Marks and Spencer Group plc

Hello everybody, it's Archie Norman here and welcome to the M&S 2023 results presentation. In a moment I'm going to pass you on to Stuart Machin who's going to update you on how we're progressing with the reshaping of M&S and then he's going to pass on to Jeremy Townsend, our redoubtable new Finance Director who is going to take you through the detail of the financial performance, perhaps less arduous than in some previous years. And then Katie Bickerstaff, hopefully now on two legs, will talk you through omnichannel and international. Now, I believe that all new leadership teams need to arrive like a thunderclap, whether they're coming from inside or outside the business, to create that new sense of direction, of electricity. of appetite for change. And what this set of results shows is not just a strong set of financial results, which they are, but also that acceleration of the pace of change, the drive for performance and the drive for innovation at M&S. I always believe that when the results are strong, the chairman should say less. So with that, I'm going to hand you straight over to Stuart.

Thank you Archie and good morning everyone from our busy renewal store here in London Colney. Thank you for joining us for our full year results presentation. If you're watching this on the 24th of May there is a conference call for analysts and investors at 9.30 this morning where we will be happy to take your questions. So now to the results. 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 and home and food, and we delivered profit before tax and adjusting items of £482 million. As you will remember, last year's profit included some business rates relief, so excluding that, underlying profits are up. Clothing and home sales growth was double digit. While store sales outperformed, online sales were also increased. Excluding the rates impact, profits were up nearly 10%. In our food business, it was a tale of two halves. Our investment in value in the first half reduced margin and profit. However, a strong customer response to our value proposition drove accelerating sales and market share growth in the second half. The benefits from the GIST acquisition as well as operational efficiencies also supported an improved performance in our food business in the second half. where profit excluding rates was down 2%. International saw a strong bounce back in partner demand and profit growth. This was despite exiting Russia and the ongoing impact of EU border costs in the Republic of Ireland. Ocado Retail generated a loss, but under new leadership, a reset of that business is underway, and it has substantial capacity for profitable growth. And most importantly, free cash flow from operations was robust. This enabled us to successfully acquire and integrate GIST, our primary logistics provider, and to further reduce our debt. This disciplined approach to capital allocation means our medium-term growth plans can be funded and the Board can restore dividends to shareholders starting at the interim results this year. In short, we've made good progress, but there remains so much to deliver in the year ahead. Over the past year, Katie and I and the executive leadership team have found a strong working rhythm and I've asked Katie to raise the bar this year even further when it comes to our omnichannel strategy. I'm also delighted that Jeremy Townsend will be working with us now until May 2025, supporting us to deliver our plan. And on that note, I will now hand over to Jeremy, who will walk you through the financial results.

Thanks, Stuart, and good morning. I'll start with the group headlines, which highlight a year of strong performance. Group sales were £12 billion, up almost 10% on last year, with profit before tax and adjusting items of £482 million, demonstrating a robust performance despite significant cost pressures. Profit before tax and adjusting items was 7.8% below last year. As a reminder, business rates relief of £59.8 million was included within profit last year. A focus on strengthening the balance sheet has delivered positive free cash flow from operations and reduced net debt, with credit metrics sustained at investment grade levels. I'll now take you through the results in a bit more detail. Starting first with a profit bridge. Excluding the impact of business rates relief in the prior year, the Group generated an increase in profit, with growth in clothing at home and international. In food, price increases for customers were lower than the inflation experienced in costs, which lowered margin and delivered a slight reduction in operating profit. Ocado retail had a difficult year and recorded a loss. This was driven by higher fixed costs from underutilised capacity, as well as lower sales, which were impacted by lower basket sizes, reduced shopping frequency post the pandemic. The contribution from M&S Bank declined due to pressures in the macroeconomic environment, causing an increase in bad debt provisions predominantly related to the forward economic guidance. Net finance costs benefited from a higher pension credit, reflecting the opening accounting surplus, reduced net debt, higher interest rates on cash deposits and the partial buyback of our 2023 and 2025 bonds. Adjusting items included store estate programme costs and costs relating to the GIST acquisition. As announced at the half year, a credit has been recognised relating to a reduction in the fair value assessment of the contingent consideration for Ocado Retail. I'll now take you through the business areas in more detail. The food business generated another year of life-like growth, supported by investment in innovation and trusted value. Hospitality and franchise showed strong recovery and we saw growth in categories such as food on the move alongside basket building categories such as frozen and groceries. We performed well in events with ambient celebration delivering double digit growth on the prior year. While basket value reduced, larger baskets continue to grow and overall basket value remains well ahead of pre-COVID levels. Operating profit decreased, although this was in part due to the inclusion of £24.6 million of business rates relief in the comparative. Operating margins declined, driven by an investment in value, as well as the impact of business rates, as I mentioned. However, in the second half, margins were ahead of last year, reflecting the benefits of the GIST acquisition. Looking at the drivers of margin in a little more detail, gross margin declined as a result of the previously mentioned investment in value, with price increases for customers lower than cost inflation of goods sold. Although operating costs increased by 5.7%, this was at a lower rate than the increase in food sales, resulting in a beneficial impact on the margin of 0.7 percentage points. The increase in operating costs was largely driven by colleague pay increases and energy inflation. Further investments were made in in-store technology and a new forecasting and ordering system. These cost increases were partially offset by savings and efficiencies from retail operations and the ending of the gist management fee following the acquisition as previously mentioned. The clothing and home business generated another year of like-for-like growth, supported by the benefits of an omnichannel model. Menswear and womenswear performed strongly, and sales also benefited from third-party brands providing customers with more choice. There was increased footfall and traffic into stores from the normalisation of shopping behaviours post-pandemic. Online sales remained in growth, with average order values up, supported by click and collect sales. Return rates increased during the year as customer trends normalised and reflected the impact of third-party brands. Operating profit decreased, largely due to a lower gross margin and the inclusion of £35.2 million of business rates relief in the comparative. The H2 margin was lower than H1, with customer prices increasing by less than the cost of goods inflation. Looking at margin in a little more detail, gross margin reduced, as previously mentioned, with customer price increases lower than cost inflation. Cost of goods increased, driven by sourcing and freight inflation, as well as currency related cost pressures, which particularly impacted margins in H2. Similar to food, the clothing and home operating profit margin was helped by the fact that although operating costs increased by 5.2%, this was at a lower rate than the increase in clothing and home sales, resulting in a beneficial impact on the margin of 2.7 percentage points. Again, as with food, the main drivers of the increase in operating costs were colleague pay increases and energy inflation. Clothing and home also made investments in technology to support the omnichannel offering. The operating cost increases were partially offset by savings and efficiencies in retail operations and logistics. The international business generated another year of growth despite a number of market exits, including Russia. Sales increased in the year, driven by clothing and home sales in India and strong partner demand in Asia and the Middle East. Similar to the UK, sales growth was stronger in stores than online. With sales up 12.6% and with a slight increase in operating margins, operating profit before adjusting items increased by 15%. Ocado retail revenue declined despite growth in active customers and orders due to lower basket size following an unwind from the pandemic. Despite this, M&S grew sales through the channel. Ocado Retail EBITDA before exceptional items was down, reflecting lower gross margins, underutilised capacity and higher fulfilment and delivery costs. The credit in exceptional items is driven by insurance receipts related to the Andover and Erith distribution centres. Overall, Ocado Retail made a loss after tax in the period of £59 million, of which M&S's share was £29.5 million. The group generated free cash flow from operations in the year. Working capital outflows were lower than expected, in part reflecting phasing at the year end of around £50 million. Capital expenditure increased with a focus on investment in the grouped key strategic areas of store rotation, supply chain and digital, which I'll talk about in a moment. Ocado Retail drew down £30 million on its shareholder loan facility in the year. The business is expected to require further cash requirements in the coming year with an additional drawdown of up to £70 million. Cash tax increased as UK tax payments resumed. Adjusting items within cash flow relate primarily to the exit of the Russian franchise business, store rotation and structural simplification. We acquired GIST at the half year, which resulted in a net cash outflow of £103 million. The reduction in net debt is driven by free cash flow, with lease debt broadly level year on year. As I previously mentioned, the CAPEX programme is focused on our three strategic transformation areas, store rotation, supply chain and digital. For the appraisal of investments in stores, we apply hurdle rates commensurate with risk, with a primary focus on cash payback. Store rotation was focused on modernising the store estate, including the opening of three full line stores, six food stores and upgrades to clothing and home space. Supply chain expenditure reflects investment in infrastructure together with spend on upgrading vehicles. An investment in digital included replacement and upgrades of technology in stores, continued investment in website design and investment in food supply chain planning systems. In the year ahead, we expect to continue focusing on our strategic priorities with a similar level of overall investment. In order to fund a group's strategic transformation programmes, the primary focus is on generating cash flow to fund investment. Hurdle rates are applied to store investments and supply chain and digital investments are prioritised on the basis of their expected impact on sales or cost reduction. Investments in capital expenditure are subject to the group maintaining a strong balance sheet in the form of investment grade credit rating metrics. Last year, the group generated free cash flow from operations and continued strengthening the balance sheet. This included buying back part of the 2023 and 2025 bonds, which helped to reduce growth debt. Investment grade metrics were maintained for another year and we are seeking to not only maintain these but to achieve an investment grade credit rating in the year ahead. The focus on cash flow, investment returns from capital expenditure and an investment grade credit rating creates a virtuous cycle which is expected to deliver an improvement in free cash flow from operations and a stronger underlying balance sheet. This in turn provides the Group with the capacity to resume dividend payments and, as Stuart and Archie have already mentioned, the Board plans to do this at the interim. Now, looking forward to this financial year. We've had a good start with both food and clothing and home growing sales. While the outlook is uncertain and our customers still face high cost inflation, there remains much within the Group's control. Modest growth is expected in revenue, driven by omnichannel, as well as from the benefits of store rotation. We plan to make further investment in quality and trusted value and we expect this will only be partially offset by actions to mitigate sourcing cost pressures and stock loss. In the year to come, we will see the annualisation of the GIST benefits and the delivery of at least £150 million of cost savings, which will help in mitigating the impact of underlying cost inflation. Therefore, despite the uncertain outlook, the overall objective is to build on performance delivered last year. Thank you. I'll now hand back over to Stuart.

