staffing (0.3) Other store costs 0.7 Gross margin 1.5 Distribution and warehousing 0.5 Operating costs 0.1 Central costs (0.8) 23/24 10.3 Total 0
Slide 11: International Performance
THE BEGINNINGS OF A NEW M&S INTERNATIONAL PERFORMANCE INTERNATIONAL EXCLUDING REPUBLIC OF IRELAND Change 2023/24 vs. 2022/23 Sales (£m) 719.1 (1.0%)1 Operating profit before adjusting items (£m) 47.7 (29.7%) Operating margin % 6.6 (2.6% pts) REPUBLIC OF IRELAND Change 2023/24 vs. 2022/23 Sales (£m)
Slide 12: Structural Cost Programme
THE BEGINNINGS OF A NEW M&S STRUCTURAL COST PROGRAMME 2023/24 DELIVERED INCREASED OPPORTUNITY (2023 – 2028) Marketing £500m Data, Digital & Technology £11m £23m Retail £400m £56m Years 3-5 Corporate Years 3-5 Costs £19m £180m Year 2 Year 2 £14m Property £57m £150m £180m Year 1 Year 1 Logistics Initi
Slide 13: Group Profit Bridge
THE BEGINNINGS OF A NEW M&S GROUP PROFIT BRIDGE £m ADJUSTING ITEMS INCLUDE: Store Estate (£93m) Ocado Retail capacity review (£30m) Ocado Retail remeasurement £65m 51 716 79 3 673 147 (9) (8) (44) 453 PBT Food Clothing International Ocado M&S Interest PBT Adjusting Profit before & Home Retail JV Ban
Slide 14: Free Cash Flow Generation
THE BEGINNINGS OF A NEW M&S FREE CASH FLOW GENERATION £m 44 1,365 122 526 77 (346) 673 (423) (62) 25 414 (222) Profit Before Depreciation Interest Adjusting Adjusted Cash lease Working Capex Loans to Financial Other Free Cash Tax 23/24 and items EBITDA and capital and Associates Interest Flow from a
Slide 15: Change in Net Debt
THE BEGINNINGS OF A NEW M&S CHANGE IN NET DEBT £m 68 12 471 414 (3) (20) Free Cash Acquisitions, Dividends Decrease in Other Decrease Flow from investments paid lease debt in total operations and net debt divestments 15 M&S Liverpool One
Slide 16: Balance Sheet Metrics
THE BEGINNINGS OF A NEW M&S BALANCE SHEET METRICS REDUCING NET DEBT £4.0bn £3.5bn £2.7bn £2.6bn £2.6bn £2.4bn £2.2bn £2.3bn £2.3bn £2.2bn £1.4bn £1.1bn £0.4bn £0.4bn 1 9 / 20 20/21 21/22 22/23 2 3 /24 (£46m) Net debt (funds) before lease liabilities Lease liabilities Net Funds 16
Slide 17: Investment Performance
THE BEGINNINGS OF A NEW M&S INVESTMENT PERFORMANCE STORE ROTATION1 STORE ROTATION1 M&A STRONG RETURNS 14.1% 10.6% 22/23 23/24 NEW STORES STORE RENEWALS GIST ACQUISITION 5 years payback 5 years payback 4 years payback INCREASING RETURN ON CAPITAL Full Line payback 2.0 years Payback 4.0 years Payback
Slide 18: Capex Expenditure Net of Disposals
THE BEGINNINGS OF A NEW M&S CAPEX EXPENDITURE NET OF DISPOSALS CAPEX IN 2023/24 PLAN FOR 2024/25 c.£500m £390m UK new stores 77 UK store renewals 52 Stores Property asset replacement, acquisition, 111 disposals & other Supply Chain 69 Supply Chain IT and M&S.com 81 Data, Digital & Technology 18 M&S
Slide 19: Summary
