Resh a pin g

Marks and Spencer Group plc

Annual Report & Financial Statements 2023
INTRODUCTION

RESHAPING M&S

for growth
M&S has a heritage of quality, innovation and value
for money and has been voted the UK’s most trusted
brand. From these foundations, M&S is reshaping for
sustainable profitable growth and value creation.
Read more about our strategic priorities on pages 12-13

DELIVER IMPROVE
PROFITABLE OPERATING
SALES
growth margins
Read more on pages 14-21 Read more on pages 22-23

DISCIPLINED DRIVE
INVESTMENT SHAREHOLDER
choices Read more on
pages 24-26
returns
Read more on page 27

Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

FINANCIAL HIGHLIGHTS CONTENTS

Group revenue Basic earnings per share STRATEGIC REPORT

£11.9bn 18.5p
02 Chairman’s Letter
04 Chief Executive’s Review
06 CEO & Co-CEO
21/22: +9.6% 21/22: +17.8% 08 Our Business Model
10 How we engage with our stakeholders
12 Our Strategic Priorities
28 People & Culture
Group profit before tax Group profit before tax
APM 32 Our approach to sustainability
and adjusting items
34 Our Key Performance Indicators

£475.7m £482.0m 35 Financial Review

42 Non-Financial and Sustainability
Information Statement
21/22: +21.4% 21/22: -7.8% 44 Task Force on Climate-related
Financial Disclosures Report
Net debt excluding lease liabilities Adjusted earnings per share 56 Risk Management
58 Principal Risks and Uncertainties

£355.6m 18.1p
APM APM
66 Our approach to assessing
long-term viability

21/22: -15.4% 21/22: -16.6%

GOVERNANCE
68 Chairman’s Governance Overview
70 Our Governance Framework
NET PROMOTER SCORES 72 Our Board
75 Board Activities
80 S.172 Statement
Group NPS Omni-channel NPS International NPS 83 Board Review

+36 +39 +84

85 Nomination Committee Report
90 ESG Committee Report
92 Audit & Risk Committee Report
100 Remuneration Committee Report
21/22: +7 New metric 21/22: +4 130 Other Disclosures
High quality perception To align with our strategic Customers’ experience 134 Directors’ Responsibilities
across both Food and priorities, Digital and Store of M&S globally improved Statements
Clothing & Home as well as NPS metrics have been as NPS increased by
continued positive sentiment replaced with a single 4 percentage points
towards our customer service Omni-channel NPS this year.
FINANCIAL STATEMENTS
were key drivers of overall measure to track customer
Group NPS increasing by satisfaction as they shop 135 Independent Auditor’s Report
7 percentage points this year. across channels. 144 Consolidated Financial Statements
150 Notes to the Financial Statements
203 Company Financial Statements
APM
205 Notes to the Company Financial
Statements
ALTERNATIVE PERFORMANCE MEASURES 211 Group Financial Record
The report provides alternative performance measures (“APMs”) 213 Glossary
which are not defined or specified under the requirements of 218 Notice of Meeting
UK-adopted International Accounting Standards. We believe these 230 Shareholder Information
APMs provide readers with important additional information on our 232 Index
business. We have included a glossary on pages 213 to 217 which
provides a comprehensive list of the APMs that we use, including an
explanation of how they are calculated, why we use them and how
they can be reconciled to a statutory measure where relevant.

COVER
Pure Cotton Printed Maxi Tiered Dress (T427541): These icons, used throughout the report,
Part of the Summer 23 campaign, the on-trend blue indicate where you can find out more.
printed dress is £39.50, our best-selling dress price
Read more
point. M&S is now no.3 in the market for dresses, up
from no.6 three years ago. Download
M&S Tree Ripe Cox Apples: M&S is the only retailer to
tree ripen its British Apples, ensuring a better flavour Link to Sustainability Report
development and a richer colour. M&S has worked
Website
with its longstanding grower to use the method on
four apple varieties and seen sales increase 19%.

Annual Report & Financial Statements 2023 1

STRATEGIC REPORT

CHAIRMAN’S LETTER

We are now
at last seeing
the reshaping
of M&S
take hold.”
Archie Norman
Chairman

DEAR SHAREHOLDER This year almost all the main businesses In reshaping the business, we still have
When I arrived at M&S five years ago, traded strongly, growing overall market plenty of “old world” issues to tackle.
we embarked on the most important share in both Clothing & Home and Because the cost headwinds remain
turnaround mission in British retailing, Food, despite a challenging consumer strong, we are still “running up a down
to bring this great British brand back environment and strong regulatory escalator”, not least because we rightly
to health after years of drift. Of all the headwinds. Overall I measure our committed to a near 10% pay award to
turnarounds I have been part of, this has progress by the extent of change in the support our colleagues through the cost-
been the slowest and most intractable; business and customer reaction to of-living crisis. Our central support
reflecting the deep-rooted nature of product and service. Our ratings for functions and supply chain processes
our problems and culture at the style, quality and value in Clothing are remain inefficient by industry standards.
‘old M&S’, but we are now at last seeing well ahead and in Food, value perception That means we must become leaner and
the reshaping of M&S take hold with new is at the highest it has been in six years invest in improved technology support,
energetic leadership, new strong trading and our lead on quality has widened. as well as supply networks. This is where
results and the prospect of a return the “spirit of the turnaround” with the
At its core our strategy is clear: to imperative for change needs to be
to dividends.
deliver exceptional product ranges at rekindled and sustained as the desire to
Stuart Machin succeeded Steve Rowe as trusted value; shift our sales into high revert to business as usual at M&S is
Chief Executive at the beginning of the performing growth channels; rationalise always strong.
year with Katie Bickerstaffe as Co-Chief the rest and underpin it with a modern
Executive reporting to Stuart. All new omni-channel infrastructure and lower I believe the M&S Board should be an
leaders need to arrive with a bang, create cost base. Years of indecision had left engaged Board helping drive the
new energy and set direction early. In the M&S with a sprawling store network, strategy by supporting and challenging
last twelve months the sense of pace, including some historic but “legacy” the executive team. With the extent of
openness to change and delivery of stores. By rotating into new high modern governance pressures, it is easy
performance has accelerated. The M&S productivity digitally-enabled stores in for Boards to lose their “edge”. We run
challenge has always been fundamentally our new “renewal” format we can increase a very active Board involvement
about culture, talent and organisation sales and margins and the year ahead will programme and our meetings are never
and the change is palpable. see some exciting new developments. dull. Following their appointments in
May, Katie and Stuart joined the Board
M&S is a family of businesses each Our objective is to grow online, so that and through the year we welcomed
with different economics, suppliers 50% of our Clothing & Home business Ronan Dunne and Cheryl Potter as
and consumer dynamics bound will be ordered online, and with a margin non-executive directors. Ronan has led
together by a common brand, values that will exceed the store average. many businesses through technological
and trading philosophy. This channel shift will be supported by and people transformation and Cheryl
our emerging competitive advantage brings a strong private equity
on data, so we will be able to talk to each shareholder lens as well as retail
customer as an individual, moving away turnaround experience to our Board.
from “one message fits all” marketing. Since Cheryl joined us in February, we
now have a majority of women round
the table.

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 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

At the end of December, Andy Halford -

our superb Senior Independent Director
and Chair of the Audit Committee - stood
down from the Board after ten years and
HOW GOVERNANCE
IS SUPPORTING M&S

Reshaping
goes with our thanks.
We believe M&S has to fight its corner in
public life, standing up for our business
and values, as well as our colleagues,
customers and the thousands of trusted
suppliers – large and small – who work
with us. We live in a world where retail,
especially food, has become the
“politicians playground” and we have to STAKEHOLDER ENGAGEMENT
defend the customer’s right to choose. Our stakeholders underpin everything we do and
So we have fought high profile are fundamental to the delivery of our strategy.
campaigns on the Northern Ireland
Protocol and customs controls with Read more in Our Business Model and
some success in the form of the Windsor Stakeholder Engagement pages 8-11
Agreement. We are also leading a and S.172 Statement on pages 80-82
national “Share your Voice” campaign to
bring back retail shareholder democracy
fit for a modern digital era. If M&S does
not stand up for the small shareholder, ‘SHARE YOUR VOICE’ CAMPAIGN
who will? This campaign aims to give all shareholders
Given the scale and passion of our retail a voice by improving communication SHARE
shareholder base, we want to use today’s and engagement. YOUR
technology to make it easier to have a VOICE
stake and say in M&S and I look forward Read more in the Chairman’s
Governance Letter on pages 68-69
to welcoming many of you to our next
digital AGM in July.
Colleague culture and values are
central to our M&S history and we ANNUAL GENERAL MEETING (‘AGM’)
want to recreate a business where every Following the success of previous years,
colleague at every level can have a the 2023 AGM will once again take place
say and feel listened to. The support as a digitally enabled meeting.
from our store managers, the Business
Involvement Group representatives and 
Read more in the Notice of Meeting
all our colleagues across the business, on pages 218-229
including Gist who have now joined the
family, has been magnificent and we
thank them all.
Yours sincerely, NED APPOINTMENTS
The Nomination Committee led the recruitment
and appointment of two new Non-Executive
Directors, Ronan Dunne and Cheryl Potter.

Read more in the Directors’ biographies on

Archie Norman pages 73-73
Chairman
Details of the appointment and induction
process can be found in the Nomination
Committee Report on pages 85-89

Annual Report & Financial Statements 2023 3

STRATEGIC REPORT

CHIEF EXECUTIVE’S REVIEW

STRONG RESULTS AS M&S RESHAPES FOR GROWTH

M&S is a
special business
with so much
potential.”
Stuart Machin
Chief Executive Officer

OVERVIEW Food sales grew 8.7% with like-for-like  RESHAPING M&S

One year in, our strategy to reshape sales up 5.4%, outperforming the market TO DELIVER
M&S for growth has driven sustained in volume and value terms, as LONG-TERM GROWTH
trading momentum, with both businesses we broadened appeal through focused
product development and investment in M&S has a heritage of quality, style,
continuing to grow sales and market
trusted value. While investment in value innovation and value for money and
share. Our Food and Clothing & Home
reduced margin, the positive customer during the year, was voted the UK’s most
businesses invested in value to protect
response supported the delivery of trusted brand. After a number of years
customers from the full force of inflation
improved trading performance in the of substantial change and investment,
which, whilst impacting margin, was the
second half. Margin in the second half a strengthening omni-channel position
right thing to do as serving our
also benefitted from the strategic in Clothing & Home and the broader
customers well is the only route to
acquisition of Gist. reach of Food, including through
delivering for our shareholders.
the Ocado Retail joint venture, there
STRONG TRADING RESULTS International sales were up 11.2% at are significant opportunities for
M&S delivered strong results in 2022/23 constant currency, driven by demand profitable growth.
despite significant inflationary cost for clothing from global partners.
As a result, profits recovered despite During the year, supported by Katie
headwinds impacting margins,
the combined impacts of the exit Bickerstaffe as Co-CEO, I set out our
reflecting the benefits of our programme
from Russia and ongoing EU border- priorities to reshape M&S to deliver
to reshape for growth. Profit before tax
related costs. sustainable growth. To support the
and adjusting items for the period was
implementation of our plan, Jeremy
£482.0m (2021/22: £522.9m). Statutory
Ocado Retail sales were down 1.2%. Townsend was appointed to the team as
profit before tax was £475.7m (2021/22:
While active customers grew, revenues CFO in January 2023, and I am pleased
£391.7m). Prior year results included
reflected reduced volumes as a result of to say he will remain with the business
£59.8m of UK business rates relief and
lower shopping frequency post- until May 2025.
a net rates charge of £139.7m compared
pandemic. Profitability was impacted by
with a net rates charge of £186.6m in This Annual Report updates on our
the effects of higher fixed costs from
2022/23. delivery against this plan, setting out
under-utilised capacity, the impact of
which we are working together to reduce, how these priorities will deliver profitable
Clothing & Home grew sales 11.5%
as we build customer numbers over time. sales growth, improve operating margins,
with like-for-like sales up 11.2% driven
provide investment choices and drive
by a more confident approach to buying
Read more in our Financial Review shareholder returns. The nine priorities
and a focus on the modern mainstream
pages 35-41 are summarised below.
customer, which is starting to drive
better style perceptions. While store  Exceptional product, trusted brand:
sales outperformed, online sales were Developing exceptional product
also up, with growth in Click & Collect worthy of a trusted brand, through
sales, active App users and Sparks investment in great tasting, value for
loyalty membership. Alongside this, money, quality Food and developing
volume and value market share increased. stylish, great value, quality Clothing
& Home ranges.

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 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

 Leading in omni-channel: OUTLOOK AND GUIDANCE

more
Driving omni-channel growth. M&S has had a good start to the new
Increasing the participation of
Clothing & Home online sales, through
financial year, with both Food and
Clothing & Home growing sales. While
WHERE TO FIND OUT
leveraging the national store and the economic outlook for consumer
distribution network, to offer a spending is uncertain, cost inflation
convenient and consistent service remains high, and market conditions are
however and wherever customers expected to become more challenging,
choose to shop. And growing the strategy is beginning to deliver
utilisation of Ocado Retail’s capacity, improved performance and there OUR EXTERNAL MARKET
by providing superior service, market- remains much within the Group’s control. ENVIRONMENT
leading choice and M&S products. Read more on pages 6-7
In FY24, modest growth is expected in
 Expanding global reach: revenues, driven by omni-channel as well
Capitalising on the strength of the as from the benefits of the accelerating
M&S brand to grow global sales store rotation plan. Further investment in
through capital light partnerships quality and trusted value will be partly
and the development of a multi- offset by actions to mitigate sourcing
platform online business. cost pressures and to reduce waste and
stock loss.
 Structurally reducing costs:
Making £400m of structural cost Cost inflation includes over £50m of
savings over five years, reducing cost energy costs as well as colleague pay
to serve and growing our margins increases of more than £100m, which are
through technology improvements expected to be offset by the delivery of OUR STRATEGIC PRIORITIES
to increase retail and supply chain over £150m of in-year savings from the
Read more on pages 12-13
efficiency and simplified and structural cost reduction programme.
streamlined digital, technology This gives scope to invest in customer
and support centre functions. service and digital development, while DELIVER IMPROVE
controlling costs. PROFITABLE OPERATING
 Creating a high-performance
culture: A simpler, faster, delivery Despite facing significant headwinds,
SALES
growth margins
focused business which is passionate we are encouraged by the strong
about M&S products, puts the foundations established last year.
customer first and has the digital
DIVIDEND
skillset to make fast, informed
We suspended dividend payments at
decisions. DISCIPLINED DRIVE
the start of the pandemic to protect INVESTMENT SHAREHOLDER
 Accelerating store rotation:
Accelerating store rotation and
our balance sheet. This enabled us to
invest in our transformation priorities choices returns
renewal to create a more productive and trusted value. With the business
estate of c.180 full line stores and generating an improved operating
opening more than 100 new Food performance and having a strengthened
stores positioned in growth locations, balance sheet with credit metrics
which support omni-channel retailing. consistent with investment grade, the
Board plans to restore a modest annual OUR FINANCIAL PERFORMANCE
 Modernising our supply chain: dividend to our shareholders starting
Modernising the supply chain to with an interim dividend at the results Read more on pages 34-41
improve availability and customer in November.
service, while reducing costs and
working capital. THANK YOU TO OUR
REMARKABLE PEOPLE
 Compelling customer ecosystem: M&S is such a special business with so
Creating a more engaging and much potential, and I want to thank all
connected customer experience to of my colleagues for their contribution
drive omni-channel growth. This to these results. Delivering performance
brings together the Sparks loyalty and driving change is everyone’s
programme and payment options, responsibility at M&S, and they have
supported by an effective and more done a remarkable job. Despite facing
efficient technology infrastructure. significant headwinds, I am encouraged OUR APPROACH TO
 Disciplined capital allocation: by the strong foundations established SUSTAINABILITY
Disciplined capital allocation, to last year and excited about what we can
achieve in the year ahead. Read more on pages 32-33
strengthen the balance sheet,
reinstate an investment grade rating
for our debt and restore dividends.
Robust liquidity and balance sheet
metrics allow for a further bond
repurchase exercise of c.£225m in Stuart Machin
respect of our medium-term Chief Executive Officer
maturities.

Annual Report & Financial Statements 2023 5

STRATEGIC REPORT

CEO & CO-CEO

HOW M&S HAS RESPONDED TO
THE EXTERNAL ENVIRONMENT

Stuart Machin Katie Bickerstaffe

Chief Executive Officer Co-Chief Executive Officer

COST-OF-LIVING CRISIS

Q How has M&S supported

its colleagues? Q How has M&S supported
its customers?
KB As in Food, great value in Clothing &
Home means more than just price,
it also means great cost per wear,
SM Whether you’ve been running SM We know value has been the hand-me-down quality, the
a home or running a business, single most important factor for confidence that it will fit and also
everyone across the country has felt customers when deciding where wash well. Ultimately, customers
the pressure of rising costs this year. to shop. Over the last three years want clothing that is made well and
It was the top concern for our we have started to change value made to last. Through our Back-to-
colleagues, and we wanted to do perceptions of M&S thanks to the School marketing campaign we
what we could to help ease some investment we have made in price showcased how we extend the life
of that strain. Throughout 2022/23 – particularly in Food. Of course, at of our school ranges through
we invested over £46m in front-line M&S value isn’t just about price – it durable design features and
colleague pay across two separate means never compromising on the innovations – such as grow-proof
pay rises, including our first ever quality standards our customers hems and adjustable waistbands.
Autumn pay review. In February expect. We wanted to protect this In January, we launched “Value
2023, we announced a commitment and invested again in our value. You Can Trust”; a Clothing & Home
to invest a further £57m in store campaign designed to reaffirm our
 Read more on page 14
colleague pay, meaning the hourly value credentials and reassure on
rate has increased 20% over the last Across both businesses we have our promise of stylish clothing at
two years. When combined with focused on protecting prices on a great everyday price without
pension and benefits, this gives the products that matter most compromising on the quality
M&S one of the strongest reward to customers. In Food, alongside and standards customers expect.
packages in retail. our everyday Remarksable ranges
we launched “Price Locks” on over We have also been agile to have the
KB Alongside pay, we have protected right product mix for cost conscious
100 customer favourites to give
front-line roles this year. We also customers. Their concerns peaked in
them certainty on the products they
wanted to offer practical support to the Autumn with the reality of rising
love to shop. Customers have
our colleagues. We used awareness energy prices, so we bought deeper
noticed the difference, with M&S
weeks to make sure colleagues knew into warmwear ranges and launched
price comparison videos going viral
about the help available to them – a “Cosy Shop” in September –
on TikTok. In Clothing, as the market
such as our free financial planning offering great value on thermal
leaders in Back-to-School season,
workshops and the Unmind mental ranges and unique innovations such
we took the decision to hold prices
wellbeing App. With input from our as M&S Snuggle™, which sold 79%
on uniforms last summer.
colleague listening schemes and more than last year.
Schoolwear is an essential purchase
BIG – our colleague representative
for millions of families, and we
group – we introduced free sanitary
wanted them to have confidence in
products across all sites and stores
the value of our uniform.
and a free meal per shift for
colleagues at our Distribution
Centre in Castle Donington. It was
clear that Christmas was a particular
pinch point, so we gave a £250
giftcard to store and junior
colleagues to provide just a little
extra help towards their
celebrations.