Thank you, Jeremy. Many of you came to our Capital Markets Day in October, where we set out our nine priorities to reshape M&S to deliver growth and value creation. Three of these focus on delivering profitable sales with a medium term ambition for market share growth of around 1% in both our businesses. through developing exceptional product and a trusted brand, leveraging stores and online to deliver omnichannel growth, and building on the strength of the M&S brand to grow Capital Light International Partnerships. Two of our priorities are about improving operating margins with a medium term objective of 4% in food and 10% in clothing and home. These programs are structurally reducing the cost base and of course creating a high performance culture. And we are prioritizing investment choices in three key areas. accelerating store rotation and renewal, modernizing our supply chains, and creating a more engaging, connected customer experience. Our plans are underpinned by a disciplined approach to capital allocation. Now Katie and I will cover our progress against this plan, starting with our performance of our businesses before moving on to our cost reduction plans and investment choices. It was a strong year for food. Sales grew 8.7% 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 four-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 front of our customers' minds, we've invested again this year in value. We've sharpened the prices of over 100 Remarkable 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% and products featured in over 20% of our customer baskets. We also locked prices on 150 family favourites, giving our customers confidence in the quality but also the everyday value on the products that they shop most. We reinfigurated our iconic dining offer with new deals such as our steak 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 organisation. We will never compromise on our market-leading innovation or quality standards. M&S Food has won over 200 tried and tested awards from our fair trade coffee to our hand-crafted sausage rolls, and we were named Good Housekeeping's Wine Retailer of the Year. Product development drove sales across all our categories, with over 1,800 new lines introduced. For example, we worked with growers to launch our unique to M&S white pearl strawberries and introduced exciting new ambient lines for celebration events like Mother's Day. Our Mother's Day sales actually increased by 20%. We also reset ranges that support a bigger family shop, like in our soft drinks category or household cleaning. In addition, M&S continues to lead the way in animal welfare standards. In autumn, we became the first retailer to sell only slower reared, higher welfare fresh chicken with our British Oakham Gold range. 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. All of this supports momentum as we enter this new financial year. I'm really pleased to report that it was also a strong year for our clothing and 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, modernising 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. As we have said previously, kids and home are important market share opportunities for M&S. Here growth was more modest, up against tough comparatives, and we're looking forward to growth over the coming year. Our value in these categories has been strengthened and new ranges and collaborations such as Fired Earth are starting to drive increased awareness. 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 and home. Offering fresher, better quality and innovation and great taste in our food business. Offering improved quality and style in our clothing business. But across both our businesses investing in trusted value which has helped drive strong sales growth. Katie will now pick up a really important part of our strategy, which is omnichannel. And I've asked Katie to also include a cardo in this update.

