Never the Same Again FORGING A RESHAPED M&S - FULL YEAR RESULTS - Marks & Spencer
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Never the Same Again
FORGING A RESHAPED M&S
FULL YEAR RESULTS
26 MAY 2021
1
A RESHAPED M&S
M&S EMERGES RESHAPED FROM COVID YEAR
A RESILIENT FINANCIAL
PERFORMANCE
FORGING A
RESHAPED M&S
STEVE ROWE
CHIEF EXECUTIVE
2
A RESHAPED M&S
M&S EMERGES RESHAPED FROM COVID YEAR
Adjusted profit before tax, strong focus on cash preservation
and healthy reduction in net debt
Strong underlying Food growth; substantial Ocado Retail
contribution – M&S achieving c.50% of fresh category sales
Clothing & Home and International heavily impacted; effective
stock management, over 50% online growth and 14% online
margin
Accelerated transformation under the Never the Same Again
programme
Food positioned to deliver underlying growth and recover
hospitality & convenience. A reshaped C&H product engine
and online capability gaining traction with customers
Encouraging early signs of recovery; group sales ahead of same
period two years ago
3
FACING FACTS
ADDRESSING OUR DEEP-SEATED ISSUES
1 Complex corporate
culture and structure 2 Behind the curve
in digital 3 More to do on
style and value in
Clothing & Home
4 Underperformance
in Food 5 High cost retailer
with inefficient
supply chain
6 Store estate not
fit for the future
4
A RESHAPED M&S
FIXING THE BASICS: THE TRANSFORMATION SO FAR
1 Simplified structure and
greater accountability 2 Substantial increase
in digital and data
capability
3 Shifted to trusted value
and more contemporary
styling in C&H
Accountable businesses with P&L Technology transformation and Increased ‘good’ price points by around
responsibility decommissioned mainframe one third
Substantial restructuring in corporate centre, Customer data engine & cloud hosted Reduced option count and stock into sale
regional management and in stores platform enabling Sparks relaunch Evolved fit to more contemporary style
Cost savings of over £350m Created Microsoft partnership and
digitised operations
4 Outperforming in Food
and entering growth
markets
5 Simplified operations
and increased capacity 6 Created capability to
accelerate rotation
Shifted to trusted value with fewer Single tier network with Welham & Bradford Closed over 50 full-line stores
promotions Fixed Castle Donington and increased Developed and tested renewal format
Innovation focused on families capacity Asset management capability
Faster growth with 50% share of Vangarde to improve Food store trading to fund costs of rotation
Ocado Retail
5
EOIN TONGE
CHIEF FINANCE OFFICER
M&S Hedge End
A RESHAPED M&S
FULL YEAR FINANCIALS AT A GLANCE
£9.0bn £41.6m £(201.2)m
-11.9% -89.7% -
Profit before tax
Group revenue & adjusting items Loss before tax
£296.4m £3.52bn £1.11bn
+44.1% reduced 10.9% reduced 20.1%
Net debt
Free cashflow Net debt excluding leases
Note: P&L metrics on 52 week basis, cash and balance sheet on 53 week basis
7 M&S COLLECTION
Pure Cotton Printed T-Shirt, 12.50
A RESHAPED M&S
FOOD PERFORMANCE
CATEGORY MIX
% change to 19/20 % change to 19/20