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 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

CUSTOMER PRIORITIES AND BEHAVIOUR REGULATION

Q How has the external environment

impacted customer behaviour? Q What technology trends
have influenced customer
shopping habits?
Q How has M&S responded to
new regulation this year?
SM After the disruption of Covid, SM We know that health is a priority
customers were determined to KB Ease of payment is an increasingly for customers and 43% want to eat
enjoy events and occasions this important factor for customers in more healthily. We want to make
year. Our Family Matters Index building a relationship with a retailer. this easier for them and this year
(below) found they were prepared Digital payments have grown we committed to a new target of
to cut back in other areas to protect exponentially in recent years, and 62% of sales coming from healthier
these celebrations and eating out Apple Pay, Google Pay and PayPal products including our Eat Well
was the first thing to go. We are three of the most widely used ranges by 2025/26. As part of this,
responded in two ways in Food; Apps globally today. we have an ongoing reformulation
firstly, through increased innovation programme to improve our
In October we launched Sparks Pay.
in our event ranges and secondly, products, and this includes
Unique to M&S, it’s a fully regulated
by making sure we offered a great reducing HFSS (High Fat, Salt,
digital credit account which gives
value alternative to dining out. Our Sugar) within our ranges.
Sparks customers a seamless,
much replicated Dine In deal was
personalised, one-click payment However, the implementation of
launched in response to the 2008
experience on M&S.com and the the new HFSS regulation across
downturn and we have refreshed the
App. This creates one definitive way England this year has placed
offer with more of our Gastropub
to pay at M&S, making it easier for additional operational complexity
ranges and exciting new restaurant
customers to purchase their and cost on a sector already under
quality products like our slow
favourites, and be rewarded for huge inflationary and logistical
cooked meats, to make it feel really
shopping with us. pressure. Compliance with the new
special again.
location requirements in England
The customer base in our Sparks
KB We saw a similar story in Clothing. required extensive preparatory work
loyalty programme gives us a strong
Customers are enjoying the return across our stores and we remain
platform to test and trial, and this
of events – particularly holidays. uncertain about the impact it will
year we have started experimenting
Over half of M&S customers told have across the wider business, as
with different subscription models –
us they are planning a beach holiday we await consultation responses in
such as Sparks Delivery Pass –
and three quarters planned to both Wales and Scotland. Whilst we
so we can make shopping with
refresh their summer wardrobe. support the regulation’s ambition
M&S an established part of
That’s why we have extended the to drive healthier choices, we are
customer routines.
size and scale of our “Holiday Shop” yet to see the influence it has on
and brought forward the online SM Customer expectations for consumer behaviour.
launch to January. personalised experiences
Separately, we very much welcomed
continues to grow and with the
SM Despite cost-of-living concerns, the decision within the Autumn
acquisition of fashion marketplace
customers’ focus on sustainability statement to drop the proposal for
Thread’s IP and source code in
hasn’t dipped. In fact, many have an online sales tax which would have
November, we have taken a “buy-not-
seen living more sustainably as an made it even harder for retailers to
build” approach to accelerating our
opportunity to save money. For invest in the digital transformation
capabilities in the space. We already
instance, seven in ten UK adults are required to survive and grow in the
know the incremental value
changing their behaviour, with 85% of modern, digital era.
personalisation can bring and we
those cutting back on food waste in
anticipate that personalisation will
particular, according to our latest
generate more than £100m of
Family Matters Index. In response, we
annualised incremental revenue
Marks and Spencer Group plc

The M&S Family Matters Index,

launched our partnership with Tom

April 2023

TITLE
for the business. HERE
Kerridge to provide families with Although
the

inspiration for affordable, delicious

concerns, of which the foremost is

recipes designed around “all taste,

less waste”, helping to reduce waste FAMILY MATTERS
and use up leftovers. Last July, we
also removed best before dates from The M&S Family Matters Index Over the past year FAMILY
over 300 fruit and vegetable launched in 2021, in partnership with we have seen family MATTERS
products (85% of the produce we sell) research specialists Yonder. Each optimism fluctuate. 1 | Family index report

to encourage families to throw away quarter we undertake in-depth Back in April 2022,
less edible waste at home by using research with 5,000 UK adults to help the overall index score was 53, before
their judgement. us understand what really matters to dropping to 49 in October as cost-of-
families in the UK, and to track their living concerns became the dominant
feelings, priorities, and ambitions in force in families’ day-to-day lives. With
the years to come. The quarterly our most recent index, conducted in
findings include an overall index score, January 2023, the overall family index
ranging from 0 to 100, specifically score has recovered slightly to 51
measuring family optimism. A score – an initial sign of cautious optimism
above 50 represents a positive, returning.
optimistic perspective.
Read the Family Matters Index here
corporate.marksandspencer.com/
family-matters

Annual Report & Financial Statements 2023 7

STRATEGIC REPORT

OUR BUSINESS MODEL

M&S operates as a family of businesses across Food, Clothing
& Home and International, each led by its own integrated
management team with accountability for their divisions,
including marketing, supply chain and finance.

WHAT MAKES US M&S?

TRUSTED BRAND
A heritage of almost 140 years has built
a unique relationship between M&S and
the British public. M&S is a brand trusted
to do the right thing by the people and
communities it serves.
Read more on pages 14-17

THE GROUP
CLOSER TO CUSTOMERS
Insight from the 30 million customers
M&S serves each year and a company- OUNTABLE BU
F ACC SIN
wide culture that puts colleagues close ILYO ESS
M ES
FA
to the front line, helps ensure we develop
products and services that make M&S UGH OMN
more relevant, more often. THRO I-C
RING HA
VE NN
LI EL
Read more on page 29 E
D TOME
S RS
CU
ED BRAN
Food UST D Clothing
TR & Home
CLOSER TO COLLEAGUES
Over 64,000 remarkable people all have
a role in delivering change and great
service at M&S. They bring extraordinary
Digital Stores
passion for the business and deep
TY

technical expertise in areas such as

OU

I LI

sourcing, fit and product development.

AB
R

PP N
A

RO AI
Read more on pages 28-31 ACH ST
TO SU
Property Services
CO
LLE AGUES

EXCEPTIONAL OWN-BRAND PRODUCT

Innovative and exclusive to M&S
product, made and sourced with care Ocado
by longstanding trusted supplier
partners, with market leading animal
welfare standards, ethical trading International
programmes and a sustainable
approach to raw materials.

Read more on page 32

OUR APPROACH TO
SUSTAINABILITY
OMNI-CHANNEL ADVANTAGE
Read more about our
The scale and reach of our network of
approach to sustainability
1,064 UK-owned and franchise stores can
in our Sustainability Report
connect the digital and physical
marksandspencer.com/
shopping experience to make it easier sustainabilityreport2023
for customers to shop the way they want.
M&S has a 50% investment in Ocado
Retail and a growing global presence
in over 100 international markets.

Read more on pages 18-21

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 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

CREATING VALUE FOR ALL OUR STAKEHOLDERS

1 SHAREHOLDERS 2 COLLEAGUES 3 CUSTOMERS

Building shareholders’ trust through Reshaping M&S requires a high Put simply, without customers M&S
continuous engagement helps secure performance culture where delivering would not exist. Maintaining and growing
their ongoing investment and support. performance and driving change is their loyalty ensures the enduring
Given the scale of our shareholder base, everyone’s accountability. We are success of our business. We put
we operate a bespoke engagement committed to making M&S a great place customers at the heart of everything we
programme for retail shareholders to to work; that is close to its colleagues and do and provide great service and
enable them to make informed decisions. customers, where everyone has a voice, exceptional quality product, at
As the business generates an improved can be themselves and be their best. remarkable value however they want to
operating performance with investment That starts with all our colleagues feeling shop with us.
grade credit metrics, the Board plans to fairly rewarded for the work they do and
restore a modest dividend to we have invested to provide a leading

1
shareholders, starting with an interim pay and benefits package to front-line YouGov No.1 High street,
dividend at the results in November. colleagues. No. fashion and supermarket
retailer for 2022

48,000
shareholders registered
£100m
Announced investment
for digital communications in store colleague pay

4 COMMUNITIES 5 SUPPLIERS 6 PARTNERS

Community acceptance and mutual Trusted suppliers enable us to provide Our franchise and joint venture partners
respect provides us with a licence to customers with the high-quality, ethically provide avenues to expand our reach and
operate and ensures we are a force for sourced and produced goods they access new customers in the UK and
good for the people and places we impact. expect. Long-term partnerships with M&S internationally. These relationships
This includes the wider environment, allows suppliers to create great products, provide our partners with benefits,
where considerate use of resources build volume at equitable prices and including access to the M&S brand and
contributes towards our long-term gives them confidence to invest in distribution of our unique product.

27
sustainability. sustainable solutions and new
innovation. This year we invested further
M&S makes a difference to the causes that
in third-party brand Nobody’s Child,
matter to our customers and colleagues
enabling them to scale the brand. We Franchise partners globally
through activity such as our Marks & Start
also fund specific innovation projects
employability programme, Neighbourly
with our suppliers, such as Farming with
food redistribution scheme, Sparks charity
Nature and international gender
partnerships and by making it easier to live
empowerment programmes.
sustainable lives with facilities such as

£400,000
shwopping clothes recycling and plastic
take back schemes at our stores.

19.9m
meals redistributed across the UK
funding to Farming
with Nature Innovation

OUR STAKEHOLDERS S.172 STATEMENT

The directors confirm that, during the year, they have acted Read more:
6 1 in good faith in a way that best promotes the success of
Stakeholder
M&S for the benefit of shareholders as a whole. In doing so,
Engagement:
they have had regard for the interest of all M&S
5 2 pages 10-11
stakeholders, whilst preserving M&S’ reputation and
ensuring our long-term sustainability. Our complete
4 3 S.172 Statement:
pages 80-82

Annual Report & Financial Statements 2023 9

STRATEGIC REPORT

HOW WE ENGAGE WITH OUR STAKEHOLDERS

Understanding what matters most to our key stakeholders.

1 SHAREHOLDERS 2 COLLEAGUES 3 CUSTOMERS

HOW WE ENGAGED HOW WE ENGAGED HOW WE ENGAGED

– Our Private Shareholder Panel, a group – O
 ur Business Involvement Group (“BIG”) – I n 2022/23 we brought customers into
of shareholders selected from an annual is the Board’s key engagement method our Support Centre for a series of focus
ballot, attend meetings with our Board with colleagues. The Chair of BIG groups reaching over 400 of our Clothing
and senior management. This year’s represents the collective colleague & Home colleagues. We have also
events included a sustainability session voice by attending one Board and one conducted “Closer to Customer” events
held at our Company Archive in Leeds Remuneration Committee meeting with Business Unit Leadership Teams on
and an introduction to Stuart to discuss during the year. Discussion at these various topics from Sleepwear to
the new leadership team’s priorities. meetings was focused on the cost-of- Autograph.
– The AGM is our key engagement living crisis and its impact on our – This year we launched the “Collective”, an
opportunity for two-way dialogue between colleagues. online community where 40,000 loyal
the Board and shareholders. Our digital – O
 ur colleague suggestion scheme, customers are engaged by our Food
AGM format over the past three years has “Straight to Stuart”, allows colleagues to colleagues on problems they are working
driven shareholder engagement, trebling submit their ideas and receive a response on. This direct contact means customers
participation levels. At the 2022 meeting, straight back from CEO, Stuart Machin. can influence decision-making and see
leading radio and television broadcaster, This year, we have introduced live results first hand. Topics included
Anita Anand, put questions to the Board as sessions broadcast online, providing seeking views on digital receipts and
shareholder advocate. Our drive to engage colleagues with the opportunity to have exploring future product ideas.
shareholders led to the launch of our their ideas discussed and answered in – T
 his year we set up a quarterly
“Share Your Voice” campaign. real time by Stuart and the leadership reputation tracker. Run by Portland
team. Communications, it surveys a robust
  Read more on pages 68-69
  Read more on how we engage with sample of 20,000 nationally
– Board members, alongside our Investor colleagues in the People & Culture representative customers four times
Relations team, regularly engaged with section on pages 28-31 a year to give a view of how we are
major shareholders to understand their performing on ESG issues.
views on our strategic performance. PRIORITIES AND OUTCOMES
Our Investor Relations team met with IN 2022/23 PRIORITIES AND OUTCOMES
over 120 institutional funds, engaging with – M
 anaging the cost-of-living crisis and IN 2022/23
investors who we estimate represent over inflationary pressures has created many – A
 s well as great quality, good product
half of our issued share capital. In October, challenges for our colleagues. It is availability and an easy and enjoyable
we held a Capital Markets Day with important to them that support provided way to shop both in store and online, the
shareholders, led by the CEO and Co-CEO, by the Company is meaningful in cost-of-living crisis has put value firmly
to communicate our strategic ambitions reducing their uncertainty. As a result, at the forefront of customers’ minds.
to reshape the business for growth. two out-of-cycle pay reviews have been This has been a key driver for our
implemented to combat increasing “Remarksable” and “Price Lock”
PRIORITIES AND OUTCOMES financial pressures. initiatives in Food.
IN 2022/23
– O
 ur customers continue to be more
– D
 uring the year, we have frequently heard  Read more on page 81 conscious of their environmental
from private shareholders that they are
– C
 olleagues continue to tell us having impact and look for sustainable options.
focused on receiving a return on their
their voice heard in Company decision- In February 2023 we stepped up our
investment through the reinstatement
making is a priority for them. Numerous commitment to reduce plastic packaging
of a dividend payment. While the Board
suggestions from our “Straight to Stuart” through the roll out of our “BYOB”
agreed not to pay a dividend in 2022/23,
scheme have been approved, from initiative; asking customers to bring
it did so to retain and reinvest the funds
providing sanitary items in women’s their own bag when collecting online
in the business instead. The Board plans
toilets, to including the option to add orders in store. We also campaigned for
to restore a modest dividend to
stammer symbols to name badges. improved collection and recycling
shareholders, starting with an interim
infrastructure in the UK for plastic
dividend at the results in November. PRIORITIES FOR THE COMING YEAR packaging and textiles.
– O
 ur institutional shareholders have – T
 he cost-of-living crisis is not expected to
continued to tell us they are interested improve dramatically, and colleagues will PRIORITIES FOR THE COMING YEAR
in our strategy and how this will ensure continue to expect our ongoing support – W
 ith economic uncertainty and potential
delivery of value and long-term, over the coming year. financial strains, our customers will
sustainable growth. Our transition to a continue to shop for value and style.
low-carbon economy has also featured – W
 e expect customers to be increasingly
strongly in these conversations. interested in personalisation, including
product recommendations, loyalty
PRIORITIES FOR THE COMING YEAR
rewards, and a seamless omni-channel
– Shareholders
 will want to see
experience.
acceleration of our transformation
plans to deliver long-term
sustainable growth.