Thanks, Stuart. And good morning from me at our White City store. I'm pleased to confirm I'm firmly back on two feet. 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 continued to grow with our active app users increasing 40% to 4.3 million. Our sign-up campaigns, such as the 12 days of Sparks in December, gave this a boost, offering customers access to exclusive offers and rewards. Our app aims to provide personalized shopfront to M&S brand and Sparks for our customers and connect the store and online worlds 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 one third of our sales are now through our app, compared with only 26% last year. Upgrades to our online experience have included one-click checkout with digital receipts and improved functionality in the app. Digital click and collect is now being rolled out to the estate, enabling rapid collection for our customers. And we've implemented self-service returns, reducing the cost of processing and turnaround time for resale. Using in-store fulfillment allowed 8% of orders to be filled from stores, and we're also trialing the resell of returns to Simply Food stores through local hubs. The opportunity we have is to leverage our omnichannel store and warehouse network, further reducing costs and creating additional capacity for growth without the need for significant capital investment. We think building the best omnichannel offer includes a curated selection of complimentary 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. We want to be a great partner for brands and that's why we're investing to make brand onboarding easier and simpler. We're also introducing dropship capability to enable fulfilment from partner stock and reduce the volume of split shipments, therefore lowering cost to serve. It's still early days in our brand strategy and we see substantial potential for further growth. 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 £600 million of sales through Ocado in the last year. As you'll have seen this morning, 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. M&S's share of Ocado Retail net loss reflects the effects of higher fixed costs from a new and underutilised capacity investment, as well as increased marketing and energy costs. 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. A new leadership team was appointed during the year and the team's focus is on improving customer experience. This includes re-engaging lapsed and occasional customers, improved service, for example, resuming kitchen table deliveries, and investing in value through the Ocado price promise to broaden appeal. We're also deepening collaboration between Ocado Retail and M&S. A few early examples include the M&S core range available on Ocado.com being increased by over 300 lines and efficiencies are also being scoped from a number of areas to reduce fixed costs as well as joint sourcing and logistics. So as you can see, we have some powerful omnichannel assets which provide us with substantial opportunity and capacity for growth. International sales increased over 12%, growing ahead of partner retail sales driven by clothing and 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 a quarter of international clothing and home sales. As a result of strong shipments, operating profit before adjusting items also saw a healthy recovery. With European online sales having grown rapidly over the past three years, investment is being made to improve customer service and reduce our cost to serve. For instance, during the year we opened a new logistics hub in Croatia, enabling the direct import of stock destined for EU markets. And in the Republic of Ireland, where the food business continues to be impacted by Brexit-related costs, initiatives to mitigate this are underway. Like in the UK, this includes investing in trusted value and also cost restructuring, as well as increasing the proportion of locally sourced supply and assessing new routes to market, such as our recent franchise trial with Apple Green. So that's it from me here in White City Store, and I'll hand you back to Stuart.

Thank you, Katie. Last year, operating margins were 8.7% in clothing and home and 3.4% in food. But our objective is to improve these to 10% and 4%. Our cost reduction programme will structurally reduce the cost base in M&S by more than 400 million over the next five years, whilst also aiming to offset annual inflation with productivity improvements. To bring this to life, during the year, we rolled out a further 800 self-scan checkouts, including clothing and home. As a result, in stores with self-checkouts, around 70% of food transactions are now self-serve. This helped us achieve our target of retail cost to serve of 10% in the year. In clothing and home, the warehouse network continues to be rationalized as we invested in automation at the Bradford warehouse alongside changes to the returns process as Katie highlighted. In the year ahead, we're planning for significant inflation including colleague pay of more than 100 million and $50 million in energy costs. However, these headwinds will be largely offset by structural cost savings of over $150 million. A key element of our plan to reshape M&S is the creation of a high performance culture. This means a simpler, faster, digitally-enabled Marks & Spencer where delivering performance and driving change is everyone's responsibility. The Support Centre is becoming simpler and more efficient, aligned to our strategic priorities. The technology, digital product and data teams have been brought together as one team. 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 seven days a year working in a store. We have raised the bar on talent. We've introduced new fast track learning and future leaders programs and we're also building the skills required for tomorrow. We were the first retailer to offer an advanced data science and AI apprenticeship and over 200 colleagues have now taken part. At our Capital Markets Day, I said we would invest in growth categories, growth channels and programs that will reduce our cost base. Total investment for year 2022-23 was over $500 million. This included the acquisition of GIST and around $400 million of capital expenditure, a level which, as Jeremy has explained, we expect to maintain. The integration of GIST is going well with a strong contribution to the second half with more to come this year. Our capital expenditure is focused on three key programs. Firstly, accelerating store rotation and renewal. 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 four years. As we enter the new financial year, we're accelerating the programme with eight new full line stores and 10 new food stores. This includes five brand defining stores in Liverpool, Leeds, Manchester, Birmingham and Thurrock Lakeside. It's a significant investment by M&S and we expect payback of around three years. We now have 80 stores in our renewal format, including one full line store at Stevenage. The full food renewal format delivers a bigger, better, fresher, more inspiring store experience, which also creates opportunities for a larger family shop. Paybacks are looking promising at under four years. The second capital programme is modernising the supply chain to create a lower cost network, which ensures the timely flow of products. Clothing and Home are creating a five-year program of investment, which we will update you on later this year. It includes consolidation of fabric and clothing suppliers. Systems upgrades create greater visibility, improved replenishment, and will reduce our excess stock. And using the logistics network to support our omnichannel offering. There is also the potential to drive productivity improvements from the shared transport across both clothing and home and through food. Now we've acquired GIST. A plan for network modernization will also be developed in the coming year. The final investment area aims to create a more connected digital customer experience, which brings together loyalty and payment supported by effective technology. This year, we launched a trial of Sparks Pay, which means Sparks members can spend with 45 days interest-free credit through .com and through the M&S app. Before I close, a word on capital allocation. The group's ability to invest is driven by its capital allocation framework, which prioritises the generation of free cash flow. Through this approach, we generated free cash flow from operations and net debt was further reduced. This allowed us to maintain investment-grade metrics, meaning we can invest in future growth and resume dividend payments at the interim results in November. 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, which is being reset. 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.

Good morning, everybody. It's Archie here.

I'm not really going to make any opening remarks except to say the sun is shining and hopefully it's shining on M&S. We've got here Stuart, Katie, and Jeremy to answer the questions. And, but before we start, Stuart just wanted to make a few hopefully brief opening remarks.