THE BEGINNINGS OF A NEW M&S SUMMARY Sustained trading momentum driven through strong LFL sales, store rotation returns and attraction of new customers Structural cost reduction exceeded targets, with programme objectives increased to fund further value and quality improvements and offset inflation C
Slide 20: Stuart Machin, Chief Executive
STUART MACHIN Chief Executive M&S COLLECTION Chenille Striped Cushion, £25 20 Geometric Embroidered Cushion, £19.50
Slide 21: Food
FOOD Investing in innovation and value, attracting family shoppers M&S FOOD Salt & Black Pepper Wedges, £3.50 Mediterranean Style Veg, £3.50 M&S FOOD 21 Cajun Salmon, £7 COLLECTION Fine Beans with Truffle Butter, £5
Slide 22: The Beginnings of a Virtuous Circle
THE BEGINNINGS OF A NEW M&S THE BEGINNINGS OF A VIRTUOUS CIRCLE UPGRADING AND DEVELOPING BIGGER INVESTING IN INCREASING SHARE INNOVATING 1/3 FRESH MARKET TRUSTED VALUE OF LARGER BASKETS OF THE RANGE RENEWAL STORES 22
Slide 23: The Beginnings of a Virtuous Circle
THE BEGINNINGS OF A NEW M&S THE BEGINNINGS OF A VIRTUOUS CIRCLE Promotional participation Quality perception absolute NPS Store renewal progression M&S value market share 25% -50% +10% vs. 2018 vs. 2019 18% 70 3.7% 26% 3.4% 14% 60 50 +9% 7% 40 3% 30 13% 20 0.7% 0.9% +29% 18/19 23/24 2019 2020 2021 2
Slide 24: Food Delivers Market Leading Volume Growth
THE BEGINNINGS OF A NEW M&S FOOD DELIVERS MARKET LEADING VOLUME GROWTH M&S VOLUME GROWTH CONSISTENTLY AHEAD OF THE MARKET 9.7% c.£60M FURTHER INVESTMENT IN TRUSTED VALUE 6.2% 6.7% 5.4% Lower prices: ‘Remarksable’ sales grow a further +34% Building trust: 90 prices ‘Dropped & Locked’ Focusing promoti
Slide 25: Bigger Fresher Food Stores Delivering Strong Returns
THE BEGINNINGS OF A NEW M&S BIGGER FRESHER FOOD STORES DELIVERING STRONG RETURNS SIZE OF BASKET INCREASING IN NEW STORES Foods basket value growth vs old/control store BETTER STORES ATTRACTING FAMILY SHOPPERS 12% New Food stores c.13k sq ft, showing growth opportunity 8% Customers able to complete m
Slide 26: 'Backbone' Programme Drives Availability and Efficiency
THE BEGINNINGS OF A NEW M&S ‘BACKBONE’ PROGRAMME DRIVES AVAILABILTY AND EFFICIENCY GIST ACQUISITION GENERATING STRONG RETURNS A MORE EFFICIENT, SUSTAINABLE SUPPLY BASE £66.7m Working with dedicated suppliers to grow long term £50m Increased efficiency enabling investment in trusted value Removing pl
Slide 27: Clothing & Home
CLOTHING & HOME Growth reflecting the transition to a new trading model M&S COLLECTION Pure Cotton Striped Shirt Navy Mix, £40 Dark Navy Crew Sweat, £25 Flex Jean, Regular, £45 M&S COLLECTION Comfort Stretch Denim Jacket, £39.50 Summer Resort Picnic Tray, £14 Denim Collared Pintuck Shirt, £35 Pure C
Slide 28: C&H Growth Reflecting Transition to New Trading Model
THE BEGINNINGS OF A NEW M&S C&H GROWTH REFLECTING TRANSITION TO NEW TRADING MODEL FOCUSING BUYING BOLDER SHIFTING TO IMPROVING OPTIONS AND DEEPER TRUSTED VALUE STOCK COVER 28
Slide 29: C&H Growth Reflecting Transition to New Trading Model
