Marks and Spencer Group plc (MKS) Earnings Call Transcript & Summary

Hello, and welcome to the Marks & Spencer 2023 AGM. I'm the Chairman, and I'm Archie Norman. And I've been reading a book. It's entitled, it's a well-worn leather bound book. it's entitled The Chairman's reviews at annual meetings since the incorporation of the company in 1926. And this is a record of AGMs from 1926 to 1962. And the reason I've been reading it is not just because, of course, those were the glory days for M&S when we were a rapidly growing company. but also because those were the heydays of the great AGM, the days of popular shareholder democracy. And we've set ourselves a target of trying to bring back the spirit of those days, the spirit of shareholder democracy. And so we set ourselves a target today of getting 2,500 people to join us at this meeting live. And I don't know whether to achieve that, but I hope we have. And I want to say a particular thank you to interactive investor who joined us in on our Share Your Voice Campaign for shareholder democracy, and shared with us the contact details of their nominee shareholders so we can talk to them directly. I hope some of them have been able to join our meeting. So welcome all. A couple of words about this campaign, Share Your Voice. What is it about? Well, look, I think it's as simple as saying, we want to bring back shareholder democracy to the U.K. We believe that a healthy country is one in which people feel they've got a stake in the business that employ people, that generate wealth, that pay taxes in our country. And having a stake means that you can communicate with them and the companies can communicate with the shareholders. And we feel that, over the years, instead of that, we've been sleeping -- sleepwalking into a situation where growing numbers of nominee shareholders don't even hear from their company and don't vote on AGM resolution. so they don't feel they have that stake. AGMs have become all too often, to be honest, some antiquated town hall events that are not accessible to people. I mean if you live and work in the north of England or Newcastle, Edinburgh, it's a big ask to say take a day off to come down to London to queue up to get into some hotel room to listen to an AGM. And often, the AGMs are pretty dull and not really very welcoming. And finally, we think annual reports are just too long and, to be honest, there're regulatory documents now, they are quite turgid. And I'm not saying they're not important, but they should be filed online and then we should talk to shareholders, giving them the communication they really need. Our annual report this year is 260 pages. It's a wonderful document in every possible way. But I have to tell you, I think I and the audit partner from Deloitte and probably our very good finance director, Jeremy Townsend, are probably the only people who've read it page to page. So I'm not sure that's the way we should be talking to people in this modern era. We believe that government needs to act and companies need to act to bring back shareholder democracy. And after all, if companies like M&S don't stand up for the little person, for the small shareholder then who will. So let's move on. A few words on M&S, and what we're going to do today in our AGM. In a moment, Stuart Machin, our Chief Executive; and Katie Bickerstaffe, our Co-Chief Executive, who works for Stuart, are going to talk about how they're doing on reshaping M&S and how much progress we've made in the last year, it really is an exciting time for the business. Then we'll come to the core of the AGM which is going to be an open and transparent Q&A session. All questions are welcome, and it really is an open field. And presiding over the Q&A, we're welcoming back again this year Anita Anand, and Anita needs no introduction to most of you. She's a very well-known radio presenter, and actually quite a well-known podcaster. She presents the PM program and Any Answers? on Radio four. And I can tell you now, she doesn't take prisoners, and her job is to hold us to account and the questions we select for the live meeting are of her choice. Then we're going to have the formal process and wrap up. But first, a question for you from me. We're going to now hold a shareholder mood poll. And this is to test how you feel about our company now. And then we'll ask the same question at the end and see whether we've moved on or whether we've gone backwards. So the question which you will see on your screen is, are you feeling more confident about your investment in M&S than you were this time last year? So are you feeling more confident than you were this time last year? So you can vote now. It's on a scale of 1 to 10, and you'll have another chance to vote at the end of the meeting, and we'll announce the results, and fingers crossed, we'll have made some progress. So I'm speaking from our Waterside support center, where we hold our AGM. And this is our buzzing center. We have 2,000 or 3,000 people in here, hopefully, buying things, developing products, talking to customers. I can tell you it's an unimaginably different place from 4 or 5 years ago. Then it would be in the quiet, offices everywhere. It was pretty slow. Now things are really moved forward. And that's important because our challenge has been to transform M&S. I don't just mean the financial results, of course, they're the end product, but the way we work, the type of people we have, the way they interact at work every day. And I now feel that the beating heart of M&S is really changing and going faster. We have a very strong team, a very high energy leadership team, but all through the business, commitment to the business is very strong. Product is improving. I hope you all feel that. Hopefully, you're enjoying our food and wearing our clothes. Our stores are changing. Some of you would have been to our new stores. They're performing very strongly, and they look very, very different from the old stores. And online is growing. We're becoming truly a technologically enabled omnichannel business. Because our objective is to be a growing company so that the shares can go up in value, we decided not to pay a dividend for the last year, but we are going to pay a dividend next year. And that's so we can just conserve a bit more of our capital to invest in the company to modernize the business. It's also because we want to get back to investment grade. What this means is the rating agencies rate our bonds. And if they rate them a bit [ for want a ] better word higher, then we pay less interest, that means more money to shareholders. So that's why we've made this decision, but we are getting back to dividend paying next year. And hopefully, we can all look forward to a bit of a [ Ka ching! ] in the pocket when that happens. So I believe this is an exciting time for Marks & Spencer, for our customers and our shareholders. And we want you to feel you can join us on that journey and see the progress and hear from us throughout and hold us to account. However, I do believe that when the results are strong, the Chairman should say less. So with that, I'm going to pipe down and hand you over to Stuart and Katie. Thank you.