Bruce, because you'll be staring at me. Good morning, everyone. We've just finished the media call. But I thought just before we take questions, I'll lay out a few things on my mind and how I see the results. and where I think we are as an organization as I look at this year and beyond. Obviously, you've read everything. You've seen all the presentations, so you'll be across all of the detail. But the results were pretty good and probably a bit better than was expected at the half year. At the interims, the consumer backdrop was unknown. We very much focused on implementing our strategies. We've sustained momentum, as you've seen in the second half, because like we said at the Capital Markets Day, we very much focused on what's been in our control, whether that's product or whether it's value or cost reduction or where we invest for growth. I'm pretty pleased with our progress over the last 12 months, but I think it's only right that I do reinforce that we know we have still lots to do. And I think it's my job as chief executive to always set that bar a bit higher and to, for us as an organization, probably set a bar where people probably don't think it is achievable, but to take the organization beyond where people think possible. What is on my mind is the word transformation. I still quite like that word because our plan is to reshape M&S for growth, but it is a transformation plan because Katie, Jeremy, and myself are very conscious that we do have quite a lot to do in these next 12, 18 plus months. I do think Richard and the team have done a really good job on clothing, and you can see that in the presentation. whether it's the numbers or the maintaining the quality and value perception, but also that move to style, moving up two places. So there's some good work going on in clothing. And Alex, our new food MD, has been here six months now. He's finding his feet and he's got a clear plan and he's ambitious for our food business. So between us as a leadership team, we're quietly confident in clothing at home, the future, and the opportunities in these next few years on our omnichannel clothing home strategy. Likewise, our ambition is still to redouble the size of the food business that we actually set out a few years ago. So I think for me, it's to say that we're still positive about the results, but positively dissatisfied because that's the way we work. We've made progress. but we're relentless in our determination to make M&S a much bigger, better business over time. So I just wanted to say that. Plus, before I hand to Archie on the Q&A, I'm really pleased that Jeremy, as our CFO, who's been a brilliant support to me personally over the last six months, a wise counsel as our Chief Financial Officer, someone very calm, organised, disciplined, experienced, And Jeremy's going to stay with us for another two years. So I'm very pleased with that. But I'll hand over to Archie, and we'll do Q&A.

Archie Spencer- Thank you, Stuart. Good opening. Now, look, we've got a flurry of hands up.

So we'll try and get through the questions, and we'll treat it as a conversation. But so do by all means introduce yourself. If we can, we'll take one question at a time, because otherwise we won't remember what you asked. And maybe we can keep ourselves to two in total. That would be good. But I know some people, have a lot of things they want to discuss. Let's start with Isabel Del Prevo, Morgan Stanley. You were first up, so why don't you open the bowling?

Hello, good morning, and congratulations on your results. I had two questions. So the first one is just around your outlook around price investments for the next 12 months. and how you see yourself on that journey of investing in value. So should we expect that the bulk of the investments are now behind us, or would you expect a similar pace of investments for the year ahead? And then my second question was on the food market share.

Okay, let's take one at a time. We'll come back for the second one. I'll kick off on that, Isabel. Thank you. It looks a slightly tricky one because, as I said in the statement, there is still some uncertainty. And the uncertainty, of course, is around the consumer and it's around inflation. And that's our COGS inflation because our energy prices, wages, price increases is what our suppliers are going through as well. So it is slightly unknown. There's a couple of things. The first is we're confident we can grow revenue. And that's our plan. The second thing is In our control, we know we have a cost reduction program. I'll go a bit stronger on that because we want to restructure our costs to be a lower cost business. And therefore, we did this well last year and we want to do again. And the plan is $150 million of cost reduction this year. That helps us offset that inflation. As you know, our inflation in wages is around $100 million and in energy is still going to be $50 million this year. And therefore, That makes it slightly hard to also work out where is our consumer. And I see a similar trend, at least for the next few months, in how we've invested in value. And it is important to note that, especially in our food business, we did take some pain at gross margin. and you will understand this as well from the half year results and in a half year we invested 107 basis points and in the second half 119 basis points at gross margin level where we did not pass through the full rate of inflation and that has worked in our favor because it's grown our food business in value terms and volume terms and in market share terms so I see a similar pattern. Of course, commodity prices will start to come off, we think. At the moment, there's some early signs, but we don't know when. And as of today, we still see the cost of sugars up 11% on last year, the cost of cacao up 25%, eggs, et cetera. So that's what makes the outlook from a profit perspective slightly challenging to work out. Jeremy. Yes, Stuart, not a lot more to add. Absolutely right. There will be further investment in the gross margin in both food and clothing at home. Clothing at home exacerbated by FX, and there's still some more of that to flow through in the current year. As Stuart said, we had some waste issues actually in the first quarter of last year, and that should help gross margin in food year on year. But otherwise, I would expect a fairly similar pattern, 23-24 versus 22-23. Okay, thanks. Isabel, you had another question.

Thank you. Yes, the second question was your market share in food, which we can see from the counter data is obviously trending very well. But I was wondering, can you give us some color on how that market share is evolving by baskets? So I remember small was about 10%, but then large was about 1% market share the last time we gave the numbers.

Yes, it hasn't changed a lot, but overall market share we are pretty pleased with. In fact, yesterday we got the four-week data that showed we were the leading retailer on volume, which was also a bit of a standout. So we're encouraged, and I think that's testament to the work the team have done on balancing quality, maintaining that quality differential, versus others, but also the investment and not passing through everything in price inflation. As you saw, the market value growth is the best it's been for our food business, but also the best it's been on volume as well. I think the fact we're now holding volumes flat is good. What I would say is it answers slightly your question, but in our larger stores, We're very encouraged by the big basket movement. So where we've got our renewal stores in particular, in those 80 stores, there's some good news on bigger baskets and some good news on volume as well. The shape overall hasn't changed a big deal. You can't read too much into it, Isabel, because of the return to travel, you know, city centres. So what's happening with transaction and basket size is as much a function of macro as micro transactions.

Okay, thanks Isabel. Shall we go to Jonathan Pritchard at Peel Hunt? Jonathan?

Thank you and good morning. Just one for me actually. It's on that comment you made on clothing and the style perception. Is that across the board or are there any sort of spikes in that from an age group or demographic perspective or is everybody spotting that change in style?

I'll hand to Katie.

Morning. It's a measure that you, Gov, carry out. And we've obviously improved our staff perception by two points. And this is a metric that's quite difficult to move. It takes quite a long time because you need customers to come back, reappraise you, reappraise you again, reappraise you again. It's common, actually, across all categories. But the two standout categories within there are women's wear. both formal and casual, and menswear, both formal and casual as well. And we've still got, I think, a little bit of work to do on kidswear in terms of the non-school uniform range, and certainly Alex and the team are working very hard on that. But those would be the two standout categories, which is good because they're two of our biggest categories.

