04 Nov 2009
Marks and Spencer - Half year results 2009/10

Well they're better than expected, which is always good news and I think it just shows that a year in business, as indeed a year in politics, is a long time and we've made some progress.

We've had to react internally and we've had to react externally. Internally, we had to fix a few issues that we knew were business issues, whether it's on stock control, whether it's on costs. I think we've done a pretty good job on cost. It's on the way we market and that links directly to the external environment just listening to what the customer wants and giving them more of that. Essentially, it's about upping our game in innovation, upping our game in product development, upping our game in terms of promotional stance and making sure that the customer sees us as a very serious option in a difficult high street.

The good news is there is more confidence about. The bad news is the confidence levels are still a long way from historic highs. But people are more confident. They've managed now to go through a period of 12, 15 months of this recessionary period and, if they've got jobs, they've got some idea of what's in store for them. The key thing is to maintain or grow confidence through into 2010.

I think the outlook is okay, but I'm certainly not looking for a quick bounce back. If you look at all the metrics coming towards us then you've got reason to be cautious. We have got VAT coming back early in January. We don't know to what level, but it certainly won't be less than 17.5 percent. We've probably got continuing unemployment coming through, although that may affect younger people, which are not our typical demographic, more than most. We have got increased taxation for the higher paid, but that will undoubtedly have a trickle affect on consumers. We've got a few things like stamp duty relief coming up and we've got our own costs going up in terms of running our business.

Whether it's online or in-store, we can accommodate both. I'm pleased to say our online business is doing particularly well at the moment and outperforming the market. Equally, when you look at the offer that we've got in stores this year, it's a more tailored offer. It's an offer which offers something for everybody, by which I mean that if you're a bit pushed financially you can find very good value gifts and, indeed, much better value foodstuffs and fantastic clothing. Equally, if you want to stretch your budget, we've got something for those people as well. So I think we're better set up than we were last year. But, clearly, I think it's going to be quite a knuckle ride through the next eight weeks to Christmas, but that's no different to every Christmas. This is my 38th Christmas in retail.

Well last year was last year. We did last year what we needed to do to protect, if you like, Marks and Spencer's market share and keep faith with our customers. This year I believe we've laid out our store in a different way. We've absolutely upped our innovation. Our values are even sharper than last year. Our stock is under control and I think we will trade through this year in a different way.

I'm pleased to say that our market share now has pretty well stabilised. It's no secret that we had an accident a couple of years ago, that we had to make some management changes, so there were some self-inflicted injuries in our Food division which we've now put right, in the sense that we are now growing our total food business again. We delivered in the last quarter flat like-for-likes and I'm confident we can grow into next year.

I think so. What we've said clearly is that we will do what we need to do to make sure our business continues to move forward. We've not been shy of investing in Food, or indeed any other margin in the last 12 months. But we're in a much more robust place. I think mentally the business is in good shape. I think that we know we can fight back. We believe in what we stand for in terms of quality, value, service, innovation and trust and I'm very, very confident the team is pretty well set up to deal with what 2010 brings us.

Well, our customer comes to Marks and Spencer both in textiles and food to find new and exciting products. We know in Food that they particularly come to us for that and we've upped the level of innovation very considerably. We strengthened the management team. We will have something like 30 percent new lines coming into the business over the next 12 month period and where we get those products right our customer responds well to it. There has always been competition, but we must make sure as we go into next year that we absolutely do knock the socks off customers in terms of that innovation. And the same applies to Home, the same applies to Kidswear, the same applies to Lingerie or to Menswear or indeed to Womenswear.

It's now clearly understood that Simply Food is a success; there's no question about that. It does allow us to grow our footprint and we can demonstrate that very quickly and it is extra business. At the same time, it's true to say that our Simply Food stores have over the last 12 or 15 months outperformed the core business. But there's room for both. What we must do is make sure that our big destination stores, our stores where people come to see the complete range of Marks and Spencer and the stores which are the smaller Simply Food stores in those areas for convenience for the consumer all offer consumers what they want for that particular time. So it's more of the type of food to go, more of the instant decision food and less of the complete week shop. We can do that pretty well in our Simply Food stores.

What we've said is that we understand there is demand. What we've said is it's probably not an if. What we've said is it's almost certainly the when. We're still working through how that might work. But, equally, at the back of my mind, I know that there are very few retailers who have successfully developed a model that's profitable. We need to look very carefully at which model we want to endorse, which model we want to drive before we go down that route. But we will be in online foods at some point.

I think it fits very well. I keep saying to people that brand stretch as we call it is about recognising that Marks and Spencer is a shop and we are there for the customers and not the customers for us. This is not the first brand stretch that we've done. We've been selling electronics, whether it be selling Sony televisions or whatever else, for some three or four years now and have got a growing business there. What we've said in the food side is that we recognise, and indeed I am a customer myself who acts that way, that there are certain brands that we must have; whether it is Marmite, whether it's Bovril or whether it's Tabasco, we like to buy those things. If I can provide my customer with that service at the same time as he or she comes into buy some other thing, I can offer a more complete shop and the convenience to him or her. It's around 300 or 400 brands. It will be extended and I'm confident it's what our customer wants.