Thank you, Archie, and good morning, everyone, from our busy renewal store here in London Colney. It's been a strong year despite the headwinds as M&S invested in trusted value and did not pass on the full force of cost increases to customers. While this reduced gross margin, sales growth has been strong in both Clothing & Home and Food. And we delivered profit before tax and adjusting items of GBP 482 million. It was a strong year for Food. Sales grew 8.7% and with continued good growth in core categories such as fresh bakery and core grocery, reflecting our strategy to broaden our appeal. Grocery market share increased, and M&S outperformed all major full-line supermarkets. Over the last four years, M&S Food has made a significant shift to trusted value, reducing the volume of promotions and becoming far more competitive, not just on quality, but on value price points. With the rising cost of living in front of our customers' minds, we've invested again this year in value. We've sharpened the prices of over 100 remarksable value lines, offering great everyday quality, but also great everyday prices, upholding the M&S quality point of difference. Remarkable value sales were up 40% in and products featured in over 20% of our customer baskets. We also locked prices on 150 family favorites, giving our customers confidence in the quality, but also the everyday value on the products that they shop most. We reinvigorated our iconic dining offer with new deals such as our stake dine-in for two, and we moved our dining proposition to always on, providing permanent, affordable, better-than-restaurant quality alternatives to eating out. Exceptional product is at the very heart of M&S. We are a product organization. M&S Food has won over 200 tried and tested awards from our fair trade coffee to our handcrafted sausage rolls, and we were named Good Housekeeping's Wine Retailer of the Year. Customers are noticing and responding to our investment in quality and our investment in everyday trusted value. Value perception is now at its highest in six years, and we've maintained our leading position in quality and sustainability. I'm really pleased to report that it was also a strong year for our Clothing & Home business, with sales up 11.5%. Importantly, full price sell-through held steady on last year and market share has increased. Store sales were particularly strong, but online sales were also up. This was driven by the M&S app and strong demand for Click and Collect. Over recent years, we have cut the numbers of lines to create a more focused and edited clothing range. This action has enabled us to buy more deeply into core categories. For example, women's denim, the department I'm standing in now, sales have grown over several years, extending our industry-leading market share to above 13%. A more focused offer has also allowed us to buy more confidently into areas that drive our style and style perception. Dresses are a standout example. Three years ago, our market position was sixth and M&S now holds the third spot. But our performance has been achieved by an overhaul of our pricing architecture, modernizing our designs with forward-looking prints and taking a more confident trading approach with more open to buys, allowing us to test demand and use shorter lead time routes to replenish stock. Casual dresses were up 40% last year. Our leading position in value, quality and sustainability has been maintained. But the really encouraging news for our Clothing business is that style perception has now moved up several places to take third position. So it's been a good result in both Food and Clothing & Home. Katie will now pick up a really important part of our strategy, which is omnichannel, and I've asked Katie to also include Ocado in this updaters.

Thanks, Stuart, and good morning from me at our White City store. So we've talked to you about the opportunity we have to increase digital engagement, online sales and profitability through our work on omnichannel. Our goal is to increase customer frequency and spend by leveraging our national store and distribution network to offer a more convenient and consistent service. We know customers who shop multiple channels and products typically spend more and more frequently. An effective and profitable way to serve them is through our M&S app. The use of the app and associated Sparks memberships continues to grow, with our active app users increasing 40% to 4.3 million. Our app aims to provide personalized shop front to M&S brand and Sparks for our customers and connect the store and online world with added value services. It's been a great year for online sales, with sales increasing 4.8%, supported by our click and collect growth of over 20%. And even better, more than 1/3 of our sales are now through our app compared with only 26% last year. We think building the best omnichannel offer includes a curated selection of complementary third-party brands. We now have over 140 partners, increasing relevance in categories where brands matter to customers, such as dresses, footwear, sports and outerwear. Branded sales have increased 67% and these now represent about 8% of our total online sales. Launches have included an extended sports offer through the sports edit and Clinique and benefit in our beauty categories. Our branded offer is attracting new shoppers and incremental spend, which otherwise would have gone to our competitors. And importantly, a large number of customer baskets also include M&S products. You'll remember, we invested in the Ocado Retail business to bring the best together, combining the strength of Marks & Spencer's brand, food quality and innovation, with Ocado's unique and proprietary technology. The joint venture has already generated volume growth and buying benefits for M&S Food with over GBP 600 million of sales through Ocado in the last year. Ocado Retail's revenue in the year was slightly down, although Marks & Spencer's share of that revenue has increased. While active customers grew, revenues reflected reduced volumes due to lower shopping frequency post the pandemic and the impact of cost inflation on customers' baskets. However, Ocado Retail has grown by 40% since the M&S investment and has a large addressable market and substantial invested capacity for growth. This will enable it to grow sales and recover profitability in the medium term. International sales increased over 12%, growing ahead of partner retail sales, driven by Clothing & Home as partners restocked following the emergence from COVID. This was a good performance considering the impact of exiting markets such as Russia during the year. Online sales were up and are now more than double our pre-COVID levels and account for almost 1/4 of International Clothing & Home sales. So that's it from me here in White City store, and I'll hand you back to Stuart.