This is quite a move on, Jonathan, for Richard and the team. And I think it's encouraged them as well, Katie, hasn't it, on pushing the style credentials even further. And as Katie said, we've noticed it across all of the categories. So, you know, we think the team is doing a good job on this.

Okay? Okay. Cheers. Okay. Anything else from you, Simon? Jonathan?

No, I'm all good. Thank you.

Okay. Thanks.

We'll go to Simon Irwin at Credit Suisse and then Warwick. Simon, do you want to?

Have a go. Yes, good morning. Simon Owen, still at Credit Suisse. Congratulations, everyone, on a stunning set of numbers. I've got a couple of questions, the first of which is just on the store rotation program. We're down full line total in the UK, down three. So you've still got quite a long way to get to 180. Is this program kind of back-end weighted or are you seeing kind of better opportunities out there in terms of rent renewals or kind of better performance of existing stores? Or do you just think it will naturally accelerate over the next three years?

Yeah, good question, Simon.

It is a good question, Simon, because this plan was originally five years. And therefore, to your point, I sort of got quite uncomfortable when you said back-end loaded because I'm sitting here thinking, well, it is a bit because it's back-end loaded to my new challenge of three years. So let me just remind a couple of key points. I think the first is it's well documented. We're aiming for about 180, you know, full line stores. And we keep using the words high productivity, brand defining, because it forces us as a collective team to really focus on the right stores. We don't say yes easily in our property committees to signing off the money. We put the team through a lot of challenge. So we're still aiming for that. Look, I say five years into three, I'm pretty confident it'd be about three-ish years, but some of that is back in loaded. There is some good news. If you think about since the program started in 2017, we've opened 16 full-line stores. We've closed 75. we've actually reduced clothing space by 10%. And as you know, we're aiming for more than that. So it's, I would say, good progress, not exceptional, but good. Last year, in this financial year we're talking about, we opened five new stores. Three of those were relocations as well. And the relocation point, I think what's probably slowing us down a bit is we're really learning a lot on relocation and some of the new things we're doing. We relocated Chesterfield, Colchester, and there was one other I forgot, Maccasfield. But also, we're trialing some other things like our Pearly Way format. And in Pearly Way, what we've worked out is with a food of around 15,000 and the clothing around 20,000, very, very different to what we've done before, this is looking very promising. And therefore, as we trial these new things, it forces us to think differently. as we think about these new stores or relocations. And last year, we closed nine stores. This year, the good news is we've got 20 closures. 10 of those are relocations, so not real closures. We've got better sites. We're very encouraged by that. We've also got eight new four-line store openings. I read some of these out earlier, so I know them. Leeds White Roses this week. which we think will be one of the best. Liverpool won, which I was just there recently. We have to take down this horrible art wall in front that's blocking our store. We don't know whose it is yet, but to get visibility, but that would be a good store. Thurrock, Hurley Way, as I've said, Washington Galleries, Trafford Centre, Dundee. So we've got some really good sites coming up this year. My challenge to us as a team is they're the Debenhams sites in the main. And we're still out there looking for sites. And in fact, recently, we had a lot of landlords and people for one of our evening dinners in the office, where we really explained our ambition on finding the best site. So it's going okay. It is a bit back end loaded, and we need to go faster on rotation. Okay.

Thank you. I'm glad we didn't get didn't even get into Oxford Street planning. Could I just ask a quick follow-up on basket size? Just obviously lots of moving parts with convenience and stuff, but can you X out at convenience and tell us kind of roughly what the move in basket size was and kind of how you think about it over the next couple of years?

I think that's pretty difficult. I'm only letting the team force the breath, but because of the movement of convenience and travel and also inflation, You know, inflation is very forgiving, really. It makes everybody look cool, doesn't it, with the sales going up. But when you distill it down to volume, it's a different story. Stuart? Well, look, there's a couple of points on basket. I have to be honest. I don't focus enough on this. And based on the questions today, I think I'm going to spend more time on drilling the baskets every week. Larger baskets were up. Now, I am quite obsessed with large baskets, especially in renewal stores. And our baskets, therefore, over £30 were around 5% up on last year. Someone correct me if I'm wrong on that, by the way, but I think I'm about right. Our average basket was slightly down overall on last year. But actually, when you look at 19-20, we were double, I think, about 20% up overall. So overall, basket is up on the two-year period. Basket items on the two years on 19-20 were up. but slightly down on last year. I think that what's difficult to read is the convenience is recovering. So food on the move now has been recovering. Our food on the move sales were pretty strong, about 25% up on last year, and hospitality sales are up. So again, the minute you get food on the move added to the mix, that impacts the items in the basket. So that's why we tend to really just focus on that big basket number. But I think we're in OK shape, and definitely on the two-year period we are.

Thank you very much.

Thanks, Simon. Okay, we'll go to Warwick O'Kine and then the great Clive Black. Warwick.

Yeah, good morning. Warwick O'Kine from BNP Paribas. Two questions on clothing and home, please. The first is on full price sales mix. You said you've managed to hold the full price sales mix level year on year. It's a sort of historic high, I think. Is this now structurally higher because of the way that you you buy and because of competitor withdrawals or do you think this goes backwards as industry supply chains more broadly normalize? Yeah, good.

I think we'll chip in.

Katie, short answer to that.

Yes, short answer to that is we held our target in terms of the mix of full price sales and the north of 80% bucket, which we expected. We've got much greater control over promotional mix now and we're buying across our core lines more deeply. So we've changed the way that we buy product to make sure that the lines that are in, for instance, the edit in women's wear, we don't mind selling out of those. That's okay. Going back three or four years ago, we'd have carried that stock and then marked it down or had to promote it. So we are very happy to sell through that, but keeping in stock of our core lines on our never out of stock lines. So our intention is to hold that mix and hold that shape for the foreseeable.

Yeah. We hope it is structurally lower. But you hesitate to say because, of course, if we have one disappointing season, then the clearance will go up. But we're not doing all this friends and family. The team has fundamentally changed the way we price and promote.

Understood.

Thank you.

My second question is on closing homes profitability. I think of the interims you talked to before about a four or five point gap in profitability between online and offline. Do you think you make much progress in closing that gap this year and what are the levers to do that?