10 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

4 COMMUNITIES 5 SUPPLIERS 6 PARTNERS

HOW WE ENGAGED HOW WE ENGAGED HOW WE ENGAGED

– M
 &S donated £5.8m to various charitable – W
 e measure supplier satisfaction using – A
 fter three years of travel restrictions,
organisations in 2022/23, and through our the independent Advantage Report we have returned to in-person strategic
customers, colleagues, and partners we Mirror to survey a proportion of our partner events, bringing our global
were able to fundraise an additional £2.3m. supplier base each year. The annual franchise partners together to view
Through our Sparks programme we Groceries Code Adjudicator survey also future product and discuss the
donated £2.1m to our 35 Sparks charity provides valuable insight on sector strategic direction of the business.
partners in the UK. priorities and supplier perceptions. This, combined with digital selling
– We helped create meaningful employment – In 2022/23, we held three conferences events, fully enhance the buying
for those facing barriers to work through to align supplier partners with our Food experience for our partners.
our Marks & Start Programme. priorities. Suppliers were given – E
 ach of our non-executive directors met
the opportunity to meet the new Food the new CEO of Ocado Retail Limited,
 Read more on page 9
leadership team. We also held a series Hannah Gibson, to be briefed on her
– We conducted widespread consultation of “Supplier Exchanges” focused on plans for her first 100 days and the
with our community, sustainability experts sustainability and human rights to set future of the joint venture. Hannah
and local government on our plans to out our Plan A requirements, introducing then attended the Board strategy
redevelop the Marble Arch store, and how tools available to suppliers to facilitate away day in February 2023, to maintain
this will support our Plan A net zero goals. best practice sharing across our a collaborative relationship between
– T
 he M&S Archive shared our unique supply base. M&S and Ocado.
heritage through education workshops, – I n September 2022, we completed the
 Read more on the Ocado joint
public outreach programmes, online events acquisition of our Food logistics provider,
venture on page 20
and digital resources. The Archive, which is Gist. We engaged collaboratively with
based on the University of Leeds campus Gist throughout negotiations, to PRIORITIES AND OUTCOMES
and open to the public, has undergone a balance business as usual with working IN 2022/23
complete refurbishment this year. towards transaction completion. – E
 nsuring sustainable and socially
responsible practices is a key priority
archive.marksandspencercom  Read more on the acquisition for M&S and our Partners. We have
on pages 26-82 worked closely with franchise partners
PRIORITIES AND OUTCOMES to engage them on our ambition to
PRIORITIES AND OUTCOMES
IN 2022/23 become a net zero retailer by 2040.
IN 2022/23
– A
 priority this year was supporting those This has included developing local
– B
 uilding and maintaining long-term,
impacted by the conflict in Ukraine, and sourcing on Food with partner Al-
collaborative relationships and receiving
the earthquakes in Turkey and Syria, Futtaim in the Middle East and Asia,
fair payment terms has remained a
particularly important given our presence as well as increasing the number of food
priority. Our Payment Practice submissions
in Turkey. As a result, in February, M&S products available to be shipped using
in November 2022 and May 2023 show
donated £100k to the British Red Cross a freeze defrost model, reducing our
our average days to pay suppliers
earthquake appeal, in addition to reliance on air freight.
reduced by two days during the year.
supporting the UNICEF and Oxfam appeals
– F
 or our suppliers based in Turkey,  n exclusive agreement was signed
– A
through doubling our Sparks donations.
recovery from the impacts of the with bp pulse as an existing franchise
– O
 ur community is focused on ESG issues partner to expand its national charging
earthquake is key. Shortly after the
and is looking for M&S to be a socially network with high-speed electric
disaster, we partnered with VISMO
responsible company, that cares about its vehicle charge points at around
Tracking to offer those on the ground in
long-term impact on the communities and 70 M&S stores.
Turkey access to its Panic Button app.
the environment it operates in. This has
been a key feature in the ESG Committee’s – E
 nsuring sustainable practices is  Read more on page 82
discussions. important to us, and as a result we
worked with our renewable energy PRIORITIES FOR THE COMING YEAR
 Read more on pages 90-91 partner, Green Span, to model a – C
 ontinuing to maintain a strong
renewable energy solution across our relationship between our business and
PRIORITIES FOR THE COMING YEAR its partners, unlocking further value
milk supply chain. We have also worked
– Many
 communities are yet to recover and innovative ways of working.
with Food suppliers to establish
from the impacts of the pandemic and
roadmaps on carbon reductions.
are likely to continue to rely on
companies to provide financial support PRIORITIES FOR THE COMING YEAR
and to invest in improving employability – P
 rice will, of course, continue to be an
and job creation. important factor for suppliers to remain
– Next year, we will be establishing a new competitive. However, as customers
community strategy to address the become increasingly conscious of
challenges that matter most to our sustainability, we expect suppliers to
communities. look to us to support their sustainable
innovations.

Annual Report & Financial Statements 2023 11

STRATEGIC REPORT

OUR STRATEGIC PRIORITIES

RESHAPING FOR GROWTH AND VALUE CREATION

EXCEPTIONAL PRODUCT,
TRUSTED BRAND
Protecting the magic customers love
– driving quality, innovation and style at
great value.

LEADING IN OMNI-CHANNEL
INCLUDING OCADO
Becoming the UK’s leading omni-channel
retailer, offering a seamless experience.

EXPANDED GLOBAL REACH

Leveraging the M&S brand to drive
capital light growth around the world.

Generating
profitable long- DELIVER
term sales growth PROFITABLE SALES
across channels
and markets.
Read more on
pages 14-21
growth
Implementing
capital investment DISCIPLINED
programmes to shift INVESTMENT
volume into growth
channels and reduce
the cost base. choices
Read more on
pages 24-26

ACCELERATING STORE ROTATION

Improving the productivity, profitability
and quality of space to create a store
estate fit for the future.

MODERNISED SUPPLY CHAIN

A faster and more agile M&S,
reducing cost to serve in both Food
and Clothing & Home.

COMPELLING CUSTOMER ECOSYSTEM

Connecting every customer
engagement across M&S.

12 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

During the year the new leadership team set out plans to reshape
M&S to deliver sustainable, profitable sales and market share growth,
and improve operating margins over time. These plans include the
creation of a high performance focused culture, prioritisation of
structural cost reduction and disciplined investment in the areas that
will deliver long-term shareholder returns.

STRUCTURALLY LOWER COST BASE

Permanently removing £400m from the
underlying cost base across M&S.

HIGH PERFORMANCE CULTURE

Building a leaner, faster M&S that is closer
to customers and colleagues.

Building a more
IMPROVE productive M&S with
OPERATING a culture of delivery.

margins Read more on

pages 22-23

Embedding a single-
DRIVE minded focus on
SHAREHOLDER value creation for

returns our shareholders.

Read more on
page 27

DISCIPLINED CAPITAL ALLOCATION

Investing in growth opportunities
with returns commensurate with risk.

Annual Report & Financial Statements 2023 13

STRATEGIC REPORT

OUR STRATEGIC PRIORITIES CONTINUED

DELIVERING
PROFITABLE SALES
growth
M&S’ goal is to deliver profitable long-term sales
growth through developing Exceptional Product and
a Trusted Brand, offering a Leading Omni-channel
retail experience including through Ocado Retail and
Expanding the Global Reach of the business.

This included:
EXCEPTIONAL PRODUCT,
TRUSTED BRAND – Sharpening the prices of over
100 ‘Remarksable value’ lines which
FOOD OUTPERFORMS DUE TO offer M&S quality at everyday prices,
INVESTMENT IN INNOVATION implementing locked prices across
AND TRUSTED VALUE a range of c.150 everyday family
The objective for Food is to achieve 1% favourites and moving the iconic
growth in market share and an adjusted Dine-In offer to Always On – offering
operating margin of c.4% over the next an affordable, restaurant-quality
five years. This will be delivered through alternative to eating out.
“protecting the M&S magic” of trusted
– As a result, the mix of value lines
value and innovation in fresh, easy-to-
increased. For instance, Remarksable
cook food, while fixing the backbone
sales were up 40%, and featured in
processes of the supply chain and
over 20% of customer baskets. Dine-In
driving growth in the store estate.
launches such as “steak and chips”
Food grew sales 8.7% to £7.22bn with also drove substantial sales growth
like-for-like sales up 5.4%, with in the offer.
particularly good growth in hospitality
and franchise. Sales in core categories
were up 5.0% and well ahead of pre-Covid
levels, reflecting the strategy to broaden

viral
appeal. Grocery market share increased
20bps to 3.6%, with M&S outperforming VALUE GOES
all major full-line supermarkets. (source:
Kantar 52 w/e 19 March 2023).
Operating Profit before adjusting items
of £248.0m compared with £277.8m in
the prior year (which included £24.6m of Customers have really noticed our
business rates relief), resulting in a net investment in value this year and have
adjusted operating margin of 3.4%. taken to social media to tell the world
about it, with one TikTok post comparing
While investment in value reduced M&S Remarksable ranges to a value
margin in the first half, as we did not pass competitor generating over 1.4 million
through the full impact of cost inflation views. To maximise the power of peer-to-
to customers, the resulting positive peer recommendations, customer social
effect on customer volumes drove sales. media comments have been added to
Combined with an in-year contribution to store window displays too. M&S store
operating profit from the Gist acquisition social channels across TikTok and
of £27m, this enabled an increase in Facebook reach up to 3 million
second half adjusted operating margin customers every single week and the
to 4.5%, compared with 3.8% last year. in-store social champions across the 600
accounts have been getting creative to
Growth underpinned by investment
make M&S value go viral, with M&S
in trusted value: In recent years, Food
Devizes store topping 1.2 million views on
has shifted to trusted value to broaden
its ‘What £20 can get you in M&S’ video.
appeal, reducing the volume of
promotions and become competitive

3m
at opening price points. At a time when
customers’ focus is on the cost-of-living,
further investment was made early in the
year, which meant that the business did Customers reached every week
not pass through the full impact of cost via store social channels
inflation on its margins.

14 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Performance fuelled by innovation

Raising
and investment in basket building
categories: The innovation pipeline
helped to increase sales of fresh
categories across the year and ambient
WELFARE products over Christmas, Valentine’s and
Mother’s Day when event sales grew by
STANDARDS an estimated 20%. Product launches
included:
We’re determined to keep raising the
bar when it comes to animal welfare – A programme of quality upgrades
standards. We offer more RSPCA with M&S winning c.200 “tried and
Assured products than any other tested” awards from titles such as
retailer and this year, took on our Good Housekeeping. For instance,
biggest challenge yet. In 2021, we the introduction of Oakham™ Gold
announced our ambition to become chicken means that all the fresh
the first major retailer to sell only chicken sold is now slower-reared,
slower-reared, higher welfare chicken British and RSPCA Assured.
across our fresh chicken products. – Strong seasonal launches such as
In September, we met that goal – a the “Master Grill” range for summer
move welcomed by RSPCA Assured barbeques and limited editions for
as “the biggest positive change to key events.
chicken farming in a generation”. – Reset and relaunched ranges aimed at
Our Hubbard breed birds now driving market share in larger baskets
have 20% more space, benefit from including soft drinks, household
a multigrain diet, and have an cleaning, frozen desserts, and cereals.
enhanced environment, including
pecking aids and perches, to Quality and value perceptions highest
encourage natural behaviours. in six years: M&S continues to generate
The move, in line with the Better market-leading quality and sustainability
Chicken Commitment, builds on perceptions in Food, while the continued
our long history of leading animal strategy of investment in trusted value
welfare standards. Customers can has driven improved perceptions of value.
find our slower-reared, higher-welfare
fresh Oakham™ Gold chicken across
stores, alongside our free-range
and Organic offering.

365
RSPCA Assured products

STRATEGIC KPIs
FOOD

Market share Value for money perception

3.6% -3
21/22: +0.2% 21/22: -3ppt
Market share grew as M&S Rising costs caused value
invested in trusted value and perceptions across the market
innovation. to fall this year. However, M&S
investment drove improvements
across the year and its position
relative to the market is now
its strongest in six years
(Source: YouGov).

Quality perception Availability

66 94.5%
21/22: +1ppt 21/22: Level
M&S grew its lead in quality Against a backdrop of market
as we continued to invest wide supply chain challenges
in upgrading our ranges availability remained level.
(Source: YouGov). The acquisition of Gist will
support future improvements.
Annual Report & Financial Statements 2023 15
STRATEGIC REPORT

OUR STRATEGIC PRIORITIES CONTINUED

DELIVERING
PROFITABLE SALES
growth

FINDING OUR

sweet spot
in dresses
Dresses are a key category in driving
style perception and reducing the
number of products across Clothing &
Home has given us an opportunity to
invest in category resets. Three years
ago M&S ranked 6th in dress market
share and now holds 3rd spot. This 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 buys and
testing earlier reactions in Spring and
repeating. With a clearer and simpler
strategy, we went after the consumer
demand for versatile dressing –
dresses that can be dressed down
with a pair of trainers but equally
dressed up for an occasion to really
give our customers the cost per wear
we know they are looking for. It was in
FY2022/23, that we really established
our sweet spot with the £39.50 price
point – last year we sold more than
718,000 units, with the printed square
neck midi dress (pictured to the right)
our current best-seller, selling more
than 9,000 units. As a result, casual
dress sales have increased 40% vs.
last year.

+40%
casual dress sales vs. last year

#3
UK market share

16 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

CLOTHING & HOME DELIVERING Strong performance of event related STRATEGIC KPIs
IMPROVED STYLE PERCEPTIONS categories: In a year when customers CLOTHING & HOME
AND SUSTAINING LEADING were making the most of the return of
VALUE POSITION events, weddings and holidays, growth Market share
The objective for Clothing & Home is to was generated in top end ‘Autograph’
deliver a 1% increase in market share and
an adjusted operating margin of c.10%
sales while making further progress
in casual wear.
9.3%
over the next five years, by driving 21/22: +0.4%
– Men’s ‘Autograph’ sales increased
omni-channel growth of a stylish, M&S market share
c.60% while chino sales increased by
quality, value for money M&S range, strengthened this year as
c.25%, reflecting the strategy to
alongside a family of partner brands. it outperformed on a value
build a ‘smart separates’ business
Clothing & Home grew sales 11.5% to for workwear. A focus in the current and volume basis.
£3.72bn with like-for-like sales up 11.2%. year is on the introduction of more
Full price sell-through at 88% was level regular newness.
with last year and well above historical Value for money perception
– Kidswear and Home offer important
levels. Clothing & Footwear market share
increased 30bps to 9.3% (source: Kantar
52 w/e 2 April 2023).
potential for improvement in market
share. However, growth in the year 37
was modest, in a more difficult 21/22: Level
Store sales increased 14.9% to £2.5bn with market, against pandemic related
strength in city centre and shopping comparatives. Having established a Customers continue to
centre locations. Online grew 4.8% to stronger value position, the aim is to recognise M&S as a value for
£1.2bn, with strong growth in Click & build increased awareness and appeal money clothing retailer and
Collect sales, which were up c.20%, of the range. For instance, partnerships it has held its leading position
with more than one third of orders now such as Fired Earth are being expanded this year (Source: YouGov).
generated through the M&S App. across more categories.
Operating Profit before adjusting items Sustained, market leading value Quality perception
of £323.8m compared with £330.7m in perception: As a result of improvements
the prior year (which included £35.2m
of business rates relief), an increase of
to the range and investment in trusted
value, we have held a leading value 55
9.6% excluding the impact of business perception in recent years, alongside 21/22: +1ppt
rates. Adjusted operating margin of Clothing & Home’s lead for quality and
8.7% is now c.170bps above 2019/20. sustainability. Encouragingly, style Customers continue to rank
Overall results reflected the leverage perception is also now improving. M&S above the competition
from sales growth offsetting cost when it comes to quality and
pressures, particularly from sourcing and positive perceptions grew a
currency as we did not pass through the further percentage point this
full impact of cost inflation to customers year (Source: YouGov).
and from planned digital investments.
Style credentials improving with more
confident buying: A more confident
approach to buying, and focus on the
modern mainstream customer, is starting
to deliver increased value for money and
style perceptions.
– Clothing & Home has focused on
buying more deeply into core lines and
offering clearer price points and better
availability. For instance, women’s
denim sales have grown over several
years, cementing M&S’ leading market
share in the category, which has
increased to 13% from less than 10%
two years ago.
– Greater investment has been made
into categories which drive style
perception. For example, casual dress
sales grew 40% in 2022/23. As the
strength of demand became apparent,
increased purchases of popular lines
were made using short lead-time
supply routes, meeting demand while
managing markdown risk.
– The improved range is supported by
digital analytics to assess profitability
per option more accurately. In addition,
availability is being measured, and stock
is being allocated on a demand
weighted basis.

Annual Report & Financial Statements 2023

2023 17
STRATEGIC REPORT

OUR STRATEGIC PRIORITIES CONTINUED

DELIVERING
PROFITABLE SALES
growth

your own bag

BRING

9%
Across Clothing & Home, we have
removed 60m units of plastic since
2018, but we know we need to find
new and better ways of doing things.
Click & Collect orders
This year, we stepped up our packed in store
commitment to reduce our use of

10m
plastic packaging, launching a new
‘BYOB’ – Bring Your Own Bag – Click &
Collect initiative in 251 of our stores.
More than 60% of our customers opt units of plastic
for Click & Collect – that’s over 15 saved annually
million orders annually and, of those
orders, 9% are picked and packed in
stores – the equivalent of four million
parcels. By simply asking customers STRATEGIC KPIs
to bring their own bag when OMNI-CHANNEL
collecting these orders, we will reduce
unnecessary packaging waste, saving Percentage of UK Clothing
10 million units of plastic annually. & Homes sales online

32%
21/22: -2.1%
Acquiring, converting and retaining Whilst online sales grew, the
LEADING IN OMNI-CHANNEL, customers: Customers who move from percentage of Clothing sold
INCLUDING OCADO shopping in one channel to multiple online dipped marginally
Omni-channel development, supporting channels and products typically spend due to a strong store sales
growth in Clothing & Home online: more. An effective and profitable way performance.
Clothing & Home’s objective is to increase to serve these omni-channel customers
online sales participation and achieve a is through the M&S App.
better margin for online sales. We aim to – Use of the M&S App and associated Active App users

4.3m
drive online growth through increased Sparks memberships continued to
frequency and spend and using the grow with average active App users
national store and distribution network to increasing by c.40% to 4.3m supported
offer a convenient and consistent service. 21/22: +40%
by sign up campaigns such as the ‘12
Online sales grew 4.8%, driven by an days of Sparks’ in December when Investment in new App
improved omni-channel proposition, users could gain access to exclusive functionality helped drive
with strong growth in Click & Collect offers and rewards. strong growth in active
sales which were up 20%. Customer – The aim is that the App should provide App users.
orders grew 12.6%, despite the effects a personalised “shop front” to the M&S
of courier capacity constraints over brand and Sparks loyalty membership
peak trading. This was partly offset and connect the store and online worlds Omni-channel NPS
through services such as easy collection
+39
by the normalisation of returns rates
post-pandemic. As expected, online & returns and “Scan and Shop”.
adjusted operating profit margin – Upgrades to the online experience New metric
reduced to 5.0% from 9.1%, this was due have included “one click” checkout
to sourcing cost pressures which reduced with digital receipts and improved To align with our strategic
gross margin and planned investments in functionality in the App. At the same priorities, Digital and Store
digital and omni-channel improvements time, development of automation has NPS metrics have been
to drive future growth. driven further growth in the volume of replaced with a single
personalised interactions. Omni-channel NPS measure
to track customer satisfaction
as they shop across channels.