THE BEGINNINGS OF A NEW M&S C&H GROWTH REFLECTING TRANSITION TO NEW TRADING MODEL Q1 Womenswear options Growing sales from £1m+ lines Full price sales mix % Stock cover (weeks) 4.2k -22% +53% +18% 18.1 -38% vs. 2019 vs. 2021 vs. 2019 vs. 2018 3.3k 761 7% 6% 12.7 674 14% 11.2 30% 496 81% 63% 19/20 24
Slide 30: Delivering Sales & Share Growth Across Categories
THE BEGINNINGS OF A NEW M&S DELIVERING SALES & SHARE GROWTH ACROSS CATEGORIES IMPROVED CUSTOMER PERCEPTIONS ACROSS VALUE, QUALITY & STYLE 70 vs. 2021 STRONG PERFORMANCE IN CORE AND BEST 60 +9% Women’s denim/trousers +15%, knitwear +13% and bras +5% 50 Quality driving top tier sales, with men’s Autog
Slide 31: Strong Results from Full Line Store Rotation
THE BEGINNINGS OF A NEW M&S STRONG RESULTS FROM FULL LINE STORE ROTATION STRONG BEAUTY SALES MIX GROWTH IN RELOCATED STORES +31% NEW STORES DRIVING CUSTOMER REAPPRAISAL 4.6% +7% Stores attracting more family customers 3.5% 3.1% 2.9% Change in product mix, strong performance of beauty Omni-channel se
Slide 32: C&H Online Growth
THE BEGINNINGS OF A NEW M&S C&H ONLINE GROWTH TWO THIRDS OF NEW CUSTOMERS ONLINE BETTER PRODUCT DRIVING FASTER ONLINE GROWTH Refocused marketing spend attracting new customers 44% of orders now through the M&S App (37% last year) 65% 16% 19% Third party brand sales up 33%, with top tier partnerships
Slide 33: Progress on the End-to-End Supply Chain Programme
THE BEGINNINGS OF A NEW M&S PROGRESS ON THE END-TO-END SUPPLY CHAIN PROGRAMME STRATEGIC SOURCING CONSOLIDATION PROGRESSES 1200 -25% STRATEGIC SOURCING UNDERWAY Consolidating buying in core categories from AW24 800 Combining volumes across key fabrics 400 -33% 70% recycled polyester, 100% responsibly
Slide 34: International
INTERNATIONAL Reset to address slow growth 34
Slide 35: International Reset to Address Slow Growth
THE BEGINNINGS OF A NEW M&S INTERNATIONAL RESET TO ADDRESS SLOW GROWTH CHALLENGING SECOND HALF SALES PERFORMANCE Sales vs LY %1 8% LONG TERM AMBITION OF GLOBAL REACH 5% Growth potential with partnerships in high growth markets Wholesale operation with developing online sales mix H2 Challenge to deli
Slide 36: Ocado Retail
OCADO RETAIL Starting to deliver improved growth 36
Slide 37: Ocado Retail Starting to Deliver Improved Growth
THE BEGINNINGS OF A NEW M&S OCADO RETAIL STARTING TO DELIVER IMPROVED GROWTH M&S VOLUME GROWTH DRIVING ORL PERFORMANCE SALES PERFORMANCE IMPROVING UNDER NEW TEAM Revenue growth of 11%, with growth accelerating in H2 25% Adjusted EBITDA £26.8m vs (£15.1m) LY 15% Profit below original business plan –
Slide 38: Outlook
OUTLOOK BODY BY M&S 38 FlexifitTM Wired Full-Cup T-Shirt Bra A-E, £16
Slide 39: Outlook for 2024/25
THE BEGINNINGS OF A NEW M&S OUTLOOK FOR 2024/25 Focus remains on growing volume and market share and offering trusted value supported by our sourcing programmes Investment in colleague pay will be funded by structural cost reductions and other efficiencies Other cost inflation will largely be offset