So a very good question. We have a plan to start to reduce that gap this year There are a number of contributing factors to that gap, and I'll just call out a couple. One of those is making sure that we further reduce and improve our returns rate to make sure that when we sell a product, we keep it sold. That will help us contribute to the profitability of dot com. The second and most significant, though, is actually our supply chain costs and the way that we fulfill our deliveries to customers, both through our store network, but also direct to consumer. That's both the mix of products that we put through the delivery network, but how we use our couriers and structure our couriers on our overall supply chain costs. And you know strategically that we're looking at sorting out our supply chain and our network, and we think there's substantial upside in there. So the teams have got a very clear target in the three-year plan to get to around our dot-com margin.

Well, just to add to that, Warwick, to Katie's point, FX had an impact on our online margins. And of course, Katie and the team are doing a lot of work on digital investment. And that's why you see that impact on the online margin. But our overall belief is we can get to a much better margin position over time. I think we would expect the online margin to end up at least as high, if not higher than the store's margin. Okay, great. Thanks very much. And by the way, calculating the margin online is not a complete science. The contribution margin online is pretty good. So anyway. Yeah, got it. Thank you. Thank you, Warwick. Clive.

Thank you, Archie. And I share the applause of others for the turn of last year. A couple of questions, if I may. You've spoken for some time about improving the end-to-end position of M&S's clothing and home operations. I just wonder, in 2024, what sort of progress you anticipate making on that whole supply chain through to store journey, which has been a big challenge and opportunity for you.

Yeah, massive question. Who's going to do that? Do Katie first.

I'll attempt to summarise it, Clive, in 30 seconds, hopefully soundbite. This is extremely difficult for us to sort out and has been a historic challenge for us. I'm going to split it into three things to keep it super simple. The first is where and how we source product. So making sure that we rationalise our supply base, that we manage which markets and geographies our product comes from. And the way that we build those longer-term relationships, look at payment terms, et cetera, with those suppliers is kind of block number one. And we have somebody leading that for us. Monique is leading that for us from a sourcing perspective. The second area is how we move stuff around simply, which is effectively from factory to floor or from factory to consumer. And there are a series of opportunities for us within the supply chain. Hanging to box, store-ready ratio packs would be a great example of that. But also the flow of product, where we hold it, where we move it, and how we move it around the network is very important for us. And we think there is quite a lot of opportunity there to rationalize and simplify. And we call that effectively our supply chain transformation program. And that's under Mark Lemming's leadership in terms of the clothing and home business. And the third area actually is very, very important, and that is the systems and processes that we use to create the demand, manage the orders, manage the performance process, managing forecasting process. And we have signed off stage one of that in terms of our systems development. and currently are working through how those processes work currently and the to-be processes we would like to put in place. And we see substantial upside there for us in the future in terms of availability, in terms of the right products in the right store at the right time, and frankly, in terms of the administrative burden that we have to carry currently in the clothing and home business, being able to loosen some of that administrative burden to the teams in a systematic way. So those are the three things that we're working on. You'll see some changes in sourcing this year, Clive. You'll see some changes in the supply chain. And you'll see the early work on the clothing and home systems this year. But I wouldn't expect major systems changes until the following year.

Okay. So two or three years out, we should note a very different clothing and home business.

I would hope so. I think, Clive, just to add, I mean, this is, we have a lot to do on this. It's going to take a lot of our attention. the next 12 months is you know supply chain omnichannel are the you know the two big things on our mind and don't forget now we've got gist the team has done some good work on combined transport as well between food and clothing home and we're quite encouraged by um some of the integration of gist already so uh but this is there's lots to do and this is a multi-year plan all right and also i had a well i was allowed a briefing with uh richard price last week on this allows one. I'm allowed one.

I didn't know about it.

But no, they look, I think we're, it's not been a historic strength of the business. And it's taken a while to get scripts. But this year, there's going to be some real progress. And there's a lot of there's a lot of money in this. Yes, it's really, really a lot of money going into it and a lot of money we need out of it. Yeah. Thank you.

One follow-up question really to Simon's. But I guess, where is M&S on its trolley versus basket journey in food? And the reason that I ask that is that you have put a lot of emphasis on trying to attract a family and younger shopper. And in that context in food, are you in the foothills of having more trolley shoppers or have you kind of reach where you want to be.

Sorry, Clive, the line wasn't very good. You're asking about the journey towards larger baskets and trolley shoppers, family shoppers, was that it? Yeah, and food in particular. I think to your last point, of course, this is a journey. We only started four years ago to think about different store formats. And the first thing to say is we are very encouraged by the basket size and the more family shop in our larger stores. You've only got to shop them and you see families, kids with the kids' trolleys, you see bigger trolley shops and a full weekly shop as well. And no doubt people will top up if they want brands outside. And that's OK. And hopefully we want to get those people shopping on the cardo for their brands. So I think we've got a lot of opportunity, especially in these newer, bigger stores that I called out earlier to the previous question. But not forgetting, we still over index on those smaller top up stores. We have a convenience format of 4000 square feet, which includes our franchise partners. We have a top-up store at 7,000 square feet and what we call a full shop store between 15 and 20. And therefore, it's those larger stores we're seeing a bigger trolley shop and a bigger basket and a very different perception as well of M&S in those stores. And there's 80 of them so far. So it's a journey, but people are reappraising us. I think that's why the value perception I actually didn't think this would happen, by the way. So the team have taken quite delight in messaging me every day. But the fact that we've moved our value perception so significantly this year, where everyone else has gone back, is testament to people reappraising the quality, but also the price. Thank you very much. Thank you, Clive. Now, Tony Charette. I'm always very relieved to see Tony's name on the team sheet because he's the only person who's been around nearly as long as me. So, Tony.

Archie, I could sue you for that comment, but I won't. Right. Compliments, Tony. Yeah, yeah, yeah, yeah, right. We've had to stick together. I remember you when you were a finance director in short trousers. Just a couple of things for me. I just thought I'd play Jeremy into the game here. Just a surprise that the working capital is neutral effectively across the year. Given that the inventories are up, I thought that you were trying to move the clothing payable stays back down towards sort of 90 days. I just wondered what the clothing payable stays are and how they've moved year on year. And secondly, just revert back to... Tony, let's take that.

Because I'm really glad you asked that question because the chairman was surprised as well. Jeremy.

Yeah. Hi, Tony.

Yes, you're right. So the guidance at the half year was £100 million. working capital outflow and the year end has been stronger than that. Some of that is phasing and some of that is around the payables. We are moving back towards 75 days. Some of that's happened in 22, 23. There's more to come in 23, 24. So we've guided to about a 50 million outflow in 23, 24, which reflects some of that. So there's some phasing, there's some movement, but we are moving to 75 days over time and that will be landed in the year we're in.