Frozen +36 Hospitality -81
REVENUE Grocery & household +27 Food-on-the-move -47
Beers, wines & spirits +25 Bakery -7
% change to 19/20 Q4 FY Meat, fish, poultry, deli +13 Prepared meals -5
Produce & flowers +8 Confectionery -4
Total -4.4 -0.6
SHAPE OF CHAIN
LFL -2.7 1.3
% change to 19/20 % change to 19/20
Simply Food +18 High Street -18
LFL (ex hospitality and franchise) 2.8 6.9
Retail parks +7 Shopping centre -19
Franchise fuel +5 City centre -33
M&S.com (flowers/hampers/wine) +184 Franchise travel (rail/air/roadside) -82
8
A RESHAPED M&S
FOOD LFL PERFORMANCE
FOOD LFL EX HOSPITALITY AND FRANCHISE (% VS 19/20)
40%
+5.9% +4.7% +2.8%
20%
0%
-20%
-40%
FOOD LFL (% VS 19/20)
40%
20%
+0.2% -2.4% -2.6%
0%
-20%
-40%
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
LOCKDOWN 1 LOCKDOWN 2 LOCKDOWN 3
Lockdown 1 = weeks 1-11; Lockdown 2 = weeks 33-35; Lockdown 3 = weeks 41-52
9
A RESHAPED M&S
FOOD OPERATING PROFIT BRIDGE
19/20 £m 236.7 19/20 £m 236.7
Gross profit (60.7) Hospitality/franchise gross
profit (154.0)
Store staffing 30.8 Core categories gross profit 93.3
Other store costs 56.3 Direct Covid costs (69.0)
Distribution and (46.8) 101.0
warehousing Government support
Central costs (2.7) Other cost savings 5.6
20/21 £m 213.6 20/21 £m 213.6
SALARY COSTS OF FURLOUGHED STAFF
Furlough income of £30.2m within government
10 support partially offset salary costs of furloughed
staff of £41.9m, which was incurred in both yearsA RESHAPED M&S
OCADO CONTRIBUTION TO M&S
SHARE OF PROFIT
£m 52 w/e 28 Feb 2021
Revenue 2,353.2
EBITDA before exceptional items 189.9
Exceptional items 50.5
Operating profit 204.2
Profit after tax 156.8
M&S 50% share of profit after tax 78.4
Memo: M&S Sales on Ocado.com 319.1
11A RESHAPED M&S
CLOTHING & HOME
CATEGORY MIX BY CHANNEL
% change to 19/20 Online Stores % change to 19/20 Online Stores
REVENUE
Lingerie and essentials +121 -54 Formal -15 -72
% change to 19/20 Q4 FY Kids +78 -43 Holiday -31 -72
Casual +61 -56 Shoes and +3 -68
accessories
Total -18.7 -31.5 Home & beauty +30 -47 Outerwear +15 -52
Stores -60.6 -56.2 SHAPE OF CHAIN
% change to 19/20 % change to 19/20
Online 105.8 53.9
Retail Parks -44 High Street -56
LFL -15.5 -29.8 Food stores -44 Outlets -60
Shopping centre -63
City centre -67
12 Avengers™ (2-7Yrs)
Cotton Avengers™ T-Shirt, £9.00A RESHAPED M&S
CLOTHING & HOME CHANNEL PERFORMANCE
ONLINE (% VS 19/20)
160%
120%
80%
40%
0%
-40%
STORES (% VS 19/20)
0%
-20%
-40%
-60%
-80%
-100%
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
LOCKDOWN 1 LOCKDOWN 2 LOCKDOWN 3
Lockdown 1 = weeks 1-11; Lockdown 2 = weeks 33-35; Lockdown 3 = weeks 41-52
13 Note: weeks 50-52 are shown vs 18/19 as these weeks begin to anniversary the impacts of the first national lockdown in 19/20A RESHAPED M&S
CLOTHING & HOME OPERATING PROFIT BRIDGE
19/20 £m 223.9 19/20 £m 223.9
Gross profit (611.7) Stores gross profit (841.2)
Store staffing 147.6 Online gross profit 229.5
Other store costs 109.3 Direct Covid costs (18.7)
Distribution and
warehousing (43.2) Government support 196.4
