Marks and Spencer 2015 Annual Report Download - page 10

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08
MARKS AND SPENCER GROUP PLC
STRATEGIC REPORT
OVERVIEW
In 2014/15 we made further progress
against our strategy to become a leading
international, multi-channel retailer – as we
enhanced our M&S.com infrastructure.
With our new infrastructure largely in
place, we have been focused on execution.
A number of key projects, for example
improvements to our product allocation
and replenishment systems, have been
successfully implemented this year. We
also built up our design capabilities and
capitalised on our market leading food
product development. Whilst we faced
some di culties during the bedding in
period of the website and distribution
centre, we have learned more about how to
improve our online customer experience
and how best to stabilise the complex
operations at Castle Donington. Thanks to
our strengthened in-house capabilities,
these learnings have been e ectively put
into practice, enabling us to return M&S.com
to growth in the fi nal quarter of the year.
In 2014/15 we invested in our organisation
and our people to get the very best from our
new infrastructure and ensure we are truly fi t
for the future. We have brought in key skills
and competencies that have historically
been outsourced – helping us work more
profi tably and with greater pace. This has
included strengthening our in-house
clothing and home design capability and
our software engineering team.
We developed four new core values of
Inspiration, Innovation, Integrity and
InTouch. By putting these values at
the heart of everything we do, we are
encouraging employees to do things
di erently and take a fresh look at how we
can inspire our customers – with exquisite
quality and styling in our clothing, and
innovative, fi rst to market, exceptional
quality food. This consistency will help
customers recognise the values of our
brand and what makes M&S di erent.
PERFORMANCE OVERVIEW
We made good progress in three of our
four key strategic priorities for the year.
In driving Food growth we delivered an
excellent performance with sales up
3.4% and growth ahead of the market.
We signifi cantly increased our GM gross
margin by 190bps. GM sales, however,
were challenging, particularly in the third
quarter due to the impact of the disruption
at Castle Donington and the unseasonal
weather. Finally, we continued to control
costs tightly and reduced capital expenditure.
This, combined with a focus on working
capital, has delivered free cash fl ow pre
dividends of £524.2m up 22.5%.
FOOD
The strategy we set out in 2010 to be more
of a specialist in Food is working very well
and di erentiates us from the competition.
We had an outstanding year in a di cult
market. Sales increased despite defl ation
across the sector and our profi tability rose
as we streamlined our processes. Our Food
division has now seen 22 consecutive
quarters of like-for-like sales growth.
Customers continued to turn to M&S
for both everyday quality and special
moments. They love our constant
innovation: over the year we launched
1,700 new products. It is this newness and
innovation that makes M&S food special.
GENERAL MERCHANDISE
Customers recognised the improvements
in the style and quality of our clothing. Our
collections over the year were a stylish,
wearable interpretation of the key trends,
meeting with approval from the fashion press
and customers alike. By the fourth quarter,
all GM departments were seeing growth.
The rise in gross margin came about through
better buying and sourcing. We also focused
on full price sales and saw customers trade
up to our better and best ranges.
CHANNELS
Despite a di cult start to the year, the
performance of M&S.com steadily
improved as we listened to customers’
feedback and worked hard to improve
the online shopping experience. The site
made gains on three key metrics as the
year progressed: tra c, conversion and
customer satisfaction levels. We now o er
£5.2bn
+3.4%
£4.0bn
-2.5%
£524.2m
+22.5%
We are transforming M&S into a
stronger, more agile business – putting the
right infrastructure, capabilities and talent in
place to drive our strategic priorities.
MARC BOLLAND CHIEF EXECUTIVE
OUR BUSINESS
CHIEF EXECUTIVE’S
STRATEGIC OVERVIEW
s
ri
INSPIRATION INNOVATION
Our values underpin everything we do...
We aim to excite and inspire our customers We are restless in our aim to improve things for the better
UK FOOD
REVENUE
UK GENERAL MERCHANDISE
REVENUE FREE CASH FLOW
PRE DIVIDENDS
52.6%
+190 bps
GENERAL MERCHANDISE
GROSS MARGIN