18 Marks and Spencer Group plc

 Creating a convenient and consistent Early stage growth of third-party
service across channels: The national brands: M&S now trades with over 140
GROWING store and distribution network provides partners, strengthening the customer

Nobody’s
an important customer service offer where brands are important such
advantage with over 60% of orders as dresses, sports, home and beauty.
collected at store and more than three Third-party brands help attract new

Child
quarters of returns processed through shoppers, who also buy M&S products.
the store network.
– Total sales of Clothing, Beauty and
– Digital Click & Collect is being rolled Home brands increased 67% to £158 m.
out to the estate enabling rapid Online brands sales now represent
collection and we have implemented c.8% of total online sales.
self-service returns, reducing the cost – Launches during the year included
Nobody’s Child was the first
of processing and turnaround time for Clinique and Benefit in beauty and
third-party brand to launch on
resale. an extended sports offer through
M&S.com in November 2020 and
a year later, M&S cemented the – Using in-store fulfillment to expand The Sports Edit on M&S.com.
partnership by taking a c.25% capacity allowed 9% of items ordered – Having grown rapidly from a standing
stake in Nobody’s Child. online to be filled from store stock. We start, investment is being made to
are also trialling the resale of Clothing simplify on-boarding for partners,
Through our infrastructure and & Home returns made to Simply Food to introduce “drop ship” capability to
financial backing, M&S is continuing stores through local hubs. enable fulfilment from partner stock
to support Nobody’s Child to scale
– A key goal over the next three years and to reduce the volume of split
the business and its net sales have
is to leverage the omni-channel shipments, thereby lowering costs.
increased by 100% since the
store and warehouse network,
original investment.
further reducing costs and creating
In March 2023 we launched additional capacity.
Nobody’s Child pop-up shops
across 30 M&S stores nationwide.
Over two thirds of the brand’s
annual sales take place in the
Spring/Summer months, providing
the perfect season to raise the
brand’s profile within M&S.
It remains one of the most popular
third-party brands on M&S.com,
shopped by over 340,000
customers each year, with 1 in 10
being new to M&S. At the heart of
our third-party brand strategy is
careful curation – finding the right
partners who complement and
complete the core offer at M&S.
When we get these partnerships
right, as shown with Nobody’s
Child, everyone wins.

30
pop-up shops nationwide

1 in 10
new to M&S customers

Annual Report & Financial Statements 2023 19

STRATEGIC REPORT

OUR STRATEGIC PRIORITIES CONTINUED

DELIVERING
PROFITABLE SALES
growth

Ocado Retail Reset Underway: investing in value to broaden appeal,

The Ocado Retail joint venture through the Ocado Price Promise.
combines the strength of M&S’ brand,
Improving operating costs: Alongside
food quality and innovation with unique
this, steps to reduce costs are underway.
and proprietary technology to create
These include network optimisation, with
a compelling offer. It has already
the proposal to cease operations at the
generated significant volume growth
Hatfield site, shifting volume to more
and buying benefits for M&S Food with
efficient Customer Fulfilment Centres
over £600m of M&S product sales
including Luton – the first site with
through Ocado.com last year. During the
on-grid robotic pick, as well as marketing
year, new leadership was appointed, with
efficiencies and overhead reductions.
Hannah Gibson taking the role of CEO.
Deepening collaboration between
Ocado Retail generated total revenue
Ocado Retail and M&S: The M&S core
of £2.22bn, down 1.2%. While active
range available on Ocado.com has been
customers grew, revenues reflected
increased by more than 300 lines to
reduced volumes due to lower shopping
c.5,700 and we are starting to leverage
frequency as a result of pandemic
the potential of the M&S customer base
reversion and the impact of cost inflation
more broadly. Efficiencies are also being
on customers. The M&S share of Ocado
scoped from joint sourcing and logistics.
Retail net loss was £29.5m compared
with a net profit of £13.9m in 2021/22. Substantial growth and profit potential:
The reduction was driven by the effects Ocado Retail has grown revenue by 40%
of higher fixed costs from new and since 2019 and has a large, addressable
underutilised capacity, increased market and substantial invested capacity
marketing to drive new customer growth to grow sales and to recover profitability
and energy related cost pressures. in the medium term.
Resetting the customer proposition:

300
The team’s focus is on improving
customer experience including re-
engaging lapsed and occasional
customers with improved service
including ‘kitchen table’ deliveries and new M&S core lines added to Ocado

20 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Excluding the Republic of Ireland,

EXPANDED GLOBAL REACH operating profit was £67.9m compared
M&S’ objective is to grow International with £58.2m in the prior year.
retail sales by leveraging its brand Demand recovery across partner
through capital light partnerships and markets: In franchise and partner
a multi-platform online business with markets, demand was robust as partners
global reach. restocked as footfall increased following
International sales increased 11.2% at emergence from Covid, with particular
constant currency to £1.06bn, with strength in India and the Middle East.
partner retail sales growth of 8% driven Investing in European operations:
by Clothing & Home. Sales were European online sales have grown rapidly
adversely impacted by c.5% by the exit in the past three years, and investment is
from markets including Russia during being made to improve customer service
the year. and reduce cost to serve, including
Online sales were up 5% and are opening a new logistics hub in Croatia
more than double pre-Covid levels enabling the direct import of stock
now accounting for 22% of International destined for EU markets.
Clothing & Home sales. Operating profit Working to improve Food profitability
before adjusting items of £84.8m in the Republic of Ireland: In the
compared with £73.6m in 2021/22, Republic of Ireland, while performance in
which included a contribution in the Clothing & Home was robust, the Food
prior year of £5.5m from Russia. business continues to be impacted by
Brexit related costs. Steps include cost
restructuring, increasing the proportion
of locally sourced supply and assessing
new routes to market with a franchise

Expanding
store trial underway with roadside
retailer Applegreen.

THROUGH FRANCHISE
In October 2022, M&S Ireland launched
a trial partnership with Applegreen,
one of Ireland’s leading roadside
retailers, to offer the best of M&S Food,
including Food for Now favourites
such as sandwiches, salads and
delicious prepared meals including the
iconic Dine In. The project has been
piloted across five Applegreen
locations: Celbridge, Co. Kildare;
Cullenmore, Co. Wicklow; and
Mountgorry, Booterstown, Kinsealy,
Co. Dublin, with our food offering
delivered as a ‘shop within a shop’ in
a renewal environment. Applegreen
opened its first service station in
1992, and now operates almost 200
locations in the Irish market. The
partnership has expanded the M&S
footprint in Ireland and is helping
bring our delicious, great value M&S
Food to even more customers.

International NPS International revenue International operating profit

before adjusting items

+84 £1.1bn £84.8m

21/22: +4ppt 21/22: +12.6% 21/22: +15.2%
Customers’ experience
of M&S globally improved
as NPS increased by 4
percentage points this year.

Annual Report & Financial Statements 2023 21

STRATEGIC REPORT

OUR STRATEGIC PRIORITIES CONTINUED

IMPROVE
OPERATING
margins

To deliver this, investment is being made – Simplified structures within the

STRUCTURALLY LOWER in technology to increase retail efficiency support centre, which in 2022/23
COST BASE and reduce energy costs, embarking on a included bringing together the digital
IMPLEMENTING A PROGRAMME multi-year programme in the supply chain and technology teams in data science,
TO STRUCTURALLY REDUCE COSTS and simplifying and streamlining digital, digital product development and
In 2022/23, adjusted operating margins technology and support centre functions. enterprise systems.
were 8.7% in Clothing & Home and 3.4% in Examples of programmes include:
In the year ahead, inflation from
Food, against a medium-term objective – The roll out of a further c.800 self- colleague pay of more than £100m
of improving these to c.10% and c.4% checkout tills (including within and c.£50m in additional energy costs
respectively. The purpose of the cost Clothing & Home) and further is expected. Investments are planned in
reduction programme is to structurally developments to scan and pay. As a store service, accelerating store rotation
reduce costs by more than £400m over result, in these stores over 70% of and new technology such as the Clothing
the next five years. Accelerated store Food transactions are now self-serve. & Home order planning system and the
rotation and driving profitable online Alongside the effects of sales leverage, roll out of a new Food forecasting and
growth will be an important driver to this has enabled the business to reach ordering system. These headwinds will
increase margins. At the same time, we its target of 10% retail staff costs as a be partly offset by cost savings of over
will aim to offset annual inflation with percentage of sales, ahead of plan. £150m, resulting overall in a slight
productivity improvements. increase in costs.
– Warehouse rationalisation and
investment in automation at the
Bradford warehouse in Clothing
& Home, alongside changes to
returns processing.

22 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

– Raising the bar on talent; with fast-

HIGH PERFORMANCE CULTURE track learning and future leaders’
CREATING A CULTURE OF DELIVERY programmes introduced developing
A key element of the plan to reshape M&S skillsets at all levels. At the same time,
is the creation of a high-performance robust goals linked to delivery of the
culture. The aim is to raise the “bench nine priorities have been implemented.
strength” of M&S talent and create a – Building the skills for tomorrow;
simpler, faster, digitally enabled The data science and AI apprenticeship
organisation. This requires a culture group has expanded to over 200
that is closer to colleagues, closer to colleagues and the M&S BEAM
customers, and a place where everyone Academy, which develops technical
can be themselves and be their best. skillsets, continues to grow. Alongside
Key elements of the programme include: this the Product Academy has
equipped over 25,000 colleagues
– Building a simpler, faster, digitally
with selling and service skills for
enabled organisation; for instance,
modern omni-channel retailing.
digital leadership has been reset,
including the introduction of a new This is supported by a set of core
online and omni-channel director role. expectations and behaviours of how
The technology, digital product and
data teams have been brought together
as one function and M&S Connect
the business operates from day to day.

Read more in our People

680
colleagues took part
created, putting M&S Bank & Services
and Culture section on in the 24 hour hackathon
and Sparks under one leadership.
pages 28-31
– Creating a culture that is closer to
colleagues and closer to customers,
including a substantial investment in
colleague pay and reward and the
requirement for support centre
colleagues to spend seven days per
year working in store, bringing them
close to the front-line.

yes!
IT’S A

Since launch, the Straight to Stuart

colleague suggestion scheme has
generated over 8,000 ideas from
colleagues and grown engagement

270%
by over 270% versus the previous
scheme. More than 200 suggestions
have been implemented in year one:
ranging from transformational ideas increase in colleague
like raising awareness of the symptoms engagement
of bowel cancer on our toilet roll
packaging, suggested by Cara Hoofe
(opposite) which instigated a sector
wide ‘Get on a roll’ campaign, to simple
but effective ideas like adding Air
200
ideas implemented
Fryer cooking instructions to Food
packaging, or adding Café opening
times to M&S.com. Straight to Stuart
LIVE was introduced in August giving
colleagues the opportunity to discuss
their ideas in a live webcast with Stuart
and the relevant leadership. Each
session has been focused on a specific
deep dive theme – including a “Cost
Saving Challenge” and “Making M&S
a great place to work”.

Annual Report & Financial Statements 2023 23

STRATEGIC REPORT

OUR STRATEGIC PRIORITIES CONTINUED

DISCIPLINED
INVESTMENT
choices
M&S’ capital investment programme is focused
on increasing volume in growth channels and on
structural reductions of the cost base. Appraisal
of investments applies hurdle rates commensurate
with risk, with a primary focus on cash payback
on store investments.
Total investment during the year was

Bigger,
over £500m, up from £300m in 2021/22.
This included the £103m net initial
payment for the acquisition of Gist
and just over £400m of capital

better
expenditure. The increase in capex
largely related to store renewals, the
resumption of property asset
replacement following the pandemic
and improvements to the technology
infrastructure. In the coming year, we STORES
expect to maintain a similar level of
capital expenditure.
In November 2022, M&S moved
Capital expenditure is focused on from an ageing town centre site in
three programmes: Chesterfield to a new 46,000 sq ft
store in a former Debenhams site at
ACCELERATING STORE Ravenside Retail Park just 0.5 miles
ROTATION away. The new store has a market-style
Foodhall, a spacious Clothing, Home
Accelerating store rotation and renewal and Beauty department, and over
to create a high productivity brand 400 parking spaces to make shopping
defining estate of c.180 full-line and c.400 more convenient for customers.
Food stores positioned in growth locations. Since the relocation, sales are on track
Over five years this is expected to reduce to double year on year. The entire
Clothing & Home selling space by c.20% existing store team transferred across,
and increase Food space by c.10-15% and 100 new jobs were created for the
local community. The opening was
– In 2022/23, the full-line estate reduced

5
welcomed by the leader of the
by three stores, while the owned
Chesterfield Borough Council – who
Simply Food estate increased by five. In
called out M&S’ commitment and
some cases, we are on track to double
confidence in the town’s future, as new flagship stores
sales and pay back the capital invested
complementary to its wider
in c.3-4 years, including closure costs
regeneration plans.
for relocations. A good example of this
is the Chesterfield High Street store,

100
which was closed and the business
relocated to the nearby retail park.
– This year the plan is to open 8 full-line
and 10 Food stores while closing c.20, new jobs created
of which 10 will be closed for relocation.
The relocations include opening five Leeds
Manchester
new ‘flagship’ properties in Liverpool,
Leeds, Manchester, Birmingham and Liverpool
Thurrock.
– Over 80 stores are now in a renewal Birmingham
format including a new full-line store Thurrock
at Stevenage. In full Food renewals
these add capacity in areas catering
to the larger family shop. Paybacks
currently average c.4 years and in the
next phase the plan is to refine space
allocation, range and service to
further increase returns.

24 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

MODERNISED SUPPLY CHAIN

Modernising the Clothing & Home and
Food supply chains to create a lower cost
network which prioritises the timely flow of
products over storage and stock holding.
Clothing & Home is planning a five-year
programme of investment which includes:
– Consolidation, to focus on fewer, more
strategic clothing and fabric suppliers.
– Systems upgrades to create greater
visibility, improve replenishment and
reduce excess stock commitment
and storage.
– Creating a logistics network to support
the omni-channel offering, largely
using existing assets, and investing
in automation and new capacity to
improve availability and speed up
delivery and returns.
In Food last year the acquisition of Gist
was completed, taking control of the
logistics network.
– The H2 contribution from the
acquisition was c.£27m, from the
elimination of management fees,
operational savings and improved
service over peak.
– There is the potential to drive
productivity improvements from
shared transport across Clothing &
Home and Food and a plan for network
modernisation is being developed.
– A new forecasting, ordering and
allocation system is being
implemented, with the planned benefit
of helping to reduce waste.

Footfall (average per week) Store transactions Clothing & Home space
(average per week)

15m 10.8m -0.8%

21/22: +6.4% 21/22: +11.3% 22/23: 9.9m sq ft
21/22: 10.0m sq ft restated
As we target an estate of c.180
high productivity, brand
defining stores, we reduced
Clothing & Home space this year.

Annual Report & Financial Statements 2023 25

STRATEGIC REPORT

OUR STRATEGIC PRIORITIES CONTINUED

DISCIPLINED
INVESTMENT
choices
COMPELLING CUSTOMER
ECOSYSTEM
TAKING

control
Creating a more engaging digital
customer experience which brings
together loyalty and payment,
supported by an effective technology
infrastructure.
In 2022/23, the teams working on OF OUR FOOD
omni-channel and Sparks were combined SUPPLY CHAIN
with those responsible for commercial
and enterprise planning systems to
optimise use of technology resources
across the Group.

£27m
During the year, M&S acquired Gist, our
– Investment in the year included principal Food logistics provider for
technology improvements in stores more than 40 years, which operates
and the initial implementation of the via a network of 16 distribution centres
initial contribution
food forecasting and ordering system, across the UK and Republic of Ireland. from acquisition
personalisation developments and the The acquisition provides a platform
trial of Sparks Pay.

16
to accelerate our plans to modernise
– Steps are being taken to upgrade core our supply chain and support growth,
systems including enterprise resource whilst building on the successful
and new payroll applications and the implementation of the Vangarde distribution centres
supply chain improvements outlined supply chain optimisation programme. in the UK and ROI
above.
Ownership allows us to take closer
– The opportunity to create a more control of key decisions relating to
effective payment and loyalty property and technology, as we seek
proposition through a unified single to reduce costs to serve through a
sign on across all M&S products is also more efficient supply chain
being evaluated. operating model.

26 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

DRIVING
SHAREHOLDER
returns
grade credit rating which balances the
DISCIPLINED CAPITAL needs of shareholders and creditors
ALLOCATION while providing a robust “sponsor
The Group’s ability to invest is driven by covenant” to pension trustees. In
its capital allocation framework, which 2023/24, we will continue to focus on free
focuses on the generation of free cashflow, prioritised investment and look
cashflow from operations. In 2022/23, to achieve an investment grade credit
this was £170m and after the initial rating during the year.
consideration for the acquisition of Gist, RESTORING THE DIVIDEND
net debt excluding lease liabilities With the business generating an
reduced by a further c.£64m to £356m, improved operating performance and
with the group continuing to have having a strengthened balance sheet
substantial cash balances of £1,068m. with credit metrics consistent with
After recent improvements to the investment grade, the Board plans to
balance sheet, ratios of net debt to restore a modest annual dividend to
EBITDA and cashflow to net debt are now shareholders starting with an interim
at levels consistent with an investment dividend with the results in November.