Central costs 44.7 Other cost savings 80.7
20/21 £m (129.4) 20/21 £m (129.4)
SALARY COSTS OF FURLOUGHED STAFF
Furlough income of £95.0m within government
support partially offset salary costs of furloughed
staff of £129.1m, which was incurred in both years
14 M&S COLLECTION
Pure Cotton Broderie Midaxi Tiered Dress, £49.50A RESHAPED M&S
INTERNATIONAL
RETAIL SALES BY MARKET AND CHANNEL
% change to 19/201 Total Online Stores
RETAIL SALES
Kuwait +20 +322 +12
% change to 19/201 Q4 FY Saudi Arabia +13 +1002 +6
Jersey +1 +71 +1
Total -2.4 -18.0 Guernsey -1 - -1
Zalando +1002 +1002 -
Clothing & Home 2.2 -22.2
% change to 19/201 Total Online Stores
Food -11.5 -8.3
France -46 +41 -52
Czech Republic -36 +119 -47
Online 146.3 118.8
India -30 +170 -46
1 At constant currency
Russia -18 +149 -34
Ireland -14 +146 -28
1 At constant currency
2 Immaterial sales in prior year
15 M&S COLLECTION
Linen Striped Midaxi Tiered Dress, SAR 295A RESHAPED M&S
INTERNATIONAL OPERATING PROFIT
19/20 £m 110.7 19/20 £m 110.7
Gross profit (87.9) Stores gross profit (131.3)
Store staffing 14.0 Online gross profit 43.4
Other store costs 16.4 Online growth costs (23.6)
Distribution and (11.7) Government support 13.1
warehousing
Central costs 3.6 Other cost savings 32.8
20/21 £m 45.1 20/21 £m 45.1
Memo: Brexit costs (6.2)
16A RESHAPED M&S
PROFIT BRIDGE
£m
76
403
(23)
(353) 20 42
(66) (15)
(243) (201)
Adjusted Food Ocado Clothing International M&S Net Adjusted Adjusting Loss
PBT & Home Bank finance PBT items Before Tax
19/20 cost 20/21 20/21
OPERATING PROFIT
17 M&S SouthamptonA RESHAPED M&S
ADJUSTING ITEMS
52wks ended 27 Mar 21 53wks ended 3 Apr 21
£m £m
Strategic programmes
Organisation (116.9) (133.7)
UK store estate (95.2) (95.3)
Other (5.8) (5.8)
Directly attributable to Covid 90.8 90.8 Mell Square closing June 2021
Intangible asset impairments (79.9) (79.9)
Sparks (16.6) (16.6)
Ocado intangible assets amortisation (14.2) (14.2)
Store impairments 6.9 6.9
M&S Bank charges (2.4) (2.4)
Other (9.5) (9.5)
Total adjusting items (242.8) (259.7)
18
New M&S Sears Solihull opening June 2021A RESHAPED M&S
CASH FLOW AND REDUCTION IN NET DEBT
£m
825
268
LEASE DEBT
(37) Decrease in lease obligations £184m
New lease commitments £(48)m
Other £20m
(317) (204) 156 435
(82)
WORKING CAPITAL (54)
Increase in payables £160m 279
Decrease in stock £41m
(120)
Decrease in receivables £67m
Adjusted Cash lease Working DB pension Capex Financial Other3 Adjusting Decrease Decrease Decrease
EBITDA payments1 capital funding and Interest and items in financial in lease in total
disposals2 taxation debt debt net debt
1 Cash lease payments includes £184m decrease in lease obligations and £133m interest
2 Includes cash payments of £77m in relation to prior year capital accrual
3 ‘Other’ includes reversal of Ocado income, FX and other non-cash movements in net debt, offset by completion of investment in Ocado, employee related share transactions and settlement of derivatives
19A RESHAPED M&S
SUBSTANTIAL CASH AND UNDRAWN FACILITIES
Undrawn £1.1bn RCF with further recent
relaxation of covenants £2.89bn