Broadly, we are holding our market share both by value and by volume. It's up a bit here and down a bit there but I suppose that's a baseline win. We've come through a very difficult recessionary period with the ultimate discretionary spend in clothing having suffered. We are now back where we started from at the beginning of the recession.

Well the beauty of Marks and Spencer is that we can accommodate both types of customer. I mean the beauty of having a broad church like we have is whether it's in the Knitwear department or whether it's in the Food business now, whether it's in Menswear, whether it's in Kidswear, whether it's in Lingerie, you can literally make sure that you've got goods to offer to those customers who are, if you like, financially stretched but, equally, we've got those goods to offer those customers who might want more luxury at very affordable prices from Marks and Spencer. The balance is determined by the consumer and it's true to say that in the last 15 to 18 months they have been trading down. But, equally, for everyone that is trading down I can find certainly another half or three-quarters of a customer who wants to trade up. The trick for us is to make sure we've got one foot in each of those camps.

Well per una is slightly different. To answer the first question, we believe the brands that we're putting in are added value in terms of they actually do something different for the customer. The core brands in Marks and Spencer, i.e. the Marks and Spencer product, will always predominantly be the value brand and that will continue to be there.

Well in Kidswear I think it's very simple; we've absolutely upped our game. If you look at where we started this process back in 2004, when I think we were number five or number six in the hierarchy of market share, we're now number three and I don't believe it's impossible to get to number two at some point in time. That is about better product, better pricing and giving the customers what they want, and I know we're succeeding in that case. In the case of Home it's a slightly different equation. We have a very small market share - less than 3 percent - in a market which is very fragmented, which has seen a lot of change in terms of businesses going out of business and that's presented us with an opportunity. So we need to get after it both online and in store and one of the things we've done is open a couple of standalone home stores in the last year or so just to see how we can drive that business.

International is doing pretty well actually. I think that only endorses the strength of the brand overseas. We do have nearly 300 shops. We are making substantial profit. It's no secret that in some countries Marks and Spencer has had a tougher time. But if we've had a tougher time in Greece, it's because the Greek economy has had a tough time. If we're had a tough time in Turkey, it's because the Turkish economy has had a tough time. That's part and parcel of what's happening in the global economies. But that is only going to be a one or two year thing. We must be confident and we've said that we will drive our business in three ways. We will drive the small businesses which are the franchise businesses in the same way as we have. In other words, we will drive them on a hands-off basis through our franchisees. We will take some control and more management interest and more management involvement in some of the bigger franchise partners, whether it's in Turkey or whether it's in Greece or whether it's in the Czech Republic and Poland. Then in some of the bigger territories, specifically in India and in China, we'll drive that harder. In India we will do it on a joint venture basis and in China we'll do it ourselves. But I'm confident. I think you have to take a long-term view. We said we wanted to get revenues to 10 percent. They are 10 percent. We want to get revenues now to 20 percent within three to five years. I see no reason why that should not happen.

No. There is no plan for us to drive into Western Europe. What we have said specifically is if an opportunistic opportunity arises we would look at it, but our clear priorities are that we want to drive in India and drive in China.

We're doing pretty well. We launched this plan to a sceptical audience in 2007 and we said we would do 100 things under five pillars. We've made fantastic progress in 30 or 40 of them. We've upped the game in another 30 or 40. In other words, we've set ourselves tougher standards. We will deliver by 2012 pretty well what we said we would deliver and we are looking now to how we set ourselves more stretching targets going forward to 2015 and 2020.

Well I think what we mustn't expect is too much. What we mustn't expect is everybody to agree everything down to a level of granularity which will make it impossible. What we must accept is, or what we must hope for, is that all the countries participating - and there are many; I think there are 190 countries participating - come to some common agreements which will have to be worked through in detail in the months after that. But it's a vital summit, it's a vital meeting, and I don't think there's anybody on this planet now who doesn't recognise, whether they believe it to be with a small c or a large C, that climate change is here to stay.

We are a customer facing business. I think in certain cases governments have not taken the lead in some of these unpalatable issues and we have to do what we can to educate our consumers about what they can do to help themselves. They're actually saying to us, even in the depths of this recession, if you show us how to do things and providing it does not cost us too much, we are very willing to learn. We must push hard on that and, as we come out of the recession, I think they're will be even more willing to learn.

I'm sure that at the right time we will identify a candidate who is sympathetic to what this brand does, understands the brand ethos, sees the opportunity in the business, recognises the investment that we've made in this business over the last five or six years and drives this business very hard for the next decade.

On track.