NET DEBT CONTINUING TO REDUCE

Net Debt

£2.6bn
21/22: -2.2%

22/23 2.6
21/22 2.7
20/21 3.5
19/20 4.0

Net Debt excluding leases

£0.4bn
21/22: -15.4%

22/23 0.4
21/22 0.4
20/21 1.1
19/20 1.4

Free cash flow from operations

£170.4m
21/22: -77.0%

22/23 170.4
21/22 739.6
20/21 273.7
19/20 203.9

Annual Report & Financial Statements 2023 27

STRATEGIC REPORT

PEOPLE & CULTURE

The new leadership team has made high
performance culture a core pillar of the
strategic plan to reshape M&S for growth
(see page 13). The aim is to raise the
‘bench strength’ of M&S talent and
create a simpler, faster, digitally-enabled
organisation. This requires a culture that is
closer to colleagues, closer to customers,
and a place where everyone can be
themselves and be their best.

28 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Straight to Stuart:
1 – BUILDING A SIMPLER, As one of his first actions, Stuart Machin
COLLEAGUE REWARD
FASTER, DIGITALLY-ENABLED relaunched the colleague suggestion
Since the start of 2022/23, we have
scheme as ‘Straight to Stuart’ giving
ORGANISATION every colleague across M&S a direct line
announced investments of over
£100m in colleagues’ pay and
to share ideas and feedback with the
benefits. This has increased the
As set out earlier in the strategic report, CEO. Over 8,000 suggestions were
national hourly rate to a minimum of
the priority has been creating a simpler submitted during 2022/23 and over
£10.90, rising to £12.05 for London,
organisation that is focused on the right 200 ideas were put into action including
meaning all colleagues are paid at or
things, with more empowered roles and game-changing community initiatives
above the real living wage. In
a sustainably lower cost base. such as the “Get on a Roll” campaign
combination with health & wellness
(see page 23). A faster response time and
Whilst the programme helps mitigate benefits, generous pension and
the introduction of a new quarterly hot
the rising costs of doing business, colleague discount, M&S continues
topic themed ‘Straight to Stuart Live’
through a reduction in planned support to offer one of the best all-round
format, which gives colleagues the
centre staffing costs, it also enables reward packages in retail.
chance to discuss their ideas live, has
reinvestment in the capabilities that helped boost engagement by over 270%
will drive growth – particularly in data on the previous scheme.
Alongside this, over 44,000 colleagues
and digital. Refinements have also been
CommUnity: - equivalent to over 70% of headcount -
made to the accountable business
Adoption rate of Microsoft Teams is took part in two global Colleague Voice
operating model to deliver the right
very high at over 93% and is an excellent surveys this year. This was slightly down on
structure to support M&S’ strategic
functional tool that allows colleagues last year’s relaunched survey participation
plans. For example, in October, Katie
to do their day-to-day job by allowing rate, but the overall engagement index
Bickerstaffe reset her leadership team
them to check shifts and access policies. increased 2ppts to 64%.
to bring together the capabilities and
skills required for M&S to become a However, it did not provide a singular
The findings made clear that colleagues’
world-class omni-channel retailer with community channel for all colleagues.
primary concern was to see positive action
data at the heart. This included the To make colleague communication truly taken following any survey. As a result,
introduction of an online and omni- two-way, M&S launched CommUnity, M&S reset its approach in February to give
channel director to improve how digital in May 2022; an internal social platform greater accountability to line managers to
channels interact with stores, uniting designed for open and honest engage with their teams and local BIG
the technology, digital product and interaction and connection for all representatives and implement clear and
data teams as one function and the colleagues. It drives transparent meaningful action plans to address issues.
creation of M&S Connect, which brings communication as colleagues respond Every manager must show evidence of
together the accountability for M&S Bank publicly to leaders’ posts and leaders’ leading this process in their annual
and Services and Sparks under one reactions are published for all to see. review. Rather than relying on two surveys
leadership – supporting the ambition to Post launch there was an immediate per year, the new approach aims to drive
create a single digital identity. 50% increase in ‘reactions’ to content. more regular in-depth and action-
CommUnity is now the main route to orientated conversations that will deliver
To build a more empowered Retail team,
reach the entire colleague base – with positive change.
spans of control across store leadership
– from Team Manager to Regional posts often achieving over 30,000
CLOSER TO CUSTOMERS
Manager - have been reset to create audience views.
The Closer to Customers programme
clearer accountabilities. Alongside this, BIG Network: launched in September to bring support
the regional boundaries have been BIG – the M&S colleague representative centre colleagues closer to the front line
redrawn to drive greater ownership group –forms the foundation with a new requirement to spend seven
amongst regional managers. of an engaging and involving culture. days per year working in store built into
This year, M&S has provided further everyone’s objectives. Shifts are planned
investment in the elected BIG to allow managers to allocate tasks and
representatives and focused on driving ensure training happens in advance –
2 – CREATING A CULTURE so colleagues can support on tills and
increased leadership accountability for
THAT IS CLOSER TO working effectively with BIG. The with specific processes such as Click &
COLLEAGUES AND CLOSER National BIG Chair has regular meetings Collect. Colleagues are asked to
with ExCo (Executive Committee) and complete four of the seven days over
TO CUSTOMERS the peak trading period and this
the Board and the role BIG has played
this year in ensuring colleague support Christmas over 75,000 hours of support
CLOSER TO COLLEAGUES during the cost-of-living crisis is set out were given to stores.
It matters that every colleague at M&S in the governance section (see page 10).
can share their ideas, be listened to with Supplementary to this, CEO Stuart
respect, and - together - help make M&S Machin meets regularly with National
a great place to work. M&S has a long BIG and Co-CEO Katie Bickerstaffe leads
heritage of working closely with its engagement with Support Centre BIG.
colleagues, and over the past year the Retail Voice:
business has taken steps to reinvigorate In November, M&S held its first Shop-a-
a culture of two-way communication: thon. Taking inspiration from the success
of Hack-a-thon formats, this ran as a
48-hour working session for over 60
Retail and Support Centre Colleagues to
focus on identifying solutions to build
more efficient retail operations. Outputs
of the session included the introduction The ExCo team led by example and launched the
Closer to Customer programme by taking over as
of a new simplified morning checklist for management team at the Bluewater store in Kent
stores and a reset of the weekly ‘Store for a week.
Voice’ call to reduce time requirements
for managers.
Annual Report & Financial Statements 2023 29
STRATEGIC REPORT

PEOPLE & CULTURE CONTINUED

Last year, the performance programme

3 – RAISING THE BAR for Customer Assistants was reset to 5 – A PLACE WHERE
ON TALENT include clear outlines of what is expected EVERYONE CAN BE
in their role. The expectations have been
refreshed this year to focus on priority THEMSELVES, AND BE
Talent development has moved up the areas including digital essentials, THEIR BEST
people agenda and there is a regular efficiency, customer service, product
cadence of talent discussion at an ExCo knowledge and stock loss. The
level. There has been increased focus on expectations provide colleagues with As an employer of over 65,000 people,
succession planning and more regular greater clarity on the part they play in M&S is committed to building a culture
assessment of the internal talent delivering the store plan and support where everyone is listened to, has a
pipeline to identify critical gaps and high line managers to have more robust voice and feels they can be their best.
potential candidates. In response, a performance conversations.
‘Fast-track’ learning programme is in To help colleagues perform at their
development for 2023/24 to accelerate best, M&S provides a range of benefits
the highest potential candidates and and tools that promote and support a
provide more bespoke development 4 – SKILLS FOR TOMORROW healthy lifestyle, healthy mind, healthy
exposure to the skills and experiences finances and increasingly a healthy work
needed for pipeline roles. life balance.
The last 12 months has seen significant
In May 2022, M&S relaunched its broader investment in the skills that will drive WORKLIFE:
Future Leaders programmes, featuring future growth. This reflects the strategic Working as a retail manager is a hands-on
two module stages; Build, for new to line requirement but also direct feedback job spanning budget management,
management colleagues, and Evolve, that showed, whilst colleagues leading large teams and serving
for new to leadership colleagues. Over understood the importance of a digital thousands of customers, which is why
200 colleagues completed the Build mindset, they did not believe M&S had historically it’s always been challenging
programme this year, which is designed invested enough in the capabilities to to introduce flexible working across
to help newer managers develop their do their job better. stores. However, to keep its retail
readiness to lead. Almost 70% of employment offer competitive, M&S
The 2022/23 intake for the Data Science
participants in the four-month designed and successfully trialled
and AI apprenticeship, a 15-month Level
programme were women, helping to Worklife - a new flexible working
7 course, has been doubled and 200
support female career progression at programme – with over 800 managers
colleagues have now been enrolled into
M&S. Evolve is a more advanced module across 100 stores. Feedback was
a data-upskilling apprenticeship. M&S’
to help leaders enhance their leadership overwhelmingly positive, with 75% of
BEAM Academy has grown the number
skills and style, with a focus on managers agreeing it had a positive
of learning sessions from 14,000 to
interpersonal relationships and capacity impact on their family life. Worklife
26,000 – ranging from longer-term
for strategic and complex thinking. 47 launched nationwide in January, giving
courses, to bite-sized sessions,
colleagues completed the six month over 3,000 retail managers the option to
interactive expos and hackathons.
Evolve programme this year and over choose different working patterns, such
60% reported that their role, remit, or The programme of activity has included as a nine-day compressed fortnight or a
responsibilities had expanded as a result. upskilling over 3,000 colleagues from four day compressed week, giving them
Waterside, Chester and Salford Quays greater flexibility.
Both programmes involve a mix of support centres through a half-day
classroom learning, external speakers, Following an idea at the 2022
in-person workshop ‘Digital Essentials’.
group and individual coaching and International Women’s Day Hackathon,
All store and Castle Donington
include a longer-term impact evaluation a new Job Finder App was launched in
colleagues will be receiving in-person
between nine and 18 months post October to further support colleagues
foundational digital and data upskilling
completion to assess colleague and line managers exploring flexible
throughout April, May and June 2023.
progression. working options, such as a job share, to
Digital enablement must be access information in a central hub and
Managing performance underpinned by exceptional product help them identify potential job share
The foundation of a high-performance knowledge. Since launch, M&S’ dedicated partners.
culture is robust goal setting. Objectives Product Academy has trained over
are now clearly linked to our nine WELLBEING:
40,000 colleagues - equipping them with
strategic priorities and are monitored In recent years, M&S has invested in new
selling and service skills. The specialist
throughout the year via open and honest wellbeing benefits – such as its Virtual GP
skills in-store training sits alongside the
conversations between colleagues and service – to make it easier for colleagues
online Product Academy platform,
line managers. to live healthy lifestyles and strengthen
which features all the latest product
its overall reward package. As outlined
End-of year ratings are assigned to 100% information on M&S unique innovations
on page 6, with cost-of-living the top
of salaried colleagues and tracked in the and quality to help colleagues sell better.
concern for colleagues this year, M&S has
MyHR system. This reporting database is tried to alleviate some of the strain, with
used to identify performance trends and its biggest ever investment in front-line
improve transparency. It enables better colleague pay. In addition, M&S has
identification and recognition of high promoted the financial tools and advice
performers and supports effective available to colleagues during its
performance improvement plans. Wellbeing Week and introduced new
practical support – such as the
introduction of free sanitary products
to all sites and stores.

30 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

GROWING INCLUSION The increased profile of network events

& DIVERSITY NETWORKS has contributed to a 70% increase in
To help colleagues bring their whole network membership over the last
self to work M&S operates a number of 12 months. Over 7,000 colleagues now
colleague led networks - spanning belong to a network and a new Cancer
racial, family, cultural, sexual and gender Network was launched to provide peer
identities - designed to bring diverse to peer support for colleagues.
communities together. Each network
SHAPING OUR I&D STRATEGY:
has an ExCo sponsor and has its own
Over the course of the year, M&S has
designated site within the colleague
undertaken a deep-dive review to better
intranet offering the latest news and
understand the experience of diverse TEN YEARS OF
information.
colleagues across the business. Over 350 MOVEMENT TO WORK
M&S supports the networks to celebrate colleagues with a disability took part in M&S was a founding member
and recognise relevant events in the a listening activity to shape the discovery of Movement to Work in 2013; a
inclusion and diversity calendar. For stage of a new accessibility strategy and voluntary collaboration of UK
example, on International Women’s Day, over 500 female colleagues participated employers committed to tackling
M&S celebrated Remarkable Women in activity to help validate and shape M&S’ youth unemployment through
with a LinkedIn Live panel discussion plans as a leading employer of women. high quality vocational training.
attended by almost 900 colleagues In partnership with The Prince’s Trust,
and external participants and hosted M&S’ Marks & Start programme

80%
an ‘Ideathon’ with over 150 colleagues offers young people who face
to tackle challenges and come up with barriers to employment a four-week
new initiatives to drive gender equality placement to gain practical
forwards at M&S. Former rugby player, of Marks & Start participants experience, alongside structured
Gareth Thomas, was invited to share his offered a contract with M&S employability and skills training.
experiences as part of M&S’ Pride events, Since launch, M&S has supported
and proved to be the most popular over 10,000 disadvantaged young
Inspiring Speaker of the Year, with people aged between 16-30 and over
over 1,000 live views. 80% of participants who completed
the programme have been offered
a contract with M&S.

COLLEAGUE REPRESENTATION MEASUREMENTS

Total employees Senior Managers from Gender Pay Gap

Ethnic Minorities

5.4% 12.5%
Female
44,035
21/22: 45,484
21/22: 6.8% 21/22: 12.5%
Male
20,226 Whilst representation levels have dipped
slightly following colleague changes,
The Gender Pay Gap, the average
difference in hourly earnings between
21/22: 20,726 M&S is making progress in attracting male and female colleagues, has
more colleagues from diverse remained level. We remain focused
backgrounds into the business. This is on making M&S a great place to work
Total Senior Managers
helping build a more diverse talent pipe for women and expanding talent
line and we have strong representation development opportunities. Around
Female
of colleagues from ethnic minorities 70% of participants in our Build
64 participating in this year’s Future Leaders programme – designed to develop the
21/22: 69 programmes. leadership skills of new line managers
– were women and this year, following
Male the appointment of Cheryl Potter in
79 Engagement (Your Voice Survey) February, we now have a female
21/22: 92 majority Board.

Total Board
64%
21/22: 62%
 Read more in the Remuneration
section on page 107

Female Over 70% of colleagues participated

6 in the Your Voice surveys giving M&S
an insight into how engaged colleagues
21/22: 5
are feeling in their roles. This year,
Male engagement levels increased by 2%
5 following the initiatives set out within
the people chapter.
21/22: 6

Annual Report & Financial Statements 2023 31

STRATEGIC REPORT

OUR APPROACH Our Sustainability Report gives

a full update on our progress
marksandspencer.com/
TO SUSTAINABILITY sustainabilityreport2023

The ESG Committee Report

can be found on page 90

Since its inception, M&S has M&S’ founders knew that value means As we grow our business, how we source,
much more than price; it means giving make, sell and serve our customers will
built trust by doing the right customers assurance that raw materials impact our business carbon footprint.
thing by its people and the are sourced responsibly to protect the However, as an own-brand retailer, we
planet for tomorrow, providing are uniquely positioned to innovate in
communities it serves, and confidence that the people who make partnership with our long-standing
this remains one of its core and sell products are treated fairly, and it suppliers and business partners to
values today. The unique means setting the standards that others reduce emissions in our Food, Clothing
follow, whether that’s animal welfare or & Home, Property and International
relationship of trust between product traceability. Over the years, M&S’ businesses and ultimately be a net zero
M&S and its customers runs approach to doing business has been business by 2040.
increasingly codified into what became
much deeper than its one of the first fully integrated
Today, Plan A is not a separate
community impact - it runs sustainability programmes, launched in
programme but rather sits within the
business, with accountability for its
right through our entire value 2007 as Plan A.
delivery devolved to each of the
chain and the trusted value In building a business in this way, M&S Managing Directors. Our approach to
has created competitive advantage by sustainability encompasses the critical
promise made to its offering exceptional quality products issues and concerns of our stakeholders
customers. at remarkable value; products that are with clear governance and oversight
made and sourced with care so that by the Board and ExCo as outlined on
they’re simply too good to go to waste. page 70.
It’s for this reason that Exceptional
Product and Trusted Brand is at the heart
of our strategic priorities to reshape M&S.

OUR ESG PROGRAMME

Building & maintaining trust and upholding our product point of difference is dependent on the delivery of our full ESG programme

ENVIRONMENT SOCIAL GOVERNANCE

PLANET ANIMAL ETHICAL HEALTHIER PEOPLE COMMUNITY GOVERNANCE

WELFARE TRADE FOOD

Exceptional
LEADING IN EXPANDED STRUCTURALLY HIGH ACCELERATING MODERNISED COMPELLING
OMNI-CHANNEL GLOBAL REACH LOWER COST PERFORMANCE STORE ROTATION SUPPLY CHAIN CUSTOMER
BASE CULTURE ECO SYSTEM
PRODUCT &
TRUSTED BRAND
PLANET PLANET PLANET PEOPLE PLANET PLANET COMMUNITY
PLANET
NET ZERO PRIORITY NET ZERO PRIORITY NET ZERO PRIORITY NET ZERO PRIORITY NET ZERO PRIORITY
ANIMAL Reduce and Suppliers and Reduce food Zero emissions Zero emissions
WELFARE
 recycle businesses waste property transport
ETHICAL TRADE packaging
NET ZERO PRIORITY NET ZERO PRIORITY COMMUNITY ETHICAL
HEALTHIER NET ZERO PRIORITY Zero emissions Circular TRADE
FOOD Zero emissions transport economy
PEOPLE transport
 PEOPLE
COMMUNITY
(Across
programmes drive
GOVERNANCE new and more
efficient ways of
doing things)

DISCIPLINED CAPITAL ALLOCATION

Achieving ESG goals will require us to pioneer new approaches and invest in emerging technology,
but we must do so with clear evidence of carbon reduction, cost and payback.

GOVERNANCE
In doing the right thing by our customers, colleagues and the communities we serve, we will do right by our shareholders.