>£1.5bn
headroom 2023, £1,100m RCF
Cash balances of £674m at year end
2021, £164m
2023, £300m
£1.11bn
2025, £400m
Re-financed 2021 bond maturity in Bonds
November
2026, £300m
2027, £250m
2037, £192m
£186m SLP
Limited bond refinancing in near term Net Debt SLP, Bonds
Excluding Leases and RCF
20 M&S X GHOST
Floral V-Neck Puff Sleeve Midi Tea Dress, £69.00A RESHAPED M&S
OUTLOOK FOR 2021/22
UK costs normalise to levels broadly consistent with 2019/20
Capital Allocation Model
Normalisation of Ocado economics
Invest in transformation
Ongoing disruption in international markets
Recover balance sheet metrics
consistent with investment grade
Brexit related costs, primarily relating to the island of Ireland
Dividend unlikely in the current year
Group capex to increase to similar levels to 2019/20 as we focus on restoring profitability
Central case assumes adjusted PBT £300-350m; ambition for
reduction in net debt
21STEVE ROWE CHIEF EXECUTIVE
A RESHAPED M&S
A RESHAPED M&S EMERGING FROM THE PANDEMIC PERIOD
A strong A successful An omni-channel Accelerated INTERNATIONAL
FOOD business transition to CLOTHING & HOME rotation of the business focused on
positioned for growth M&S product on business driven STORE ESTATE major partnerships
OCADO RETAIL and by a re-shaped and online
growing capacity product engine
23A RESHAPED M&S
M&S FOOD WITH BROADER APPEAL
FOOD NPD OVER 1900 LINES INCLUDING
FOOD ON
PROTECTING THE MAGIC OF M&S FOOD GROCERY ORGANIC
THE MOVE
HOMECARE
Focusing NPD on areas of broader appeal
such as organic, plant-based and family
215 95 65 119
DELIVERING GREAT VALUE
OVER 70% HEALTH
‘Remarksable’ lines account for c.10% of PRODUCTS!
volumes with nearly half of all baskets
containing one item
IMPROVING VALUE PERCEPTION
Net Promoter Score
70%
LARGER, MORE INSPIRATIONAL STORES 65%
Early trials generated strong sales growth. 60%
Now extending to a total of around 40 stores
55%
50%
Sep ‘18 Mar ‘19 Sep ‘19 Mar ‘20 Sep ‘20 Mar ‘21
24A RESHAPED M&S
M&S FOOD WITH BROADER APPEAL
CONVENIENCE PRODUCTS RECOVERING
Performance vs 19/20
PIVOTING MARKETING TOWARDS DIGITAL 17%
11%
High impact brand-building leveraging social
content & personalisation through Sparks -5%
-20%
-30%
-47%
FOTM FOTM Prepared meals
Retail Parks ex franchise ex franchise
20/21 21/22 since reopening
RECOVERY IN FOOD ON THE MOVE
Simplified M&S cafe offer with modern, quick DELIVERING OCADO
to serve menus SYNERGIES & LOWERING COST
Benefit Share by Project Type over 2 years (£m)
Product Specification
18 30 Procurement Efficiency
LOWERING COST & DRIVING EFFICIENCIES 21
Packaging Specification
Substantial cost reduction including Ocado. Manufacturing Efficiency
Updated forecasting system & Vangarde 32
Raw Material Procurement
roll out 67
Ocado synergies
21
16 Other
25A RESHAPED M&S
SUCCESSFUL TRANSITION TO M&S FOOD ON OCADO RETAIL
PENETRATION OF M&S PRODUCTS ON OCADO
BROUGHT THE BEST TOGETHER
M&S Food with Ocado technology, range 36% CHRISTMAS
and service 34%
32%
SUCCESSFUL SWITCHOVER COMPLETED 30%
28%
c.750 new lines developed for Ocado launch.