So what is it now?

We're moving from 90 to 75. So it's 90 now, yeah? Yes, it's running at 90. It's running down. We're on the journey. We're on the journey, exactly.

Okay, and talking about journeys, Katie has just outlined the latest supply chain revamp update program lasting for many years. I just wondered, I mean, obviously, having sort of seen you for quite a long time, I've been witness to a number of these, none of which has seemed to have worked. I wondered if you could commit to actually giving us some sort of targets and some KPIs and to actually show your progress against those of future future presentations because, you know, it could be just all talk. I'm sure it's not, but it would be nice to see something a bit more solid.

I'm glad you qualified your remark, Tony. Yeah, go on. We will commit to doing something at the next Capital Markets Day. You've challenged us before. You're right to be slightly sceptical. We will share with the Capital Markets Day some of the KPIs that we're aiming to deliver through this. This is a multi-year plan. I should also just add, we're quite encouraged, Tony, by GIST. The KPIs we set, and we did announce a $50 million target at the Capital Markets Day for GIST. We're going to be realizing that in line with how we laid that out. But across both businesses is one of the biggest priorities for us as a leadership team.

Okay.

Thank you very much.

Well done.

Okay. Yeah, Tony, there is substance to it. But you're right. We should, as Stuart says, we should elaborate and spell it out. Okay.

Richard Chamberlain. Richard, I see this morning you described our valuation as moderate.

Now, I'm I don't know whether that's a good thing or not. As a man of moderation, I suppose we should be pleased.

It sounds like a sort of holding statement, doesn't it, before I've read the results properly. It's far away. Thank you. Thank you. I've got two, actually. So can you just talk about the potential for recovery Brexit-related costs over the coming year? Yeah, that's been an issue, hasn't it, in recent years, getting products into Ireland, their admin costs and so on. That's the first one.

Yeah, Stuart can respond there, but it's a moving piece still because the implementation of the Windsor Agreement and the implementation of the new operating procedure for customs, inbound customs, is due to be implemented in October. And I was actually talking to people yesterday about it, and I talked to people in government about it. It's looking at the moment as if the Windsor Agreement and the labelling requirements are going to be more onerous than initially thought.

And I won't detain the meat, but it's quite technical. It looks as if they're going to be more onerous, but we don't yet know that. We think we're pretty on top of it.

Stuart?

Yes, look. It's sort of top of my mind. There's a couple of things. Firstly, we did commit to the importance of Ireland, the island of Ireland. One, because in clothing and home, we're very strong in the Republic of Ireland. And in Northern Ireland, we're very strong in food and clothing and home, I should add. So we knew the best thing was to face right into this at the time and try and make a success of it. In terms of cost recovery, that's quite hard to actually lay out as of now because of what Archie says. We were quite encouraged by the, you know, after two years of limbo, the fact that they literally not know what was going to happen. The Windsor framework is a step forward and fundamentally good news for the people of Northern Ireland and UK businesses serving them. So we think that's positive, but there's so many unanswered questions and we do not know the costs. to Archie's point, the labeling, et cetera. So we can't really answer that now, but we're doing quite a lot of good work. Just for example, we now have a local sourcing team in the Republic of Ireland, Eddie Murphy, actually, but he's done some really good work with local sourcing, whether that's fresh, whether that's ambient, whether it's local Irish product, and that is going very well. We're also trialing other things like our partnership with apple green in the Republic of Ireland we're looking to do something similar in Northern Ireland but why that's important is we're putting more M&S food on forecourts with apple green but that's also helping with our volumes or will do when we expand this and it's helping with things like distribution because we're going to trial other things in our supply chain with apple green so there's a lot going on and the signs are encouraging in fact our performance in Apple Green is way above expectations. So we can't quite answer the cost, the cost we put in and when we're going to get that out in more profitable sales and lower cost business. But we are doing quite a lot when it comes to supply chain volume and local sourcing. And I think this is going to be a couple of years, to be honest, until we come out of this. But really what we're saying is, is forcing us to reconfigure the business in Ireland. But it's worth just reminding everybody that the regulatory costs have been a big drag on this business for the last four years. The Irish food business really, depending how you look at it, has been reduced to roughly break even. That's the Republic of Ireland. Northern Ireland margins have been reduced. Supply chain costs have increased. We've got the labeling to come in. And then we've got the inbound. French artisan cheese producers are now going to have to get approval and other authorization documentation to be able to send their cheese to the UK. And incidentally, they're going to have to label it, not for the EU, even though it comes from the EU. So there's lots of almost comic things still to come. And it has been a drag. Did you want to come back on that, Richard?

No, that's very helpful, Colour. Thank you, guys. Just one more, though, if that's right. It's a slightly different topic, which is GIST. I just wonder what your plans are for the additional spend on that in terms of sort of automating DCs and so on. What are the plans there, particularly in the next year or two?

Well, I think the good news, to start with, Richard, is now it's fully in our control. We're not rushing at this. Because we're looking at the overall supply chain, clothing, home and food. And as you know, we've done some work in Donington and Bradford. So I think the first thing is the efficiencies are coming through. There's some big cost headwinds, which we would have paid for, by the way, even when we didn't own GIST. It's just now we can face into those headwinds and plan for them earlier. So at the moment, it's all about efficiency. It's about making sure our sites are the best they can be at the moment. And we're just at this precise next few weeks going through the future network plan on our leadership away day. And that's clothing, home and food. So it's a bit early days to really lay out the capital plan and the transformation plan when it comes to site by site. All right. Thanks very much. There'll be more to come on that, I'm sure.

Okay, we'll go to Anne Critchlow and then Adam Cochrane, and we'll see where we've got to on timing. Anne.

Thanks, good morning. It's Anne Critchlow from SockGen. I have got two questions, please. The first one's on Sparks Pay. I'm just wondering what sort of impact you've seen on sales growth from Sparks Pay, and if you could remind us sort of what level of risk you perceive in this. Thank you.

Thanks. Katie, yeah.

So we launched Sparks Pay last year, Anne. We currently got 5,800 customers using Sparks Pay in a bank book of 2.5 million customers. So it's a very small part of our business. The risk is pretty low. We have a series of clearly approval processes that customers go through, which are obviously backed and underwritten by HSBC, who's our partner in M&S Bank. And initially we had some challenges actually with approval rate, which we've been working on quite hard. What's been very interesting and encouraging is when we couple our detailed Sparks data with the bank's data, the approval rate becomes very strong and we've had no issue in terms of any risk of customers not paying. We've had very, very little risk in that at all. It's £500 upfront. And what we see is those customers are using that and are spending. So we're quite encouraged by how customers are behaving, but it's very, very early days.