32 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

This approach is underpinned by our  A high-performance culture is about  Modernising the supply chain will be
ESG metrics and targets which we report making M&S a place where everyone a key contributor to reaching M&S’ net
transparently in our 2023 Sustainability can be their best and be themselves. zero target. The acquisition of Gist
Report. We have reset the operating That starts with everyone feeling – M&S’ primary food logistics provider
model and ways of working to more fairly rewarded and recognised – gives M&S full control of the food
deeply devolve Plan A into the business for the work they do. As set out on supply chain for the first time and
with higher level of oversight. The ESG pages 6 and 81, with the rising the ability to lead decision making
Business Forum meets quarterly chaired cost-of-living, the priority this year in sustainable investments and
by the Corporate Affairs Director. has been to support front-line innovation. Overall, M&S has seen a 3%
colleagues with a significant reduction in Scope 1 & 2 emissions (our
While M&S’ approach to sustainability
investment in front-line pay. property and logistics network) in
starts with Exceptional Product and
2022/23.
Trusted Brand, it runs through all the  As M&S expands its global reach,
strategic priorities to provide the the challenge is to do so without  A compelling customer ecosystem
foundation for its plans to reshape compromising the delivery of its net connects every customer engagement
M&S for growth that is sustainable zero goals or the trust in its brand. across M&S to deliver a personalised,
in every sense. This year the international team has rewarding experience. One aspect of
delivered a 75% increase in the personalisation is supporting the
RESHAPING M&S adoption of ‘freeze defrost’ delivery causes that matter to customers.
FOR SUSTAINABLE GROWTH methods. This approach enables M&S Through Sparks they can select from
OUR PROGRESS THIS YEAR: to reach its international customers 35 charities from Macmillan to WWF
using a lower carbon transport and M&S will donate every time they
  Our Exceptional Product and
method, such as shipping, whilst shop with us. It’s the most popular
Trusted Brand are core to what makes
retaining exceptional product quality. feature of Sparks and this year M&S has
us M&S. This year M&S raised the bar
donated £2.1m to its Sparks charity
again by becoming the first retailer to  Structurally lowering the cost base
partners.
only sell slower-reared higher welfare means finding new and better ways of
chicken across fresh products. In doing things. But better can mean  Disciplined capital allocation requires
Clothing we stepped up our sourcing more efficient and more sustainable. a single-minded focus on delivering
due diligence, with the introduction In Food, M&S has reduced waste by a value creation for shareholders.
of new technologies that can trace further 24% on last year through new This means investing in growth
our cotton right back to its region and interventions such as the removal of opportunities that are commensurate
farm of origin – giving us and our best before dates on over 300 fruit to risk. Achieving its sustainability
customers increased confidence in and vegetables – helping extend the goals will require M&S to pioneer new
our Responsible Cotton Sourcing shelf life of 85% of the fresh produce alternatives and invest in emerging
Policy (Read more on page 22 of our we sell. technologies. To test the business
Sustainability Report). case for such investment, M&S has
 Accelerating store rotation helps
relaunched its Plan A Accelerator
 True leadership in Omni-channel build an estate that’s fit for the future;
Fund – a £1m annual fund to support
includes leading the way in this means a more efficient, lower
projects tackling climate related
sustainable operations as more sales energy and lower carbon M&S estate.
challenges across our value chain.
transition into growth channels. For To support this goal, M&S has invested
This approach allows M&S to innovate,
example, in 2022/23 there was a 20% in new metering and data capture
whilst building clear evidence of
growth in Click & Collect sales, with 9% technology to help better plan
carbon reduction, costs and payback
of orders picked and packed in stores. emission reductions into the ongoing
rates to inform any decision to invest
As set out in detail on page 18, M&S store investment programme.
at scale.
became the first major retailer to Alongside this, in December, M&S
introduce a Bring your Own Bag announced a new 10 year agreement
initiative for Click & Collect orders, with bp pulse, which includes the ROADMAP TO NET ZERO –
which will save 10 million pieces of roll-out of 900 electric vehicle PROGRESS HIGHLIGHTS
plastic annually. charging points to M&S stores over – Our 2030 corporate greenhouse gas
the next two years. emissions reduction target has been
approved by the Science Based Target
initiative (SBTi) (see official science
based target on page 55).
– We now have clear line of sight to 62% of
the 2.1 million emissions reduction we
are committed to deliver in 2025/26
– We rolled out an ESG data performance
platform (Sphera) to better track and
manage our Scope 1 & 2 emissions
across our property estate and logistics
network (including Gist).
– As part of our SBTi approval process
and after the acquisition of Gist, we
restated our base year (2016/17)
emissions.
– A summary of changes of our base year
and current greenhouse gas emissions
can be found on page 15 of our
Sustainability Report.

Best before dates replaced Read more in our Task Force on

with a code used to ensure Climate-related Financial
freshness and quality
Disclosure Report on page 44

Annual Report & Financial Statements 2023 33

STRATEGIC REPORT

OUR KEY PERFORMANCE INDICATORS

FINANCIALS

GROUP REVENUE RETURN ON CAPITAL EMPLOYED (ROCE)

£11.9bn 10.6%
APM

21/22: +9.6% 21/22: -1.6ppt

22/23 11.9 22/23 10.6

21/22 10.9 21/22 12.2
20/21 9.0 20/21 3.8
19/20 10.2 19/20 10.0
Group statutory revenue was £11.9bn, an increase of 9.6% vs. Return on capital employed decreased 1.6ppt largely driven by the
2021/22. This was driven by Clothing & Home revenue up 10.6%, decrease in earnings before interest, tax and adjusting items.
Food revenue up 8.7% and International revenue up 12.6%.

GROUP PROFIT BEFORE TAX AND ADJUSTING ITEMS GROUP PROFIT BEFORE TAX

£482.0m £475.7m
APM

21/22: -7.8% 21/22: +21.4%

22/23 482.0 22/23 475.7

21/22 522.9 21/22 391.7
20/21 41.6 20/21 (201.2)
19/20 403.1 19/20 67.2
Group profit before tax and adjusting items was £482.0m, down Group profit before tax was £475.7m, up 21.4% on 2021/22.
7.8% vs 2021/22, largely due to declines in Food, Clothing & Home
and Ocado Retail, offset by an increase in International operating
profit and reduced interest.

ADJUSTED EARNINGS PER SHARE (EPS) BASIC EARNINGS PER SHARE

APM

18.1p 18.5p
21/22: -16.6% 21/22: +17.8%

22/23 18.1 22/23 18.5

21/22 21.7 21/22 15.7
20/21 1.1 20/21 (9.8)
19/20 16.7 19/20 1.3
Adjusted basic earnings per share was 18.1p due to lower adjusted Basic earnings per share was 18.5p, up from 15.7p in 2021/22, due to
profit year on year. the increase in profit year-on-year. The weighted average number of
shares in issue during the period was 1,963.5m (2021/22: 1,958.1m).

DIVIDEND PER SHARE FREE CASH FLOW FROM OPERATIONS

Nil £170.4m
APM

21/22: Level 21/22: -77.0%

22/23 Nil 22/23 170.4
21/22 Nil 21/22 739.6
20/21 Nil 20/21 273.7
19/20 3.9 19/20 203.9
As stated elsewhere, the Board plans to restore a modest The business generated free cash flow from operations of £170.4m,
dividend to shareholders starting with an interim dividend reducing year on year. This was driven by lower operating profit as a
with the results in November. result of business rates relief in 2021/22, prior year working capital
inflows, increased capital expenditure, and tax payments.
APM Read more about our alternative
performance measures on page 1

34 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

FINANCIAL REVIEW

A focus on cost reduction and cash generation is enabling

investment in growth and a stronger balance sheet.”

Jeremy Townsend
Chief Finance Officer

FINANCIAL SUMMARY
Change vs
1 Apr 23 2 Apr 22 2021/22
52 weeks ended £m £m %

Group statutory revenue 11,931.3 10,885.1 9.6

Group sales 11,988.0 10,909.0 9.9
UK Food 7,218.0 6,639.6 8.7
UK Clothing & Home 3,715.0 3,332.2 11.5
International 1,055.0 937.2 12.6

Group operating profit before adjusting items 626.6 709.0 -11.6

UK Food 248.0 277.8 -10.7
UK Clothing & Home 323.8 330.7 -2.1
International 84.8 73.6 15.2
M&S Bank and Services (0.5) 13.0 -103.8
Share of result in associates and joint ventures (29.5) 13.9 -312.2

Interest payable on lease liabilities (111.1) (115.6) -3.9

Net financial interest (33.5) (70.5) -52.5
Profit before tax & adjusting items 482.0 522.9 -7.8
Adjusting items (6.3) (131.2) -95.2
Profit before tax 475.7 391.7 21.4
Profit after tax 364.5 309.0 18.0

Basic earnings per share 18.5p 15.7p 17.8

Adjusted basic earnings per share 18.1p 21.7p -16.6
Net debt 2.64bn 2.70bn -2.2

Group capex and disposals 409.2 213.5 91.7

Free cash flow from operations 170.4 739.6 -77.0

Notes:
There are a number of non-GAAP measures and alternative profit measures (“APMs”) discussed within this announcement, and a glossary
and reconciliation to statutory measures is provided at the end of this report. Adjusted results are consistent with how business
performance is measured internally and presented to aid comparability of performance. Refer to the adjusting items table below
for further details.

Annual Report & Financial Statements 2023 35

STRATEGIC REPORT

FINANCIAL REVIEW CONTINUED

GROUP RESULTS Operating profit before adjusting items was £248.0m

Group sales were £11,988.0m. This was an increase of 9.9% compared with £277.8m in 2021/22, with last year’s result
versus 2021/22, driven by Clothing & Home sales up 11.5%, Food benefiting from £24.6m of UK business rates relief.
sales up 8.7% and International sales up 12.6%. UK Food sales
The overall Food adjusted operating margin decreased by
growth also reflects the impact of third party sales by Gist
80bps (40bps excluding rates relief). Within this, gross margin
Limited of £84.2m following its acquisition, which had a positive
declined 110bps, largely as a result of investment in trusted
effect of c.1.3% in the year. Like-for-like sales were unaffected
value, while operating costs improved 70bps as sales grew
by the acquisition of Gist.
faster than costs.
Statutory revenue in the period was £11,931.3m, an increase
Total adjusted operating costs grew c.7%, with growth of c.4%
of 9.6% versus 2021/22.
excluding business rates relief and the acquisition of the Gist
The Group generated profit before tax and adjusting items third-party business. This included pay and inflation related
of £482.0m, compared with £522.9m in the prior year. cost increases such as energy of c.7%, new space and volume
of c.1.5%, and investments such as in-store technology
The Group benefited from Covid-related UK business rates
improvements. However, this was partly offset by efficiencies
relief of £59.8m in 2021/22, which was not repeated in 2022/23.
of c.6%, predominantly in store staffing and benefits from the
Adjusting items were a net charge of £6.3m, compared with a Gist management fee saving, following acquisition.
charge of £131.2m in the prior year. The reduction was largely a
The table below sets out the resulting movement in Food
result of a credit of £108.0m representing the revaluation of the
adjusted operating margin by key cost driver:
contingent consideration payable for the investment in Ocado
Retail Limited. – Store staffing costs decreased 50bps. Colleague pay
increases were largely offset by retail efficiencies and
As a result the Group generated a statutory profit before tax
sales growth.
of £475.7m, compared with £391.7m in the prior year.
– Other store costs increased 10bps, with a 40bps adverse
Adjusted basic EPS were 18.1 pence, down 16.6% on 2021/22 impact from the receipt of business rates relief in the prior
reflecting business rates relief in the prior year. Basic EPS were year, and additional energy cost headwinds.
18.5 pence, up 17.8% on 2021/22, reflecting the reduced net
– Distribution and warehousing costs increased 10 bps. The
charge for adjusting items.
increase largely reflects pay and inflation increasing faster
For full details on adjusting items and the Group’s related than sales, although these were partly offset by Gist
policy, read more on notes 1 and 5 to the financial information. management fee savings in H2.

UK: FOOD – Central costs decreased 10bps due to sales leverage, despite
UK Food sales increased 8.7%, with like-for-like sales up 5.4%, additional technology investments in store and trials of the
underpinned by strong performance of hospitality and new forecasting, ordering and allocation system.
franchise sales, following Covid restrictions in the prior year. Operating profit margin before adjusting items %

Change vs 2021/22 % Q1 Q2 Q3 Q4 FY 2021/22 4.2

Food1 6.6 4.5 10.2 13.2 8.7 Gross margin (1.1)
Food like-for-like sales 3.4 2.5 6.3 9.2 5.4 Store staffing 0.5
Other store costs (0.1)
1 UK Food sales growth in Q3 and Q4 reflect the impact of third party sales by Gist
Limited, which had a positive effect in the FY of c.1.3%. UK Food sales are equal to Distribution and warehousing (0.1)
statutory revenue.
Central Food costs 0.1
M&S Food has an online grocery presence with Ocado Retail 2022/23 3.4
and these sales are reported through Ocado Retail and are
not contained within these numbers. UK: CLOTHING & HOME
Change vs
Clothing & Home sales increased 11.5% with continued recovery
52 weeks ended 1 Apr 23 2 Apr 22 2021/22 % of store sales, which are now above pre-Covid levels, and a
robust performance by the online business.
Footfall, m (average/week) 10.5 10.2 2.9
Transactions, m (average/week) 9.0 8.0 12.5 Change vs 2021/22 % Q1 Q2 Q3 Q4 FY

Basket value inc VAT (£) 15.2 15.9 -4.4 Clothing & Home sales 18.2 10.3 8.8 10.2 11.5
Total sales ex VAT £m 1
7,218.0 6,639.6 8.7 Clothing & Home
like-for-like sales 17.6 10.2 8.6 9.6 11.2
1 Includes M&S.com
Clothing & Home stores
Transactions increased, driven by the growth in hospitality and sales 24.3 14.0 12.8 9.8 14.9
franchise sales which are typically smaller value and which Clothing & Home online
were reflected in a reduction in overall basket value. However, sales 7.0 2.9 0.7 11.1 4.8
larger basket transactions continued to grow. Clothing & Home
1 Apr 23 2 Apr 22 Change vs
statutory revenue 16.7 9.6 7.1 10.8 10.6
52 weeks ended £m £m 2021/22 %
To enable greater insight into these movements, further detail
Sales 7,218.0 6,639.6 8.7 is provided on the performance of each channel.
Operating profit before
adjusting items 248.0 277.8 -10.7
Adjusted operating margin 3.4% 4.2% -80bps

36 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

ONLINE Total adjusted operating costs increased 7.6%, with growth

Change vs of 5.2% adjusted for business rates relief. Pay and inflation
52 weeks ended 1 Apr 23 2 Apr 22 2021/22 % related costs such as energy contributed 4% to cost growth,
Traffic (m) 1
446.5 405.7 10.1 while space, volume and channel mix contributed 3% and
investments were made in digital development, the growth
Conversion (%)2 6.7 7.0 -30bps of third-party brands and marketing. These were partly
Average order value incl. VAT offset by efficiencies of c.3%, including store staffing.
pre returns (£) 58.6 55.4 5.8
The table below sets out the drivers of the movement in
Returns rate (%) 3
29.5 25.6 390bps Clothing & Home operating profit before adjusting items
Sales ex VAT £m 1,176.4 1,122.7 4.8 for the total segment and by channel.
1 Traffic: the number of site visits to M&S.com and the app. – Store staffing costs decreased 60bps. Colleague pay
2 Conversion: the number of orders as a % of the number of site visits. increases were more than offset by retail efficiencies
3 Prior year number restated due to basis of calculation. Returns rate represents returns and sales growth.
on despatch sales.
– Other store costs were level. There was a 100bps adverse
Following strong performance last year, online sales remained impact from the receipt of business rates relief in the prior
solid with growth throughout the year despite a tough market year, which was offset by the effects of sales growth.
backdrop. Average order value grew almost 6% reflecting – Distribution and warehousing costs improved 110bps due
higher average selling prices, partly driven by mix. to sales growth and channel mix, which more than offset
The online returns rate increased year-on-year due to the pay inflation.
growth of third-party brands which have a higher returns rate – Central costs were level as a percentage of sales despite
and a reversion in product mix and customer behaviour. Store significant additional digital investments including website
returns rates reduced, with fitting rooms now reopened post front end development and increased personalisation.
pandemic.
Operating profit margin
STORES before adjusting items Total % Stores % Online %
Change vs
2021/22 9.9 10.3 9.1
52 weeks ended 1 Apr 23 2 Apr 22 2021/22 %
Gross margin (2.9) (2.1) (4.5)
Footfall, m (average/week) 4.5 4.0 12.5
Store staffing 0.6 0.9 0.4
Transactions, m (average/week) 1.8 1.7 5.9
Other store costs 0.0 0.4 0.1
Average basket value inc VAT
pre returns (£) 37.4 34.9 7.2 Distribution and warehousing 1.1 0.8 0.9
Sales ex VAT £m 2,538.6 2,209.5 14.9 Central Clothing & Home costs 0.0 0.1 (0.9)
2022/23 8.7 10.4 5.0
UK Clothing & Home store sales increased 14.9%, with all
clothing store formats seeing an improvement in sales year- As outlined above, store margin increased, largely due
on-year, also supported by higher average selling prices and to strong sales growth. Online margin was adversely
mix. Average weekly footfall was up 12.5% following Covid impacted due to slower sales growth, product mix and
restrictions lifting during Q1 last year, contributing to an digital investments.
increase in transactions.
INTERNATIONAL
TOTAL CLOTHING & HOME Total International sales increased 11.2% at constant currency.
Operating profit before adjusting items was £323.8m compared Store sales grew 14% as the business recovered from lockdown
with £330.7m in 2021/22, with last year’s result benefitting from in several markets in Q1 of the prior year. Online sales were up
£35.2m of UK business rates relief. 5% led by India and growth through European marketplaces
in H2.
1 Apr 23 2 Apr 22 Change vs
52 weeks ended £m £m 2021/22 % Sales excluding the Republic of Ireland were up 15.1% at
Statutory revenue 3,658.3 3,308.3 10.6 constant currency, driven by Clothing & Home sales in India
and continued robust demand from partners in the Middle
Sales 3,715.0 3,332.2 11.5
East. Trading in Europe was adversely impacted by the closure
Operating profit before of operations in Russia and France. Sales growth in the Republic
adjusting items 323.8 330.7 -2.1 of Ireland was robust despite continuing EU border related
Adjusted operating margin 8.7% 9.9% -120bps headwinds in Food.
1 Apr 23 2 Apr 22 Change vs Change vs
The overall Clothing & Home adjusted operating margin 52 weeks ended £m £m 2021/22 % 2021/22 CC %
decreased by c.120bps (20bps excluding rates relief). Within
this, gross margin decreased 290bps, although this was partly Total sales 1,055.0 937.2 12.6 11.2
offset by lower operating costs as a percent of sales, as sales Memo: Sales excl.
grew faster than costs. Republic of Ireland 741.0 637.8 16.2 15.1
Within gross margin, bought-in margin declined c.200bps.
Sourcing, freight and in-year currency related cost pressures, Operating profit
particularly in H2, were not fully offset by pricing activity. before adjusting
In addition, as expected, promotional mix normalised and, items 84.8 73.6 15.2 16.2
third-party brands grew, diluting margin by c.30bps. Adjusted operating
margin 8.0% 7.9% 10bps 30bps