Slide 40: Our M&S Behaviours
THE BEGINNINGS OF A NEW M&S 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 I
Slide 41: Strategic Priorities for 2024/25
THE BEGINNINGS OF A NEW M&S STRATEGIC PRIORITIES FOR 2024/25 EXCEPTIONAL PRODUCT, TRUSTED RETAILER STRUCTURALLY LOWER COSTS Food: Invest in value, volume innovation, 1,000 upgrades Increased 5-year objective from £400m to £500m C&H: Refocus on core home & under indexed categories +£100m savings: sto
Slide 42: Appendices
APPENDICES M&S COLLECTION M&S FOOD Satin Look Belted Longline Waistcoat, £45 Raspberries 250g, £3.75
Slide 43: Quarterly Sales Performance
THE BEGINNINGS OF A NEW M&S QUARTERLY SALES PERFORMANCE % change vs 2022/23 Q1 Q2 Q3 Q4 FY Food 15.1 14.2 10.5 13.0 13.0 Food LFL 12.5 11.0 9.9 11.9 11.3 Clothing & Home 7.4 4.1 4.8 5.0 5.3 Clothing & Home LFL 7.2 3.8 4.8 5.1 5.2 Total UK Sales 12.5 10.6 8.5 10.6 10.4 Total UK LFL 10.7 8.5 8.1 9.8 9
Slide 44: Trading Performance in Food
THE BEGINNINGS OF A NEW M&S TRADING PERFORMANCE IN FOOD FOOD SALES % Change from 2022/23 H1 H2 FY Total Food 14.7 11.7 13.0 LFL 11.7 10.9 11.3 DRIVERS OF FOOD SALES 52 Weeks 2023/24 2022/23 % Change Transaction (m) (average/week) 9.7 9.0 7.8 Basket value inc VAT (£) 16.0 15.2 5.3 Sales ex VAT (£m) 8
Slide 45: Trading Performance in Clothing & Home
THE BEGINNINGS OF A NEW M&S TRADING PERFORMANCE IN CLOTHING & HOME DRIVERS OF ONLINE SALES 52 Weeks Ended 2023/24 2022/23 % Change CLOTHING & HOME SALES Active customers (m)1 9.4 9.2 2.2 Frequency2 3.5 3.4 2.9 % Change from 2022/23 H1 H2 FY Transactions (m) 33.2 31.1 6.8 Total C&H 5.7 4.9 5.3 Averag
Slide 46: Adjusting Items
THE BEGINNINGS OF A NEW M&S ADJUSTING ITEMS £m Strategic programmes (109.5) Store estate (93.0) Furniture simplification (18.3) Organisation (3.5) Structural simplification - UK logistics 5.3 Other adjusting items 65.6 M&S Birmingham Bullring Store impairments & other property charges 35.1 Acquisiti
Slide 47: Depreciation and Amortisation
THE BEGINNINGS OF A NEW M&S DEPRECIATION AND AMORTISATION 2023/24 £m Food C&H Intl Other Group Adjusted operating profit 395.3 402.8 75.6 (35.1) 838.6 Depreciation Tangible asset 142.9 134.3 15.0 - 292.2 Right of use asset 78.2 56.2 25.3 - 159.7 Amortisation 21.5 25.9 7.3 - 54.7 Impairment & Disposa
Slide 48: Lease Liability Breakdown
THE BEGINNINGS OF A NEW M&S LEASE LIABILITY BREAKDOWN International £210m Office, Warehouse & Other £460m £860m Full Line £2,212m £682m Simply Food 48 M&S Lakeside
Slide 49: Stores and Selling Space
THE BEGINNINGS OF A NEW M&S STORES AND SELLING SPACE NUMBER OF STORES Selling space Memo: Closures of UK Mar 24 Mar 232 Openings Closures Change (m sq. ft) which are relocations Shopping Centre 1.6 17 16 3 (2) 1 2 Retail Park 4.6 81 81 1 (1) 0 1 High Street – large 4.5 68 71 2 (5) (3) 2 High Street
Marks and Spencer Group — FY2024 Earnings Presentation on 6ix