Now over 25% of sales and more than 50% in 26%
fresh categories 24%
Sept Oct Nov Dec Jan Feb Mar
SMOOTHED SHAPE OF WEEK Ocado mini CFC, Bristol
Strong demand led to increased throughput WINNING IN FRESH CATEGORIES
and reduced trunking and delivery costs
M&S % of Ocado category sales since launch
78%
RAPIDLY EXPANDING CAPACITY
64%
50% more in the next 18 months with plans to 56% 55%
49% 48%
broaden national reach and expand immediacy
MAXIMISING JV POTENTIAL
Omni-channel, data-sharing and product Desserts Chilled Deli Salads & Fish Meat
development and sourcing opportunity ahead prepared
foods
herbs
26A RESHAPED M&S
RESHAPED OMNI CHANNEL CLOTHING & HOME
PLANNING OPTION COUNT DOWN c.25% BY AW21
STRENGTHENED PRODUCT ENGINE No. of options (‘000s)
Deeper buying into core ranges with option 4
count a third lower than AW18. Launched
brands at M&S with initial group of over 2
20 partners
0
Womenswear Menswear Kidswear
AW18 AW19 AW20
PIVOTING TO GROWTH CATEGORIES
Focus on smart office wear, kids casual and
athleisure with Goodmove range now #1 full MARKET SHARE GROWTH: ACTIVE & KIDS CASUAL
price retailer share
3.4% 5.8%
CREATION OF MS2 TO PRIORITISE ONLINE
Builds on investment in data engine, cloud
hosted web platform and Sparks loyalty
2.9% 5.1%
relaunch
27 Jaeger
Jersey Animal Print Midi Wrap Dress, £79.00A RESHAPED M&S
MS2: DRIVING OMNI-CHANNEL GROWTH
SUBSTANTIAL OPPORTUNITY IN AVAILABILITY
Online availability
IMPROVING THE ONLINE OFFER
87% 86% 86%
Increasing availability from 76% in 20/21. 84%
Online only ranges including ‘test and repeat’ 79%
76%
lines and curated range of brands
2018/19 2019/20 2020/21
DIGITAL-LED CUSTOMER EXPERIENCE All Lines Core Lines
Sparks relaunch driving 3.5m new app
downloads. Digital services including video-
powered retailing for bra fit, beauty and DRIVING GREATER ENGAGEMENT THROUGH APP
furniture. Credit option launching in summer
Weekly average app downloads (k)
350 NEW SPARKS
300
MAXIMISING OMNI CHANNEL ADVANTAGE 250
200
AVERAGE AVERAGE
Investing in technology to enable low cost 46K/WK 69K/WK
rapid click and collect. Driving increased use of 150
payment services and specific benefits for 100
Sparks members 50
0
Apr Jul Oct Jan Mar
28 M&S COLLECTION
Pure Cotton Los Angeles Slogan Sweatshirt, £19.50A RESHAPED M&S
ACCELERATED ROTATION OF STORE ESTATE
No. of full-line stores
INCREASED NEED FOR STORE ROTATION
Good progress prior to pandemic with 59 255
full line stores, many in declining locations
already closed New Food
c.45
Rotate Close
110 c.30 180
New c.15
GREAT TIME TO OPEN NEW SPACE Core 80
Up to 17 full line stores planned including a 65
Core
number of former Debenhams units 65
New c.20
Prime Prime 100
80 80
CLEAR FRAMEWORK FOR ROTATION
Targeting trading in 100 prime markets and
80 core markets at end of programme CURRENT FUTURE
FULL LINE ESTATE FULL LINE ESTATE
29A RESHAPED M&S
STRONG ECONOMICS OF ROTATION
17/18
£14.3m
Sales
19/20
£1.1m*
Profit £39.0m
(12.3)% Sales
LFL KETTERING £4.8m*
Profit
+6.5%
RUSHDEN LAKES LFL
17/18
£24.2m
Sales
£2.5m*
Profit
(7.0)%
LFL NORTHAMPTON
*Cash contribution
30A RESHAPED M&S
FUNDING ENABLED BY REDEVELOPMENT OF ASSETS
31A RESHAPED M&S
INTERNATIONAL FOCUSED ON PARTNERSHIPS AND ONLINE
DIGITAL SHOWROOM FOR RANGE CURATION
AMBITIOUS PLANS FOR ONLINE GROWTH
Partnerships with marketplaces expanding
Localised fulfilment; stores and future hubs
Broadening distribution; new country sites