One of my first actions as Chief Executive was to create a culture, which is closer to our colleagues closer to our customers that means being closer to our store operations. As part of this, I reintroduced a CEO suggestion scheme so every colleague could come straight to me, we call it Straight to Stuart, with any idea that they have to improve M&S. In just this first 12 months, I've received over 10,000 different suggestions from our colleagues. Our new closer-to-customer program also requires every single colleague in our store support center to spend a minimum of 7 days a year working in a store. Accelerating store rotation and renewal makes customers think differently about M&S and builds an estate fit for the future. A brilliant example of this is Chesterfield store where we closed the High Street store and shifted to the former Debenhams unit on the retail park. The new store environment speaks for itself and customers are noticing and loving the difference. The store is on track to double the sales from the former store, and payback of the capital invested is under 4 years. As we enter the new financial year, we're accelerating the program with 8 new full-line stores and 10 new food stores. This includes 5 brand-defining stores in Liverpool, Leads, Manchester, Birmingham and Thurrock Lakeside. It's a significant investment by M&S, and we expect payback of around 3 years. The full food renewal format delivers a bigger, better, fresher, more inspiring store experience which also creates opportunities for a larger family shop. In summary, one year on as Chief Executive our plans to reshape M&S are beginning to drive improved performance, and customers are noticing the difference. In our Food business, we've consolidated our reputation for great quality and great taste, but we're now also being recognized for great value. Our style credentials in clothing are starting to catch up with our leading value and quality position. Our emerging strength in omnichannel means we're beginning to offer an easier and more inspiring shop through our renewal stores, through app, through Sparks, through m&s.com and of course, through Ocado retail. Looking ahead, of course, the outlook always remains slightly uncertain. But we are in the early weeks of this trading year and trading is on track and both our businesses are showing good growth. So much is in our control for the year ahead. M&S is such a special business with so much potential. And I'm excited about what we can achieve in the year ahead, building on the strong foundations we've established this year.

Well, hello, everybody. And now we're live in Waterside for the most important part of the AGM, which is the questions and answers the point at which you put your opinions or your questions to the executive team. But before we do that, I wanted to give you the answer to the question I asked you, which is whether you all feel more confident about the future of M&S than you did a year ago. And the outcome of the mood poll, it was 6 out of 10. So positive, but probably room for improvement. And we're going to ask the same question at the end of the Q&A session just to see whether the dial has moved at all. So let's see what happens. Now I'm just going to go to the introductions, starting with our executive leadership team. Stuart Machin, our Chief Executive, who obviously, you all know and have just heard from; and Katie Bickerstaffe, our Co-Chief Executive; and Jeremy Townsend, who's our Finance Director, who is making his debut appearance as an M&S AGM. So Welcome, Jeremy.

Thank you.

But most importantly, I wanted to welcome back Anita Anand, who's going to be our shareholder advocate again this year. and will put your questions to us. Anita, do you want to say a few words?

Sure. Archie, thank you very much indeed. Good morning to all shareholders joining us today. So my name is Anita Anand. I am very happy to have been asked back again, this year to be your advocate right here in the room. So I'm going to be putting your questions to the Board. Rest assured, I am going to make sure you get answered. And we've had so many questions come through already, submitted by you I've been through all of them. Some are along pretty similar lines. So to make sure we get into everything that you've raised, I'm going to start sort of mushing a few like questions together. So you may not hear your name. But rest assured, we will be covering what I can see are the most important issues on your mind today. And do remember, you can continue to post live questions through the platform that you're viewing on. Back to you, Archie.

Thank you, Anita. Now I just want to introduce the Board. So the Board are with us live. They're not all sitting around this room because it wouldn't be possible to see them all. But -- and I'm not going to introduce them name by name because it would take too much time out of the shareholders' question time. But what I did want to do was to introduce particularly two new Board members, Ronan Dunne and Cheryl Potter, and they've been kind enough to record an introductory video so that they can tell you who they are.

Hello, I'm Ronan Dunne, and I'm proud to be a Non-Executive Director here at Marks & Spencer. My background is I'm an accountant by profession and a banker, but have spent the last 20-plus years working in the telecoms industry, where I focused on brand customer experience and really adopting technology for the benefit of great consumer experiences. And in a way, that's what I think I'd bring to Marks & Spencer, that insight of dealing directly with consumer, customers, both here in the U.K. and also overseas in the United States. And really that focus on delivering incredible customer experiences, which is at the heart of the Marks & Spencer's brand. I think that the thing that particularly attracted me to Marks & Spencer's was just the credibility and resonance that the brand has. Having the privilege of working in other great branded businesses are recognized in Marks & Spencer is a brand that really stands for something. It stands for quality, it stands for value and it also stands for innovation. So for me, I have a very simple favorite when it comes to M&S. I have a 29-year-old daughter who, for 29 years in a row, has celebrated her birthday with a Colin the Caterpillar Cake.