Okay, great. Thank you. And then just a second one on product mix. If you could talk a little bit about what's selling well now compared to before the pandemic. So basically, are we back in a more normal market in terms of product mix in clothing and home? Thank you.

Of course. So it's been very interesting, actually. Last summer post-pandemic, as you know, was the surge of formal occasion wear. This summer, there are a couple of things I think it's worth calling out. So first of all, we've seen a little bit more normality in terms of mix of products that customers are buying. To be honest with you, it's been a little bit difficult to read because up until today when it's gloriously sunny and this week when it's been gloriously sunny, actually, we had some pretty poor weather. in April and the beginning of May versus perhaps last year where it was slightly warmer. But what we're seeing is slightly more of a return to normality. So a couple of call-out categories I've mentioned. Denim and casual trousers in women's, very, very strong. Lots of women still wearing denim and casual trousers to work. And we see that continuing. In menswear as well, actually casual wear has been trading very strongly. Casual lightweight knits, men's casual trousers. we are seeing quite a big uptick actually in our summer shop. So linen, swimsuits, kids casual summer wear, quite strong performance there, which is, I think there's twofold in this. One is the weather improving here and people sort of feeling positive about going out, being out and about in the garden. And actually, secondly, we see quite a strong uptick in our credit card book on the number of customers that have been booking holidays. So people are being very planful about holidays. They're thinking about going away. We see that in our travel money as well. So quite a strong performance in there. So not a massive swing sort of post-pandemic. The only category that has been slightly softer for us, which is worth calling out, I think, is our furniture business. And there's a couple of reasons for that. One, I think customers who spent an awful lot of time at home during the pandemic have done everything they wanted to do to their homes over the short term. And secondly, actually, it is a considered purchase for customers. So they're thinking probably quite carefully about where they spend their money. And I'd expect that to continue for a little while. And we've built that into our budget expectation. Hope that helps.

It does. It's really interesting. Thank you.

Okay. Thanks, Anne. Now, we're running out of time, so we can keep it snappy. That would help. Let's go to Adam, and then we'll try and take at least one other. So, Adam, fire away.

Thanks for the question. Two for me. And firstly, the risk of regulation with regards to the food business. Lots of chatter about whether a company might need to do something about food pricing, et cetera. More of a question for the larger supermarkets, potentially. But do you think this would have any impact on your relative pricing? Or is there anything that you sort of say about any government intervention on food pricing?

Well, look, very quickly, Adam, I hope not. You know, I think we're very responsible. The food industry in the UK is a responsible industry. I think everyone's working incredibly hard, if I think about M&S, on what we've tried to do to manage pricing through our whole supply chain, from farmer, manufacturer, through supply chain, through to our cost of goods. And I honestly think the last thing we need is more government regulation. We've gone through quite a lot, more than I've ever experienced HFSS being the most recent one, the implications of Brexit, all the other ESG regulation that's coming down the track that governments are delaying. So I hope not. I think we're all trying to do the right thing. And I think we've tried to do the right thing in how we've managed value for customers this year.

Secondly, including factory gate prices are coming down in Asia. Is there a risk that if the market starts to, the wider market starts to lower prices to the consumer rather than rebuild margins, what would M&S's reaction be in that kind of market environment?

I think if I couldn't quite hear you, but I've got a simple answer, which is as prices come down and commodity prices come down, wholesale prices, energy prices and everything else, we would want to pass that through to our customers and keep our shape on value. We're pretty clear where we are. The good thing about us is it's very much in our control because we're an own label business. And that means we can control every one of our products, our technical specifications, all the way from sourcing to selling. And that gives us the ability to absolutely make sure, you know, because the P&L is in every product we sell and that helps us manage it. So we will pass things through. We've done it already as best we can and we will continue. We have a very good commodity tracker. We're very clear where we are, whether it's oil or wheat or dairy. And the minute prices decrease, we pass that on whilst obviously balancing our margin. I think the big picture, Adam, is, you know, Price inflation is in some ways quite kind to food retailers. It's a mask to what's going on. Obviously, if prices start to come down and costs continue to inflate, that would put a lot of pressure on the industry. What we can do is manage our own position. And the good thing about the food business is that growing market share, relative performance is strong, value position is strong. So whatever comes, we're in better health than we have been for a long time. I think that's right.

Okay. Thanks very much for that.

Now, we'll just take, we'll see how we go, but we'll take one more anyway. James Grisnick, do you want to chip in? Yes, morning. Thank you, Archie. Good morning, everybody. I have three. I'll ask just one in the interest of time. Can you perhaps help us understand, from a switching gains perspective, where you're really making inroads, both on the food side of things and in CNH, who you're taking from disproportionately? That'd be very helpful. Thank you. Yeah, good question.

It is a good question. I mean, in summary, there's always ups and downs. It's very easy to look at our value and volume gains in food and clothing. And of course, we do have switching data. It does move a bit. And I think you can see in the competition numbers where the winners and somewhat the losers are, of course. I think the first thing on food is our customers all do shop elsewhere, especially when they've only got a convenient small store in their local neighborhood. So it's not surprising that those people who are at the top of the league of Qatar people will be switching to those retailers. At the same time, we're getting gains as well, which is why, of course, we're growing our share in value and volume in our food business. That does change a bit. It's not as straightforward as the same retailers. It just changed month for month. But we are attracting share from the four-line supermarkets, which is pretty straightforward. in clothing? Did you want to comment on switching in clothing?

Yeah, it's slightly harder to read in clothing, but clearly we have a series of competitors that we look at within the Camtar share data. And we kind of track roughly neck and neck with Next in terms of growth and our desire to try and outperform them in terms of value and quality and style, which we're working very hard to do. We see some growth come actually from some of the pure play retailers, particularly ASOS and others. We think we've taken some share off them and a little bit from John Lewis as well.

Thank you.

Okay. I think we're out of time, really. I know the team has got ton of stuff to do today, as you can imagine. So I'm going to call all that apologies to those we didn't get to.

We'll pick that phrase. We'll make sure we pick you up later.

Just to say thank you all for joining us. Look, I think I would say watch the trajectory, you know, so it's not just the results.

It's the sense of where the business is going. There's never been more momentum and energy. I would say never, not in recent times at M&S. And, you know, my role as chairman is a lot easier than it's been for a long time.

So good results, good performance, and we're excited about the year ahead.

Thank you. Thank you, everyone.