MODERNISING OPERATIONS PARTNERS
Invested in digital showroom
Renewed and reshaped store estate STRONG SHIFT TO ONLINE
UK export hub to improve service
Retail Sales £m
218
MANAGING AND MITIGATING BREXIT 103
Supply of fresh product problematic 68
82
Implemented short term solutions
Working to find sustainable models
2017-18 2018-19 2019-20 2020-21
32 Harry Potter™
Harry Potter™ Slytherin Pyjama Set, ₹1,799.00A RESHAPED M&S
RECAP: RESHAPED M&S POSITIONED FOR RECOVERY
Food: Strong underlying growth; positioned to recover in
hospitality, expand in convenience and on Ocado Retail
Resilient performance, optimistic as emerge from Covid year
C&H and International: New range and online capability
gaining traction. Stores positioned for multi-year recovery
Cost base reshaped: Even greater focus on cash, working
capital and returns
Extraordinary colleague effort: Feeding the nation, increasing
capacity for delivery and working with our trusted suppliers
Encouraging early trading in first six weeks of the year
33APPENDICES 34
A RESHAPED M&S
ADDITIONAL COSTS ASSOCIATED WITH BREXIT
GROUP BREXIT IMPACTS
£m 20/21 21/22
Admin costs (14.0) (29)
Tariffs (2.1) (13-18)
Total (16.1) (42-47)
PRODUCTS JOURNEY
Farm or Factory Labelling Delivery Product Vet Pick Vet Export Paperwork Vehicle Sailing / Movement Clear EU Import Stock on
Fishery into depot segregation Inspection Certificate declaration printed departs tunnel through customs into EU sale in store
granted to EU EU port
35A RESHAPED M&S
QUARTERLY SALES PERFORMANCE
% change to 19/20 Q1 Q2 Q3 Q4 FY
Food -2.1 1.6 2.2 -4.4 -0.6
Food LFL 2.0 3.4 2.6 -2.7 1.3
Clothing & Home -61.5 -21.3 -25.1 -18.7 -31.5
Clothing & Home LFL -59.3 -21.2 -24.1 -15.5 -29.8
Total UK Sales -22.6 -6.6 -8.2 -8.5 -11.3
Total UK LFL -19.2 -5.6 -7.6 -6.4 -9.5
International -40.7 -9.2 -10.4 -10.2 -17.3
Group Adjusted Revenue* -24.3 -6.9 -8.4 -8.7 -11.9
Memo
M&S.com 32.4 45.0 40.4 107.5 53.5
Clothing & Home.com 21.5 46.4 47.5 105.8 53.9
Food LFL ex hospitality/franchise 7.7 8.6 8.4 2.8 6.9
*At constant currency
36 XXX
XXXXXXA RESHAPED M&S
DEPRECIATION AND AMORTISATION
FY 20/21 (53 weeks)
£m Food C&H Intl Other Group
Group Adjusted operating profit 229 (131) 44 80 222
Depreciation
Tangible asset 113 165 13 - 291
Right of use asset 84 64 25 - 172
Amortisation 56 74 7 - 136
Write off & disposal costs 11 6 (13) - 4
Depreciation & Amortisation 264 307 32 - 603
Underlying EBITDA 493 176 76 80 825
Interest payable on leases 52 60 13 - 125
Total Group depreciation & amortisation includes amounts within adjusting items of £202.1m
37 M&S Eclipse MaidstoneA RESHAPED M&S
FINANCE LEASE BREAKDOWN
International
202
Office,
Warehouse 494
983 Full Line
& Other
£2,406m
FY 20/21
727
Simply Food
38A RESHAPED M&S
STORES AND SELLING SPACE
NUMBER OF STORES
UK Selling space (m sq ft) Mar 21 Mar 20 Openings Closures Change
Shopping Centre 1.5 16 16 0 0 0
Retail Park 4.2 73 70 3 0 3
High Street – large 5.4 81 81 0 0 0
High Street 2.3 84 89 0 (5) (5)
Full line total 13.4 254 256 3 (5) (2)
Outlets 0.4 32 32 0 0 0
Simply Food 2.4 314 310 7 (3) 4
Simply Food franchise 0.6 437 440 2 (5) (3)
UK stores 16.8 1,037 1,038 12 (13) (1)
C&H 10.3
Food 6.5
International Mar 21 Mar 20 Openings Closures Change
Owned/JV 1.8 154 152 4 (2) 2
Franchise 3.3 318 331 10 (23) (13)
International stores 5.1 472 483 14 (25) (11)
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