Hey there. I'm Cheryl Potter, I'm the newest addition to the Marks & Spencer's Board I've joined having spent 20 years in the private equity industry at Permira, where I run our consumer team. So I bring a wealth of consumer investing experience into food, food retail, branded apparel, apparel retail across physical stores, omnichannel businesses and pure play. I hope to bring to Marks & Spencer's a passion for stakeholder value, whether that's our colleagues, our customers, or you, our investors. I've spent 20 years working through incredibly talented management teams to support them in delivering fantastic outcomes. That's one of the things that I would hope to bring to Marks & Spencer's. I have a real passion for diversity, I chair an organization called Level20, focused on getting more senior women into investing roles. And I would like to work with the Marks & Spencer team to continue their market-leading position in terms of being a diverse employer. Why did I come to Marks? Why would you not come to Marks & Spencer. It's the most loved brand on the high street. It's got an amazing heritage. It's clearly going through a transformation at the moment where we can build on what made this an amazing business in the past to continue to enable it to be an amazing business in the future. My favorite product goes without saying, it's Colin The Caterpillar. Everybody in my family ever has had a Colin the Caterpillar cake because I never ever baked.

Well, thank you, Cheryl. Thank you, Ronan, and thank you to all the Board for joining us, but also for the shift you put in during the course of the year. So that's it from point of introductions. And without further ado, over to you, Anita.

Archie, thanks very much. So before we dive into the main body of today's Q&A and while we're collating more of your questions, let's get some views in the room on some of the themes that I've seen coming through loud and clear. And Stuart, if I can start with you in that film introduction that you did, inflation cost of living, they have never been out of the headlines of late. You have predicted there are more headwinds coming our way. How are you going to navigate those waters when thinking about the margins as well for shareholders?

No, it's a very important question. And I know I touched on this on the video so our shareholders are pretty up to date on it. But I think I'll start with saying, actually, I joined Marks & Spencer, five years ago. And everything I read about our heritage in every book in the archive center in Leeds, people I spoke to, they talked about -- actually Ronan said this on the video, quality, value innovation. And I think the brand got confused when it went to premium, and therefore, we have set about in Food and in Clothing & Home over the last few years to improve our value for customers. And we sort of have a saying, if you look after customers, you'll look after shareholders. And this year has been quite unprecedented. I've never known such a challenging year when it comes to inflation. Inflation that we've been having, we've invested in colleague pay GBP 100 million over the last 2 years, energy inflation, and then, of course, our suppliers, in particular, in food, have had their headwinds that gets passed on to us, energy inflation, wage inflation and commodity price increases, and therefore, I kept quite close to our buying teams over these last 12 months. And it really reinforced -- our buyers had a very different job last year. Instead of looking at innovation and quality and new ranges and getting ready for summer or Christmas, they were actually spending a lot of their time just having incoming calls requesting COGS, cost of goods, increases, and managing that in the hundreds of millions of pounds was incredibly time-consuming, quite actually put the buying team under quite a bit of pressure. Because how do you manage all of this inflation from your supply base and the inflation we're having within our organization. And at the same time, the P&L is in all the products you sell. And we know if we passed all of that on as quick as it was coming to us, actually, the customer would definitely feel that. And we've been outperforming the market especially in food for the last 4.5 years in value sales and volume sales, and we didn't want to go backwards. And our shareholders will remember this, but at the half year results, it was quite a tricky set of results for food because we outperformed the market, but our margin was down. And we believed very strongly, and I believed strongly that if we held our nerve and we've got more cost out of our business to fund some of that inflation, then we would have a good Christmas and have a good year, and it would set us up for the year ahead as well. And that's really what happened. And I should just call out the food team because it was on the video, Anita, but the remarksable program of 100 items that we do have better quality, but we benchmark the big supermarkets on price. We kept our shape on that. And on the Locked Lines, a campaign that the team came up with to give that trusted value, was around 150 items people by most. And I use this word tricksy. I'm quite anti promotions. Every time we do a promotion, I say why? Wasn't the price good enough? But actually, what the team did is give customers a trusted position of saying, we've locked these items for 6 months. You don't have to worry. This is the price, and you can trust us for this period of time. And the summary of that meant, we invested in our food margin by 130 basis points, but we grew our sales overall and tried to protect that cash as best we could. And I think that has given us a good start, by the way, into this year. Just my last thing, I'm slightly worried about deflation because it's not going to come down as quick as the inflation. And now we're tracking that really carefully and try to pass that on as well to customers.

Okay. I mean there's so many questions coming to mind, but it's not about my questions. It's about shareholder questions. We're going to come to those in a moment. Katie, there just very briefly. Again, from your film were talking about becoming the leading omnichannel retailer, growing online in food online in clothes and home goods. But I just wonder whether the landscape has changed a bit now. We are now post-COVID, and Marks & Spencer customers, they like to feel things, touch things, go into physical stores. Have you not had to recalibrate a little bit?