Memo: Operating
profit before
adjusting items excl.
Republic of Ireland 67.9 58.2 16.7 18.6

Annual Report & Financial Statements 2023 37

STRATEGIC REPORT

FINANCIAL REVIEW CONTINUED

Total International operating profit before adjusting items was Ocado Retail EBITDA before exceptional items was down,
up 15.2% to £84.8m, with adjusted operating margin up 10bps reflecting smaller baskets, lower gross margins, under-utilised
to 8.0%. This was largely driven by growth in markets excluding CFC capacity and higher fulfilment and delivery costs.
the Republic of Ireland.
Ocado Retail recognised £21.2m of exceptional income
Gross margin decreased by 20bps, driven by a reduced before tax, predominantly relating to the insurance income
Clothing & Home gross margin in the Republic of Ireland. for Andover and Erith CFCs, offset by costs relating to the
Operating costs increased 11.6% but reduced as a percent of development and introduction of new IT systems as Ocado
sales. The increase in operating costs was largely driven by the Retail transition away from Ocado Group IT services, tools
business returning to a fully operational state following Covid and support.
related lockdowns in Q1 last year. In addition, pay and energy
As a result of lower EBITDA, partly offset by exceptional profits,
related cost inflation was absorbed in owned markets.
M&S Group share of Ocado Retail loss after tax was £29.5m.
OCADO RETAIL LTD
M&S BANK AND SERVICES
The Group holds a 50% interest in Ocado Retail Ltd (“Ocado
M&S Bank and Services generated a loss before adjusting
Retail”). The remaining 50% interest is held by Ocado Group plc
items of £0.5m, as compared with profit of £13.0m in 2021/22.
(“Ocado Group”). Full Year Results are consistent with the
Deterioration of the forward macro-economic environment
quarterly results reported by Ocado Group on behalf of Ocado
guidance drove the need for higher bad debt provision resulting
Retail for the quarterly periods ended 29 May 2022, 28 August
in insufficient profits to generate a profit share payment.
2022, 27 November 2022 and 26 February 2023.
NET FINANCE COST
Q1 Q2 Q3 Q4 FY
Change vs
Revenue growth (%) -9.8 2.6 0.3 3.4 -1.2 1 Apr 23 2 Apr 22 2021/22
52 weeks ended £m £m £m
Active customers (k) 867 947 942 957 957
Interest payable (76.3) (85.1) 8.8
Average orders
per week (k) 385 374 382 381 380 Interest income 23.8 9.6 14.2
Net interest payable (52.5) (75.5) 23.0
Notes: Retail revenue comprises revenues from Ocado.com and Ocado Zoom. Average
orders per week refers to results of Ocado.com Pension net finance income 28.7 13.2 15.5
Revenue declined 1.2% over the 52 weeks to 26 February 2023. Unwind of discount on Scottish
While active customers grew 14.6% and order numbers Limited Partnership liability (4.3) (4.4) 0.1
increased 3.9%, basket sizes have continued to decline due to Unwind of discount on provisions (5.4) (3.8) (1.6)
the near-term pressures of the pandemic unwind and cost-of- Net financial interest (33.5) (70.5) 37.0
living crisis. Revenue performance in the last three quarters
Net interest payable on lease
was ahead of last year.
liabilities (111.1) (115.6) 4.5
26 27
February February
2023 2022 Change Net finance costs before
52 weeks ended £m £m % adjusting items (144.6) (186.1) 41.5
Revenue 2,222.0 2,248.8 -1.2 Adjusting items included in net
finance costs 105.2 5.6 99.6
EBITDA before exceptional items (15.1) 104.8 -114.4
Net finance costs (39.4) (180.5) 141.1
Exceptional items1 21.2 (14.4) 247.2
Depreciation and amortisation (69.4) (41.3) 68.0 Net finance costs before adjusting items decreased £41.5m
Operating (loss)/profit (63.3) 49.1 -228.9 to £144.6m. This was driven by higher average interest rates
Net interest charge (14.3) (16.4) -12.8 on cash balances and higher pension finance income from a
larger opening pension surplus balance. In addition, interest
Taxation 18.6 (4.9) 479.6 expense reduced as a result of the partial buy-back of 2023
(Loss)/profit after tax (59.0) 27.8 -312.2 and 2025 bonds.
M&S 50% share of (loss)/profit Adjusting items within net finance costs reflect a credit
after tax (29.5) 13.9 -312.2 relating to the remeasurement of Ocado Retail contingent
1 Exceptional items are defined within the Ocado Group plc Annual Report and
consideration of £108m and a charge of £2.8m reflecting the
Accounts 2022. discount unwind on deferred consideration and revaluation of
contingent consideration on the acquisition of Gist Limited.

38 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

GROUP PROFIT BEFORE TAX AND ADJUSTING ITEMS Adjusting items recognised were a net charge of £6.3m.
Group profit before tax and adjusting items was £482.0m, down These include:
7.8% on 2021/22. The profit decrease was largely due to declines
A charge of £51.3m in relation to UK store estate rotation
in Food, Clothing and Home and Ocado Retail, offset by an
plans. This reflects a revised view of latest store exit routes,
increase in International operating profit and reduced interest.
assumptions, estimated closure costs, charges relating to the
UK profits in the prior year benefitted from £59.8m business
impairment of buildings, fixtures and fittings, and accelerated
rates relief.
depreciation.
GROUP PROFIT BEFORE TAX
A non-cash charge of £10.7m within organisation relating to
Group profit before tax was £475.7m, up 21.4% on 2021/22.
updated assumptions regarding the sub-let of previously
ADJUSTING ITEMS closed Merchant Square offices.
The Group makes certain adjustments to statutory profit
A charge of £16.4m for structural simplification of the
measures in order to derive alternative performance measures
organisation, which has resulted in a reduction of c.700 roles
(APMs) that provide stakeholders with additional helpful
across support centres, management and stores, with the
information and to aid comparability of the performance of
charge reflecting the associated redundancy and exit costs.
the business. For further detail on these (charges)/gains and
the Group’s policy for adjusting items, please see notes 1 and 5 A net charge of £10.5m for UK logistics, reflecting estimated
to the financial information. These (charges)/gains are reported costs of closure relating to the announced closure of a further
as adjusting items on the basis that they are significant in distribution centre in 2023/24, as part of the previously
quantum in current or future years and to aid comparability announced programme to transition to a single-tier UK
from one period to the next. distribution network.
Change vs A non-cash net credit of £15.1m in relation to UK and
1 Apr 23 2 Apr 22 2021/22 International store impairments, driven by revised future cash
52 weeks ended £m £m £m
flow projections in relation to the carrying value of stores.
Strategic programmes –
UK store estate (51.3) (161.4) 110.1 A charge of £22.1m relating to the acquisition of Gist to
transform the supply chain. Within this, £18.2m of charges
Strategic programmes – relate to the settlement of our pre-existing relationship with
Structural simplification (16.4) – (16.4) Gist Limited.
Strategic programmes –
Organisation (10.7) 14.3 (25.0) A non-cash charge of £14.0m with respect to the amortisation
of intangible assets acquired on the purchase of our share in
Strategic programmes – Ocado Retail partly offset by the related deferred tax credit.
UK logistics (10.5) 21.9 (32.4)
Strategic programmes – Charges of £2.0m have been incurred relating to M&S Bank,
International store closures primarily due to the insurance mis-selling provision.
and impairments – 0.4 (0.4) In 2021/22, the Group announced the restructure of its
Store impairments, reversals and franchise operations in France. Following finalisation of costs,
other property charges 15.1 60.0 (44.9) £0.4m of the provision has been released, with no future costs
Acquisition of Gist Limited (22.1) – (22.1) currently expected.
Amortisation and fair value A credit of £108m representing the revaluation of the
adjustments arising as part contingent consideration payable for the investment in
of the investment in Ocado Ocado Retail Limited to £64.7m.
Retail Limited (14.0) (32.5) 18.5
TAXATION
M&S Bank charges incurred in
relation to the insurance
The effective tax rate on profit before tax and adjusting
mis-selling provisions (2.0) (16.0) 14.0 items was 25.9% (2021/22: 18.2%). This was higher than the UK
statutory tax rate primarily due to the impact of the recapture
Franchise restructure 0.4 (41.3) 41.7 of tax relief on distributions to the Scottish Limited Partnership
Directly attributable gains (SLP), which have resumed in the year, and non-taxable Ocado
resulting from the Covid-19 Retail losses.
pandemic – 17.8 (17.8)
The effective tax rate on statutory profit before tax was 23.4%
(111.5) (136.8) 25.3
(2021/22: 21.1%). This is lower than the effective tax rate on profit
before adjusting items due to the impact of non-taxable
Included in net finance adjusting items.
income/(costs)
In 2023/24 we expect the effective tax rate on profit before tax
Remeasurement of Ocado Retail and adjusting items to increase to c.31-32%, largely as a result of
Limited contingent consideration 108.0 5.6 102.4 the increase in the UK corporation tax rate.
Net finance costs incurred in
EARNINGS PER SHARE
relation to Gist Limited deferred
and contingent consideration (2.8) – (2.8)
Basic earnings per share was 18.5p (2021/22: 15.7p), due to the
increase in profit year-on-year. The weighted average number
105.2 5.6 99.6 of shares in issue during the period was 1,963.5m (2021/22:
1,958.1m).
Adjustments to profit before tax (6.3) (131.2) 124.9 Adjusted basic earnings per share was 18.1p (2021/22: 21.7p) due
to lower adjusted profit year-on-year.

Annual Report & Financial Statements 2023 39

STRATEGIC REPORT

FINANCIAL REVIEW CONTINUED

CASH FLOW pandemic, which are partially reversing as Clothing & Home
Change vs shifts back towards pre-Covid terms. The outflow was lower
1 Apr 23 2 Apr 22 2021/22 than anticipated due to the phasing of payables over year end.
52 weeks ended £m £m £m
Defined benefit scheme pension funding of £36.8m reflects
Operating profit 515.1 572.2 (57.1)
the agreed SLP interest distribution to the pension scheme.
Adjusting items within
operating profit 111.5 136.8 (25.3) Increased taxation was principally due to the resumption
of UK corporation tax payments in the period.
Operating profit before
adjusting items 626.6 709.0 (82.4) Adjusting items in cashflow includes £26.4m relating to the exit
Depreciation and amortisation of the Russian franchise business, £22.8m relating to the UK
before adjusting items 523.2 510.7 12.5 store estate strategy, £8.9m related to structural simplification,
£6.7m for costs related to the Gist acquisition and £2.0m
Cash lease payments (353.8) (344.3) (9.5)
relating to the M&S Bank insurance mis-selling provisions.
Working capital (10.1) 239.7 (249.8)
Loans to associates reflects drawdown of the shareholder
Defined benefit scheme
loan facility by Ocado Retail, with an outflow of up to £70m
pension funding (36.8) (36.8) –
anticipated in 2023/24.
Capex and disposals (409.2) (213.5) (195.7)
Acquisitions, investments and divestments were driven
Financial interest (66.5) (79.9) 13.4
principally by the payment of £102.8m relating to the
Taxation (70.6) (7.7) (62.9) acquisition of Gist, net of cash received.
Employee-related share
transactions 37.9 39.1 (1.2)
The business generated free cashflow of £63.6m, resulting
in a further reduction of net debt.
Share of (profit)/loss from
associate 29.5 (13.9) 43.4 CAPITAL EXPENDITURE
Adjusting items in cashflow (69.9) (61.8) (8.1) Change vs
1 Apr 23 2 Apr 22 2021/22
Loans to Associates (30.0) (1.0) (29.0) 52 weeks ended £m £m £m

Free cash flow from operations 170.4 739.6 (569.2) UK store remodelling 70.5 50.1 20.4
New UK stores 55.0 49.9 5.1
Acquisitions, investments, and International 28.9 18.2 10.7
divestments (106.8) (40.4) (66.4)
Supply chain 36.8 28.6 8.2
Free cash flow 63.6 699.2 (635.6)
IT and M&S.com 109.5 68.2 41.3
Dividends paid – – –
Property asset replacement 102.1 85.2 16.9
Free cash flow after
Capital expenditure before
shareholder returns 63.6 699.2 (635.6)
property acquisitions and
disposals 402.8 300.2 102.6
Opening net debt excluding Property acquisitions and disposals (1.1) (43.9) 42.8
lease liabilities (420.1) (1,110.0) 689.9
Capital expenditure 401.7 256.3 145.4
Free cash flow after
Movement in capital accruals and
shareholder returns 63.6 699.2 (635.6)
other items 7.5 (42.8) 50.3
Exchange and other non-cash
Capex and disposals as per
movements excluding leases 0.9 (9.3) 10.2
cash flow 409.2 213.5 195.7
Closing net debt excluding
lease liabilities (355.6) (420.1) 64.5 Group capital expenditure before property acquisitions and
disposals increased £102.6m to £402.8m due to increased
Opening net debt (2,698.8) (3,515.9) 817.1 investment in technology, store remodelling and property
asset replacement.
Free cash flow after
shareholder returns 63.6 699.2 (635.6) UK store remodelling costs reflects 31 Food renewals and
Decrease in lease obligations 231.8 216.0 15.8 upgrades to Clothing & Home space in several full line stores.
New lease commitments and Spend on new UK stores primarily related to the opening of
remeasurements (249.4) (100.6) (148.8) 3 full line and 6 Food stores and one Food extension.
New leases from acquisitions (21.3) (21.3m) Supply chain expenditure reflects investment in the
Exchange and other non-cash underlying base food infrastructure together with spend
movements 36.9 2.5 34.4 on upgrading vehicles.
Closing net debt (2,637.2) (2,698.8) 61.6 IT and M&S.com spend includes technology replacement
and upgrades in stores, continued investment in website
The business generated free cashflow from operations of development and investment in Food planning systems.
£170.4m, reducing year on year. This was driven by lower
operating profit as a result of business rates relief in 2021/22, Property asset replacement has increased in the current year,
prior year working capital inflows, increased capital primarily driven by the resumption of investment following the
expenditure (detailed below), and tax payments. pandemic. This includes roof works and replacement of fridges,
freezers, boilers, lifts and escalators.
Prior year working capital inflows were partly a result of changes
to payment terms for Clothing & Home suppliers during the Prior year disposals include receipts from the sale of two
warehouses.

