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

Good day, and welcome to the Marks and Spencer Income Investor Call. This meeting is being recorded. At this time, I'd like to hand the call over to Jeremy Townsend. Please go ahead, sir.

Thanks very much. Good afternoon, everybody. Thanks for joining the fixed income call. I'm just going to talk through a brief introduction and then more than happy to take any questions. And I've got various colleagues here from M&S who will help me out depending on how we get the questions. So good afternoon, everybody. Thanks, John. I just want to touch on the results we put out this morning and briefly talk about where we are in our reshaping M&S transformation. We set out the plan to reshape Minister growth 2 years ago. And our vision is to be the most trusted retailer. Quality products at the heart everything we do. We're obsessed with products and we've got a shared passion for Food and Clothing & Home, putting the very best in terms of our customers. Last year, we served almost 1 million more customers. That's over 32 million people, which is over 60% of the adult population. More customers than ever before have shopped at M&S. It's been a year of good progress. Our strategy has delivered growth in sales, market share, margins, return on capital and free cash flow. And profit before tax and adjusting items of GBP 716.4 million with an increase of 58%. So a lot done, but we're positively satisfied and we've got lots more to do and lots more opportunity. Just looking at the core businesses in a bit more detail. In Food, sales were up by 13%. And and value market share was up 15 basis points and volume market share was up 20 basis points. And the performance was driven by volume growth, which outperformed all our grocery peers, attracting more family shoppers. Operating margin improved to 4.8%, which is ahead of our 4% target. And that was supported by structural cost reduction in stores and benefits from the GIST acquisition, which we completed in September 2022. We're on track in foods, but we've got more to do to get ahead of the growth curve and to continue the momentum. In Clothing & Home, sales increased 5.3% with total market share up 40 basis points and our full price market share up 80 basis points driven by Womenswear. Clothing & Home is attracting new customers as well, particularly online, which outperformed the market and grew faster than stores in the second half. Operating margin increased to 10.3%, which is again ahead of our target of 10%. This was supported by structural cost reduction in the logistics network and increased full price sales. We've made good progress in Clothing & Home, but there's also significant opportunity across the Clothing, Home and Beauty business. Just let me talk you -- I'll just talk you briefly through some of our strategic priorities looking forward. In store rotation, we -- last year, we opened 6 full-line stores and 8 stand-alone food stores. And we're starting to create a very different shopping experience. These stores are performing well ahead of plan and growing in our second year trading and have paybacks above our hurdle rates. In Food, the Gist supply chain integration has gone well. And during the year, GBP 70 million of GIST savings were delivered, meaning that payback on our investments is ahead of plan. In Clothing & Home supply chain, we've got more focused ranges, although there's still more opportunity, and we've moved to fewer, more strategic sourcing partners as part of our supply chain strategy. And in both Food and Clothing & Home, the big opportunity is still to come as we invest for the future in the modernization and automation of our networks. Some parts of our business have been a bit more challenging. Our international business [indiscernible] has been slower than the U.K. and it's a key focus for the coming year. We know we've got a big job to do in our data, digital and technology investment. The progress has been slower than we've liked, and we're now playing catch up to some extent. And you'll be aware of our joint venture in Ocado it's not consolidated into numbers. Encouragingly, sales are growing with double-digit growth last year supported by M&S products online, but we're still where behind where we'd like to be on profitability, and we've got much more work to do together with Ocado JV. Despite these challenges, we've had higher profits, as I said earlier, and disciplined investment choices are translating into increased return on capital employed, which increased to 14.1% in the year, which is an increase of 33%. The higher profits and disciplined capital translates into return. We've got increased free cash flow. We've strengthened the balance sheet, and we're in a positive net funds position. And the financial health of the business is at best it's been in decades. And this has enabled us to step up our investment guidance for the current year and restoring a normal dividend of 3p per share. So looking forward to this financial year, focus remains on growing volumes and market share, delivering the magic of M&S to our customers through exceptional quality, value, service and innovation. There are some headwinds, cost inflation remains elevated, and we're planning for structural cost reductions and efficiencies to offset this. Given the increased confidence though and our track record over the last 2 years in delivering growth, we're planning to make further progress in performance this year and beyond. So very happy to take any questions from anybody on the call. Any questions?

If you've got any specific questions and you'd rather deal them separately, by all means, contact us contact James or Louise. But otherwise, if there aren't any questions, we're not seeing any -- I think we can draw the call to a close. Right, well, thanks very much for your time. Anybody like I said, any specific questions come back to us. Otherwise, have a great afternoon.