It's a really good question, Anita, and thank you. I mean there are a couple of things that happened post-COVID. First of all, a lot of people working from home. A lot of people have been shopping digitally for sort of 12, 18 months because they had to. And there's definitely been a resurgence in terms of store footfall. And we're very grateful to benefit from that, and it's driven very strong performance in our store estate. But actually, those customers are also shopping digitally. And pre-COVID we saw, on average, per year, a 2% to 3% sales increase in terms of the migration towards digital. And over the medium term, we expect that growth to continue. I actually think it's very important that we grow both, and that we continue to invest in both our fantastic store estate that Stuart alluded to in the video, we've got some remarkable stores launching this year, but also both in terms of the digital experience through the app, through our stores and continue to invest in that and to grow that. And a couple of examples of that, that we've been working through, clearly, our app and the penetration of our digital sales on our app. So currently, about 40% of our dot-com sales now are driven through the app, which is fantastic, and we'll continue to innovate within that stream. The second is actually using the stores to fulfill our orders. A significant proportion of our store orders are Click and Collected. 250 stores have screens that you press to get Click and Collect, and we try and fulfill those orders for customers once they arrive at the screen in under 60 seconds. And I think last week, we were at 45 seconds. So for me, it's using both, but I will continue to push the business very, very hard to grow our digital innovation and our digital credentials.

I can see we've got more questions coming in. From our shareholders, let's move on to those now because it is the most important part of today. So Archie, this is to you. It's been asked by many people today through these channels and also privately, I've been asked as well because when people knew I was doing this, this year. I'm going to sum it up in Cliff Weight's words of ShareSoc. He has said Archie Norman's campaign for shareholder democracy, has merits but he's gone too far too fast on the question of AGMs. Can you explain why M&S will not be allowing shareholders to attend AGMs? And I think some papers have put it to -- be buttonholed by shareholders.

That's right. Well, thank you, Anita, and probably not the first time in my career I've been accused going too far, too fast. But look, it is a topical question. We have heard the feedback, and we are thinking about it. Just a bit of context. Our objective is to have the biggest shareholder AGM in the country. And we think we're on track to doing that. I don't know how many people have been able to join us today, but I think it will be a lot. On average, since the pandemic, when everybody started trialing digital and hybrid type of AGMs, on average, AGMs of large British companies have seen a drop in attendance of about 20% to 25%. Our AGM last year was roughly 2.5 to 3x the attendance that we had prior to the pandemic. So we think we've achieved something with that. We've created this accessible AGM enables people to join us from all around the country even if they're time [ poor], even if they can't travel. So that's an achievement. The question now, which the Board is going to have to think about given the feedback we've had, and just by the way, there are some brave shareholders being kind enough to come and join us today, and they're in the room with us now. But the questions that I know people are asking is, look, why can't I come along physically and look the Chairman eye to eye and buttonholed him? And I don't think that's unreasonable. We are accessible in the year. We hold shareholder panels. But at the AGM, is there some way we can combine the reach of the digital AGM, which you've got now, with the personality, the liveliness of having people physically present in the room, and we are going to have to think about that.

Okay. I mean that sounds to me like the door is open, and next year, it may look a little different. I'm sure it's a little different?

I'm sure it'll look different, we are on a journey, as they say here. We know we haven't got to the end point. So we are going to have to think about how we make this -- get the best of both worlds, we possibly can.

Okay. All right. Another question. Now 12 shareholders plus have asked this question, including Tom Ed and Anne Rogerson, Mary Fitzgerald, [ AkraMcCullock ] . Why was the choice made to pay a very generous bonus before paying a dividend? And when will a dividend be paid to shareholders once again?

Yes. Well, I've commented on this earlier, and I'm actually going to give Jeremy a chance to comment on the dividend exactly. The only thing I may just slightly head [ head masterly ] comment, I don't think we should conflate bonuses and dividend as such. I mean, look, people worked incredibly hard. The business has outperformed mostly with expectations. We've grown market share. We've delivered a lot of change in the business. Store managers and people colleagues across the business I think, deserve a bonus for that. Incidentally, most of that -- a lot of their bonus is deferred, so they don't get cash in here. It's not as simple as that. So I think that's the right thing to do. The dividend question is about whether we got enough capital for growth, capital to invest, and whether the balance sheet is in the right condition. Just as to remember, look, share price goes up and down. It's happened in the last year that the share price is -- in the last 18 months share price has nearly doubled. So it's not as if shareholders haven't had some benefit from all the achievement. But Jeremy tell us about the dividend? What are you offering?

We clearly appreciate dividends are very important to shareholders. as you said in the introduction, and as Stuart pointed out in his section, we've got some really exciting investments to make in our stores, in our supply chain, in digital with our customers, as Katie said. So we need to prioritize those. And as you said, we are committed to an investment-grade credit rating because that helps reduce our interest costs and is good for our balance sheet. But a dividend, I think, is a key way of demonstrating our confidence in the business. And as Stuart said, we've had a good start to the year. We are confident about trading. And so at the half year, we do plan to announce a return to dividend payments with a modest dividend, reflecting how important it is to shareholders.

Okay. We asked for some of the shareholders, if they wanted to, to submit a video question. We have one of those now. It's from Richard Schaefer, and I believe it's on driving change and performance.

The pandemic and cost of living crisis created a need to react. How do you create a sense of constant stress to drive further change that?

Well, I'm going to say first merit he's a [indiscernible].

It's a question on constant stress. It's definitely not one for the Chairman. The look, I think you get good stress and bad stress. But Stuart, do you want to, this is a leadership question?

I'm conscious of my 360 feedback recently that said you need to celebrate more and not be so dissatisfied every day. So look, I think there's one thing that came through on that question. Through the pandemic, the one thing we did do, which I actually look back and think it was a great thing to do, we called it never the same again. And it actually was about how do we accelerate change. And I use this all the time. In fact, my colleagues to my left will remember this, but when we did our full year results, we did the analyst call. We did the media call. And afterwards, I got quite fidgety. I was thinking, this is all a bit too good. And I went down to Richard in the clothing team and said, Richard, how ambitious really are we? And we sat with the clothing team for 10 minutes, 15 minutes, had this discussion on the next three years. And then I went to the Food team, and Alex was already waiting because I think Richard had texted him and said, Stuart's on the way out. And I said to Alex, it's good but we've got a lot to do, and Alex is our new food MD, and he's really just getting into the rhythm of how we're going to double this food business. And then Sasha was already waiting for me on the property floor, and I said, are we really accelerating this property plan? And the reason I say that, in all seriousness is, what I love about us as a team is we're constantly striving to do better. And it's a bit of an old saying that many people use, but it's pretty relentless, and that's why I enjoy the role. And I quite enjoy the fact that I think I call it positively dissatisfied, but I actually quite like the fact we are. We've got lots to do. And I use this saying quite a bit now. It was actually one of our Board who always challenge us, hold us to account, but are always there to listen. But one of our Board said to me, they heard us saying, I've stolen it with pride every day, lots done and lots achieved, lots to do, lots to lose. So we're slightly paranoid about that. So if it's stress, it's healthy stress.

Right. Okay. Good. I'm taking positively, just satisfied home to use on the family. We've got one question that's just come in from an interactive investor platform this morning. This shareholder wants to know, I understand there's been a real focus on Sparks and how our customer incentives ensure repeat visits. Can you shed some light on how the Sparks Plus trial performed, and whether this is likely to become a permanent offering?

Well, first in great to hear from somebody from the interactive investor platform. So thank you for joining us. Sparks is a massive program. Katie, you've led on this.

Yes, of course. And thank you very much for the question. So over the last couple of years, we've done a couple of things with Sparks. The first thing is that we've driven it to become a digital-first program. So the very best experience that you get for Sparks is in the app that includes offers and direct communications as you pull up near a store, for instance, if you have your phone with you. It also allows us to do much more personalized offers and experiences, which is very important. When we started to think about what we wanted Sparks to be, what we wanted it to be was to give you the very, very best of Marks & Spencer when you're our Sparks customers. And so what we do is we constantly innovate and trial things. And Sparks Plus is one of the things that we innovated with. So Sparks Plus is effectively access to quick next-day delivery and other things within the Sparks world for a small payment fee on a monthly basis. And it resonated very, very strongly with customers. We trialed it with a very small cohort of customers, and we will do more trial activity with those cohorts of customers over the next 6 to 12 months. One of the things, and Stuart was talking about us being sort of positively dissatisfied. One of the great things about this business and one of the great things about Sparks actually and digital capability is that we can constantly A/B test things, put things in front of consumers. We do it when we're thinking about product. You saw in the video, we do it when we're thinking about new offices and new services, putting it in front of customers. And they basically tell us really, really quickly, sort of within 24 hours, what they think of it. And we measure all of that, and it enables us to go again, double down on the things that work and then kind of stop the things that don't work so quickly. So lots more to do within Sparks, and you'll see lots more innovation coming.

Another question. I'm going to try and rattle through as many of these as we can, just to get every -- the shareholders as much bank for their buck. Christopher Taylor has been in touch. It's about Ocado. When will we expect a proper return from Ocado Retail based on the price paid, 50% using shareholder funds?

Well, Anita, you gave us a bit of feedback on Ocado before meeting.

Yes. I absolutely shall I share. And sometimes stuff didn't come.

On availability, but look firstly, we strongly believe in the future of Ocado. We think it's the right model for M&S online. And for us, we've already got something out it because we are online, and we couldn't be otherwise, and we've got some return from supplying Ocado Retail, but we're not happy with where it is. Now joint ventures are hard that has to be right, but also online food is hard. So we've got work to do. Stuart, you've led on this. You want to...

Yes. I mean I think it is a good question. I think the first thing just to mention is we laid out the synergies that we would get by selling M&S volume through Ocado. That has been achieved. In fact, last year, we quite relied heavily on those synergies because with all of the inflation coming through and how to balance it all, it was quite challenging. So, to some extent, we actually got what we wanted to get from it in terms of those annual synergy savings. But the potential, I think, is pretty huge. I mean, Archie has articulated it well, in fact, we spoke about it yesterday, last night in our weekly catch-up because we've just had the Ocado Away Day and it's the Ocado Board with the new management team, and there's a complete reset. Despite not much effort, M&S is 26% of the Ocado sales, and it's gone well without actually putting a lot of effort in, and therefore, the reason I say that is if you think and our shareholders at Shop at Ocado and you will know this because we spoke about it earlier, I get quite frustrated if I see an advert and an M&S product isn't there. And I wear two hats. I want Ocado to be incredibly successful because we have 50% of it, but I want M&S to be even more incredibly successful on Ocado. So if I see an advert or an e-mail, and M&S isn't featured, or a classic example the other week, Sharry, our brilliant marketing director in Food, sent out a customer e-mail with new products and also featured you can get them on Ocado. So on that Saturday afternoon, I click and I go straight on to the Ocado website and find 3 out of the 4 not available. Hence, the e-mails get flying around all weekend, why are these products not available? So there's lots to do. Just to summarize some things that are happening, Alex, who runs our Food business, and, Hannah, new Chief Executive, I think, are working very well. And already, there's 700 more M&S products gone on to the Ocado website. I was thrilled to see the 145 veg oil on the other day, for example, a real basic item that wasn't ranged before. So the ranging is getting better. The second thing is M&S have a role to play in this as well as Ocado. We have to get the availability better. In fact, my guidance on the Away Day, if you sort availability out, you maintain the service and you really do make sure the M&S products are the same price as the store price, if we achieve those three things, Hannah, this year, you would have done a pretty good job, and there's lots to do, but we need to just focus on the few. So I'm really excited. You have to remember M&S Food wasn't online, and M&S Food wasn't really in large stores of 15,000 or 20,000 square feet five years ago. We were convenience. We were small stores and we kept thinking, how are we going to drive growth in this business over the medium to long term. We're driving growth through large stores, and we can drive growth through Ocado. I'm incredibly challenging on the team on my expectations, not really this year because I really want Hannah to find her feet, do the right thing. And medium to long term, I think we'll be looking back and saying, this is a great online business for M&S.

Okay. Okay. This is sort of slightly related. It's food question. It's from [ Alan Hakim ] . And he, says, look, I'm concerned that M&S made without the range has been decreased apparently to make more space for vegan products. And Alan says, this is the wrong approach. Having achieved regular stocking of our preferred items at my local Havant branch, but only when I attended an AGM in person and I spoke to senior management, they're now disappearing again. If you need more shelf space of vegan products, get it from regular shelves, not from the made without.

Well, I'm interested that Alan said that because I didn't realize we were doing that , so Stuart.

Nor did I, but let me pick up Havant, Alan, separately. I think there is an availability issue on some of these products. I was in stores this weekend, and I know I had about 6 photos that I sent the team on availability. Look, space, I don't know what we've done on the vegan, but I wouldn't go and find out, but there isn't a plan to reduce made without a give more to vegan. We do have high share of vegan food. Plant kitchen is a very well-known brand. In fact, it's not just about vegan. It's more about giving healthier and different choices, and we only have so much space. I don't think we've taken it away. I think we have about 125 to 130 made without products. And actually, they're very, very good products. And some of those are also featured in the categories. So I will take it away because that isn't the plan today. But I will check Havant.

Okay. Okay. Great. This is another one on food. Actually, this food is a real issue with shareholders. It is by [ Scott Dacona ] , who says, how much growth do we still believe is available for the food division today? And how will we maximize the opportunity?

Well, we only have roughly 3.5% market share in food. So we're quite small. And given the growth we are planning, which Stuart can talk about, we think there's, I would say, open road ahead because it's a very competitive market. But there's lots of scope if we get it right.

I mean I think the first answer is we want to grow both our businesses, and therefore, M&S. And our focus on growth is very serious. We're very ambitious for Marks & Spencer. And we laid out at the Capital Markets Day, Katie, myself, this year, Jeremy will join us. And between us three, and our leadership team, we've set out a 3-year plan and a 5-year vision already. And there's some ambition in that plan, but probably 80% is achievable, and that's Clothing, Home and Food. In Food specifically, we think we can grow our market share by 1%. That really means doubling the size of our business. Now most shareholders will probably know that when I joined five years ago, I said we need to double this business. Now we've added GBP 2 billion of sales, but we haven't added GBP 5 billion. So we've got a way to go. But I think it's really doable. The food margins are always thing. It goes back to the first question you asked from our shareholders about inflation. I mean our food margins are like 3.5%. So you need scale and you need volume, and that's where we focus. So like I said, through the larger stores, we've got 10 new Food stores this year opening and 8 fantastic full-line stores, now they're bigger stores. We will never be as big as a supermarket, and we're quite conscious of this. And it's an important point because I actually don't want us to -- I say to the team, we went to a store over the weekend. And I said, you're not running M&S for 5 years. We run M&S for a lifetime. And I don't want to come back in a lifetime and say why did we open this big shop? So we're very careful about format size and space on clothing and food. The maximum food store would be about 25,000 square feet. So not as big as a big supermarket, and it will be own label, 99%. But through those 10 stores, through 8 full-line flagship stores, which includes Clothing and Home, and through Ocado and natural like-for-like growth, we think we've got a big opportunity. And I think Alex and the leadership team in Food have really got the bit between their teeth.

Okay. Okay. Okay. So [ Barry heiman ] has been in touch. Barry says, in the late 60s, we decided to use our big white anonymous food delivery lorries for PR. We painted Marks & Spencer on them. But now we own Gist, why aren't we doing the same?

Well, Barry is a good friend of M&S and it's all about the business. So thank you, Barry, for the question. It's a good one. Because what he's referring to is those lorries, you see going up and down the country, they're typically white with a big Gist sign on the side. Gist is now a part of our family because we bought it just over a year ago. And the question is, why can't we say something more motivating on the side of our lorries?

Well, Barry is right, I mean, sometimes if I'm down the motorway, I end up picking up a lorry that might not be clean and then send it an e-mail to say the lorry is dirty. And there has been occasions with Ocado vans, I've talked to Hannah and said, "Can we have M&S a bit more prominent on Ocado?" The answer very quickly is I can't remember how many, but I think it's 1,400 lorries, am I right on that, I don't know. I think you roughly have 1,400 lorries. Half of those have M&S branding. As we rotate to the fleet and we get new ones, we will put M&S branding on them. So it will take a couple of years because it's quite a lot of money. So as we replace we'll, update, but it's top of mind because we like the brand in as you go down the motorway.

Okay. All right. [ Ralph Walker ] , sustainability. That's a good question. When is M&S going to just stop using plastic bags?

Yes. This is a very interesting question. It's more complicated than people think because the popular idea now is paper good, plastic bad. And we know what people are concerned about with the plastic, they're floating around the environment, nonbiodegradable, et cetera. But in fact, when you look at the science of it, the picture is slightly different and more complicated. And we always try on sustainability ultimately to do the right thing. It's not just a popular vote. We're trying to do the right thing for the environment. So to explain that rather complicated question, Stuart or Katie.

I'll answer it quite quickly. I think Archie said it. I mean plastic is top of mind. I mean, sometimes, we can convince ourselves that it's sometimes good, we took plastic out of some of our food products. Those Chicken nuggets, for example. And on occasions, when I walk in the stores and I find packaging problems or actually on a Ocado customers right, I love Ocado for this, you get marked. And I look at, I am addicted to the Ocado website where you read the comments a bit like I'm addicted to our community internally where the colleagues write. So on the late night, you can read everything and find everything out. Lot of our packaging, where we removed the plastic actually caused us some quality problems. So it's not a reason or an excuse, and it's not about carry bags, but we do have to be careful on how we remove our plastic and how we keep maintain the quality and protect the product. We've reduced about 75 million pieces of plastic out of our Food business in the last few years. We were the first retailer, I think in 2008 or '09 to go to reduce the single-use plastic bag. And actually, our plastic bag sales are down 90%. So we're on the journey. I do think, at some point, we will be saying there's no plastic bags. When, I can't confirm, but I think at some point in the journey, we will be saying that.

Okay. Some point on the journey. Okay. Another sustainability question. Elizabeth Parker has been in touch. So Labour Behind the Label, and I believe that's a pressure group, reported crisis for Pakistani garment workers. What is M&S doing to ensure that workers in its supply chain are not being exploited?

And this is one of the questions that keeps the Board awake at night. We're sourcing clothing from around the world, including countries where labor conditions aren't the same as the U.K. And you're always worried that perhaps through some oversight, we've ended up working with a factory where conditions really aren't right. So we do a lot to try and manage this. But, Katie, this is really your field.

We take this very seriously. We pride ourselves on ethical trading, and we have a series of standards that we expect when we're sourcing globally from all of our suppliers and our partners. So we signed agreements with them that are not just about clearly the quality, the provenance of the product, manufacturing targets, et cetera, but are very strongly related to the way that the product is manufactured, the way that colleagues are treated and looked after. And we do audits, we do regular audits, we do investigations. We do unprompted visits. There are a series of things that we do. We also have -- our sourcing -- our Head of Sourcing works directly for Richard in Clothing & Home, and she has a team in multiple markets who know those markets very, very well. So it's not people just coming from the U.K. to have a look, there are also people out in those markets who can make sure that everything is done properly and effectively. And these kind of swoop audit processes are very, very important. And we review the outputs of those audits on a regular basis to make sure that we're all over it and making sure that we're sourcing from the right places.

Okay. Katie, thank you. This is from [ Barbara Kale ] and Ian Metcalf has said something similar. So again, I'm going to do [indiscernible] thing. M&S Clothing quality is often poor. Are you ever going to go back to selling good quality clothes again?

Well, it's a pretty direct question. Obviously, we don't think our -- we think we've made great strides. I don't want to sound as if we think we got to the endpoint, but we have made -- I'm convinced we've made great strides and all our feedback has been to that effect and the market share and the sales we could say the same. But who wants to -- Katie, do you want to hit this one directly?

I think -- I mean there are just a couple of things to say. And Barbara and Ian, if you have specific issues around products that you've bought from us, please do get in touch with me because Customer feedback on this is extremely important. We've worked very hard to improve our quality standards. And as you know, we take a lot of our data in Clothing & Home from a YouGov poll. And currently, we are #1 for quality and our quality rating has gone up actually a percentage point over the last 12 months, which is very, very important. It doesn't mean we get it right all of the time. And I'm very, very mindful of that. And something that Stuart and I say a lot is if ever you're in doubt, you invest in quality. And I think that mantra resonates very, very strongly through the team. We test all our products. We look at all our products for the finish on the seem, for the wash or whether or not there's any sort of balling. We test the machine proof in terms of washing machine/tumble dryer. And we invest quite a lot in our technical team. We have a technical team in Food of quality. We also have a technical team in Clothing & Home looking at the garment, the fabric, the stretch. And so we take it very, very seriously. As I say, if there are any issues that any of our shareholders or customers have, we welcome the feedback, and we follow up on it very, very quickly to make sure there isn't an inherent issue within the supply chain.