40 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

The movement in capital accruals and other items is driven Within offices, warehouses and other lease liabilities, £143.0m
by landlord contributions partially offset by an increase in relates to the sublet lease on the Merchant Square offices in
capital accruals as capex spend normalises post pandemic. central London, which is part of the strategic programme,
organisation. Average lease length of all other offices and
NET DEBT
warehouses to break is c.8 years.
Group net debt decreased £61.6m driven by free cashflow from
operations of £170.4m, and a net cash outflow of £102.8m International leases relate primarily to India (c.£99m) and
relating to the acquisition of Gist. Ireland (c.£62m). Average lease length to break in India is close
to nil, as the majority of these leases are past the break point,
New lease commitments, remeasurements (including from
and so we have the flexibility to exit these at any time on
acquisitions) in the period were £270.7m, largely relating to 14
several months’ notice. Average length to lease break or
new UK leases, the consolidation of Gist Limited lease liabilities,
expiry in Ireland is c.8 years.
lease additions in India, and UK property and logistics liability
remeasurements. This was offset by £231.8m of capital lease PENSION
repayments. At 1 April 2023, the IAS 19 net retirement benefit surplus
was £477.4m (2021/22: £1,038.2m). There has been a decrease
The composition of Group net debt is as follows:
of £560.8m from the start of the year largely driven by an
Change vs increase in gilt yields.
1 Apr 23 2 Apr 22 2021/22
52 weeks ended £m £m £m The pension scheme is fully hedged for movements in gilt
yields. However, on an IAS 19 basis there is an inherent basis risk
Cash and cash equivalents 1,067.9 1,197.9 (130.0) to the scheme valuation, with the pension assets moving with
Medium Term Notes (1,346.4) (1,529.5) 183.1 underlying movements in rates and scheme liabilities exposed
Current financial assets to the movement in corporate bonds yields. In a normal period,
and other 44.8 99.4 (54.6) this always results in some dislocation between movements in
the scheme assets and liabilities. However, the increase in gilt
Partnership liability (121.9) (187.9) 66.0
yields in the year led to a larger dislocation. Nevertheless,
Net debt excluding there has been no material worsening of the scheme’s overall
lease liabilities (355.6) (420.1) 64.5 funding position and the scheme remains fully funded on
a technical provisions basis.
Lease liabilities (2,281.6) (2,278.7) (2.9) The most recent actuarial valuation of the Marks & Spencer
– Full-line stores (909.2) (919.5) 10.3 UK Pension Scheme was carried out as at 31 March 2021 and
– Simply Food stores (673.1) (712.8) 39.7 showed a funding surplus of £687m. This is an improvement
on the previous position at 31 March 2018 (funding surplus
– Offices, warehouses and other (494.6) (449.5) (45.1) of £652m), primarily due to lower assumed life expectancy.
– International (204.7) (196.9) (7.8)
MARKS AND SPENCER SCOTTISH LIMITED PARTNERSHIP
Group net debt (2,637.2) (2,698.8) 61.6 Marks and Spencer plc is a general partner of the Marks and
Spencer Scottish Limited Partnership, with the UK defined
The Medium Term Notes include five bonds, with maturities out benefit pension scheme, which is a limited partner. The
to 2037, and the associated accrued interest. During the period Partnership holds £1.3bn (last year: £1.3bn) of properties at
part of the 2023 and 2025 bonds were repurchased, reducing book value which have been leased back to Marks and Spencer
near-term liquidity draws. The USD 300m 2037 bond is valued plc. The first limited Partnership interest held by the scheme
by reference to the embedded exchange rate in the associated entitles it to receive £73.0m in 2023 and £54.4m in 2024 and is
cross currency swaps. During the year these swaps were reset included as a financial liability in the financial statements as it
and the embedded mark to market value realised resulting in is a transferable financial instrument. The second Partnership
an increased value of the debt. The full breakdown of interest held by the scheme, entitles it to receive a further
maturities is as follows: £36.4m annually from June 2017 until June 2031. It is not a
Bond and maturity date Value (£m)
transferable financial instrument, so the associated liability
is not included on the Group’s statement of financial position,
Dec 2023, GBP 185.3 rather the annual distribution is recognised as a contribution
Jun 2025, GBP 330.0 to the scheme each year.
May 2026, GBP 298.9 LIQUIDITY
Jul 2027, GBP 248.6 At 1 April 2023, the Group held cash and cash equivalents
Dec 2037, USD 251.8
of £1,067.9m (2021/22: £1,197.9m). In the period, as part of its
approach to liability management, the Group bought back
Total principal value 1,314.6 c.£190m of bonds due for maturity in 2023 and 2025.
Other 31.8
The Group currently has an unused £850m revolving credit
Total carrying value 1,346.4 facility which is due to expire in June 2026 on terms linked
to delivery of its net zero roadmap. With the facility undrawn,
Full-line store lease liabilities include £192.2m relating to stores the Group has liquidity headroom of £1.9bn.
identified as part of the UK store estate strategic programme.
Of the remaining full-line stores lease liability, the liability- DIVIDEND
weighted average lease length to break is c.21 years. However, With the business generating an improved operating
these average lease lengths are skewed by five particularly performance and having a strengthened balance sheet with
long leases on stores which are trading well in locations credit metrics consistent with investment grade, the Board
where the Group intends to remain. Excluding these five plans to restore a modest annual dividend to shareholders
leases, the average term to break of leases outside the starting with an interim dividend with the results in November.
programme is c.16 years.
STATEMENT OF FINANCIAL POSITION
Simply Food store lease liabilities include £26.3m relating Net assets were £2,814.9m at the period end, a decrease of 3.5%
to stores identified as part of the UK store estate strategic since the start of the year, largely due to the decrease in the IAS
programme. Of the remaining lease liability, the average lease 19 pension surplus, partially offset by profits.
length to break is c.10 years.

Annual Report & Financial Statements 2023 41

STRATEGIC REPORT

NON-FINANCIAL
AND SUSTAINABILITY
INFORMATION STATEMENT

The statements below reflect our commitment to, and management of, employees,
communities, the environment, human rights, anti-bribery and anti-corruption in the
last 12 months as required by sections 414CA and 414CB of the Companies Act 2006.
Policies on these matters can be found at corporate.marksandspencer.com.
Our Business Model can be found on pages 8 to 9.

Sections within the Annual Report to read more

Relevant policies, documents, or reports about the outcomes and related non-financial KPIs
Our Commitment that set out our approach of Our Commitment

EMPLOYEES
We are committed to providing our – Code of Conduct – CEO and Co-CEO Q&A, on page 6
colleagues with a safe and healthy working – Inclusion, Diversity & Equal – Stakeholder engagement, on pages 9 and 10
environment and an organisational culture Opportunities Policy – People & Culture, on pages 28 to 31
which promotes inclusivity, diversity, equal – People Principles – S.172 Statement, on pages 80 to 82
opportunities, personal development and – Board Diversity, on page 88
mutual respect. We want people to enjoy
coming to work and for the workplace to
be free from discrimination, harassment
and victimisation.

Dedicated corporate website area:

– Sustainability: Our People
 Go to corporate.marksandspencer.
com/sustainability/our-people

ENVIRONMENTAL MATTERS
M&S is committed to becoming a net zero – Climate & Energy Policy – Our TCFD Report, on pages 44 to 55
business across the entire value chain by – Food Waste Policy – S.172 Statement, on pages 80 to 82
2040. An ambitious roadmap has been – Sustainability Report 2023 – ESG Committee Report, on pages 90 to 91
established and will ensure M&S plays its – Climate-related (“CR”) financial disclosures:
part in limiting global warming to 1.5°C. – (a) governance arrangements, on pages 45
This year, to support us on our journey and 46;
to net zero, we had our 2030 corporate – (b) how CR risks and opportunities are
greenhouse gas emissions reduction identified, assessed and managed,
target approved by the SBTi (see official on pages 47 to 53;
science based target on page 55). – (c) how processes for identifying, assessing
M&S is a supporter of the Task Force on and managing CR risks are integrated within
Climate-Related Financial Disclosures the Group’s overall risk management
(“TCFD”) which provides a framework for framework, on page 54;
our approach to identifying, assessing and – (d) description of:-
managing our climate-related risks and (i) principal CR risks and opportunities,
opportunities. on pages 48 to 50;
(ii) time periods to which these are
assessed, on page 47;
Dedicated corporate website area: – (e) actual and potential impacts of the
– Plan A: Our Planet principal CR risks and opportunities on the
business model and strategy, on page 47;
 Go to corporate.marksandspencer. – (f) resilience of the business model and
com/sustainability/plan-a-our- strategy, taking into consideration different
planet CR scenarios, on pages 52 to 53;
– (g) targets used to manage CR risks and
– Look Behind the Label hub realise CR opportunities and performance
against targets, on page 55 and in the
 Go to www.marksandspencer.com/c/ Sustainability Report on pages 57 to 65;
look-behind-the-label and
– (h) KPIs used to assess (g) targets above and
calculations on which these are based, on
page 54 and in the Sustainability Report
on pages 57 to 65.

42 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Sections within the Annual Report to read more

Relevant policies, documents, or reports about the outcomes and related non-financial KPIs
Our Commitment that set out our approach of Our Commitment

COMMUNITIES AND SOCIAL MATTERS

M&S has been committed to supporting – Charity Partnerships Our contributions towards, and consideration of,
local communities throughout its 139-year & Fundraising Policy communities is integrated throughout the report
history. We aim to take a progressive – Trading Standards & Consumer and can also be found in:
approach to our community engagement Protection Policy – Stakeholder engagement, on pages 9 and 11
and actions that make a big difference on – Food & Product Safety – S.172 Statement, on pages 80 to 82
some of the most pressing causes in many & Integrity Policy – ESG Committee Report, on pages 90 to 91
parts of the world. – Farm Animal Health
& Welfare Policy
– Groceries Supply Code
Dedicated corporate website area: of Practice (“GSCOP”)
– Our Communities Compliance Report
– Responsible Marketing
 Go to corporate.marksandspencer.
Principles
com/sustainability/our-communities
– Sustainability Report 2023

– Our Products
 Go to corporate.marksandspencer.
com/sustainability/our-products

HUMAN RIGHTS
M&S is committed to respecting human – Modern Slavery Statement – Stakeholder Engagement, on page 11
rights in the UK and internationally; – Human Rights Policy – ESG Committee Report, on pages 90 to 91
ensuring people in our business and – Code of Conduct
supply chain are always treated fairly. – M&S Global Sourcing
To support this, we are committed to Principles
continuous improvement by building – Child Labour Procedure
knowledge and awareness on human – M&S grievance procedure for
rights for all of our colleagues and Food and Clothing & Home
suppliers, as well as ensuring there are supply chains
methods of speaking up through our
improved “Worker Voice” technology
platform.

Dedicated corporate website area:

– Human Rights & Our Supply Chain
 Go to corporate.marksandspencer.
com/sustainability/human-rights-
our-supply-chain

ANTI-BRIBERY AND ANTI-CORRUPTION

M&S is committed to the highest standards – Anti-Bribery & – Audit & Risk Committee Report, on page 95
of ethics, honesty and integrity. We have Corruption Policy
a zero-tolerance approach to any form – Code of Conduct
of bribery and corruption and operate a
compliance programme to prevent bribery
and corruption in our business and supply
chain. We set expected standards of
conduct that colleagues, contractors,
suppliers, business partners and any other
third parties who act for or on behalf of
M&S are obliged to follow.

PRINCIPAL RISKS
We are committed to maintaining an – Risk Management Policy – Risk Management Framework, on pages 56
agile approach to risk management with to 57
effective processes in place to proactively – Overview of Principal Risks and Uncertainties,
identify and manage risks that may impact on pages 58 to 65
the achievement of our business strategy – TCFD: Climate-related risks, on pages 44
and objectives. to 55

Annual Report & Financial Statements 2023 43

STRATEGIC REPORT

TASK FORCE ON CLIMATE-RELATED

FINANCIAL DISCLOSURES REPORT
This section sets out our climate-related financial disclosures,
aligned to the Task Force on Climate-related Financial Disclosures
(“TCFD”) recommendations and LR 9.8.6R.

TCFD DISCLOSURES INDEX

Marks and Spencer Group plc has
complied with the requirements of
LR 9.8.6R by including climate- TCFD PILLARS TCFD RECOMMENDATION REFERENCE
related financial disclosures Governance A) Describe the board’s oversight Read more on
consistent with the TCFD of climate-related pages 45-46
recommendations and risks and opportunities.
recommended disclosures, save for B) Describe management’s role Read more on page 52
our work on financial quantification in assessing and managing climate- in the Sustainability
which will continue over the next related risks and opportunities. Report
year, expanding to other risk and
opportunities currently identified A) Describe the climate-related
Strategy Read more on
as“not yet quantified”. This will enable risks and opportunities the
us to provide fuller disclosure of pages 47-53
organisation has identified over
resilience and of the financial the short, medium, and long term.
impacts of all climate-related
risks and opportunities in line B) Describe the impact of climate-
Read more in the
with strategy B & C. Financial related risks and opportunities Sustainability Report
quantification work to date has on the organisation’s businesses,
focussed on the areas provisionally strategy, and financial planning.
identified as potentially having the C) D
 escribe the resilience of the
most material impacts. organisation’s strategy, taking into
consideration different climate-
related scenarios, including a 2°C
For ease, the index provides a guide to
or lower scenario.
the disclosure including where
information is set out elsewhere in this
Risk Management A) Describe the organisation’s
report. Further information can also be Read more on page 54
process for identifying
found in our separate Sustainability
and assessing climate risk.
Report providing more comprehensive
reporting of our climate strategy and B) Describe the organisations
Read more on
progress. The Sustainability Report was processes for managing
pages 56-65 in the Risk
published on 6th June and is available at climate-related risks. Management section
marksandspencer.com/sustainability C) Describe
 how processes for
report2023 identifying, assessing and
managing climate-related
risks are integrated into the
organisation’s overall risk
management.

Metrics and Targets A) Disclose the metrics used by Read more on

the organisation to assess
pages 54-55
climate-related risks and
opportunities in line with its
strategy and risk management
process.
B) Disclosure scope 1, 2 and,
if appropriate scope 3
greenhouse gas emissions
and the related risks.
C) Describe the targets used Read more in the
by the organisation to manage Sustainability Report
climate-related risks and
opportunities and performance
against targets.

44 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

OUR TCFD JOURNEY

Published our Roadmap towards Develop detailed
Net Zero financial framework
Started quantitative scenario Work towards plan
Launched Plan A, Achieved carbon Signed up to British analysis for transition in line
our sustainability neutrality in Retail Consortium’s with TPT guidance
Disclosed scope 3 footprint
programme International Climate Action
Enhance scope 3
operations Roadmap Issued first compliant disclosure
Set an ambition to reporting
against the recommendations
be carbon neutral in
of TCFD
operations by 2012

NEXT
2007 2012 2014 2017 2019/20 2020/21 2021/22 2022/23
YEAR

Achieved carbon Signed up as a Began preparations Undertook climate-related business

neutrality in UK TCFD supporter for the future adoption wide risk and opportunity review
own operations of TCFD reporting
Published quantitative
Strengthened governance scenario analysis
with the creation of our
Enhanced governance with
ESG Committee
the introduction of an ESG
Business Forum
* Transition Plan Taskforce: https://transitiontaskforce.net/

However, as the ESG Committee has Executive Committee (ExCo) members

GOVERNANCE oversight of activities addressing our are individually responsible for reviewing
climate change and environmental and confirming risks in their own
responsibility risks, it supports the risk areas and subsequently reviewing the
A) DESCRIBE THE BOARD’S management process by reviewing and Group’s principal risks at the half year
OVERSIGHT OF CLIMATE-RELATED providing the Audit & Risk Committee and year end. This process provides the
RISKS AND OPPORTUNITIES. with recommendations on all ESG- Audit & Risk Committee with assurance
related risks. All members of both the that significant risks are appropriately
The Board has ultimate responsibility for ESG and Audit & Risk Committees are monitored and managed throughout
both risk management and ESG matters, Non-Executive Directors (Committee the year.
including those risks and opportunities membership and meeting attendance
related to climate change. The Board is This year, we have enhanced our
is outlined in the respective Committee
also responsible for reviewing and ESG governance process with the
Reports on page 90 for the ESG
guiding significant strategic programmes introduction of an ESG Business Forum,
Committee and page 92 for the
and expenditure and, as set out below, to replace the Plan A (Net Zero) Steering
Audit & Risk Committee).
relies on the support and advice of the Group. This forum, which is chaired by
ESG and Audit & Risk Committees in An overview of our risk management a member of the ExCo, meets on a
doing so. governance, including that relating to quarterly basis and is made up of the
climate change, is set out on page 57. accountable business leaders for ESG
Responsibilities in relation to ESG related issues. Quarterly updates from
matters are discharged to the ESG these meetings are provided to the ExCo
Committee. The ESG Committee is and the ESG Committee.
B) DESCRIBE MANAGEMENT’S ROLE
responsible for ensuring the Company’s
IN ASSESSING AND MANAGING
ESG strategy and associated governance,
CLIMATE-RELATED RISKS AND
including management of climate-
OPPORTUNITIES.
related issues, is fit for purpose and
appropriate metrics and targets are As outlined in our risk management
in place and reported on. The ESG process (see page 56), ESG risks,
Committee oversees progress against including those climate change risks
these targets via a quarterly ESG report. identified via our business-wide risk
Responsibilities in relation to risk and opportunities review, are considered
management are discharged to the as part of each business’ risk register.
Audit & Risk Committee, who review Each business area considers the capital
the principal risks twice a year, of which expenditure required for projects to
climate change and environmental mitigate the likely short term climate-
responsibility is one. related risks within the annual budget.

Annual Report & Financial Statements 2023 45

STRATEGIC REPORT

TCFD REPORT CONTINUED

GOVERNANCE STRUCTURE

BOARD

Ultimate responsibility for both Risk Management and ESG matters,

including those risks and opportunities related to climate change. Approves the Company’s
ESG strategy, including the group-wide target to become net zero.

EXECUTIVE COMMITTEE BOARD COMMITTEES

– T
 he CEO/Co-CEO are responsible for overseeing the ESG COMMITTEE
development of group-wide ESG strategic goals and are – R
 esponsible for ensuring the Company’s ESG strategy
accountable for the delivery of the Company’s group- and associated governance is fit for purpose, and that
wide ESG programme (including the roadmap towards plans are in place and reported on.
net zero). The Executive Committee members are
individually responsible for setting ESG strategy in their  dvises the Audit & Risk Committee on ESG-related risks
– A
respective areas of the business to achieve group-wide and opportunities, including climate-related issues.
strategic goals (overseen by the ESG Committee and for
ultimate approval by the Board) and putting in place
mechanisms to deliver their strategy, in turn managing
the climate-related risks and opportunities impacting
their business areas.
 he Executive Committee members are individually
– T AUDIT & RISK COMMITTEE
responsible for reviewing and confirming risks in their – R
 esponsible for ensuring the effectiveness of the risk
own areas as part of our risk management process, management process.
including climate risks.
– R
 eceive updates from the business leadership on how
principal risks and uncertainties of the business are
being appropriately addressed.
– R
 eviews the principal risks twice a year, of which climate
change and environmental responsibility is one.

MANAGEMENT FORUMS

BUSINESS AND FUNCTIONAL LEADERSHIP TEAMS ESG BUSINESS FORUM

– R
 esponsible for their business’ risk register, and for – A
 ccountable for driving progress against the
managing and resourcing mitigating activities. workstreams/targets of the Company’s ESG programme,
which mitigate our climate risks. Meets quarterly to
– R
 esponsible for ensuring climate-related risks are
review progress and agree the right metrics and targets
considered as part of the business’ risk register.
on a forward-looking basis.
– R
 esponsible for ensuring climate-related opportunities
– U
 pdates the Executive Committee and ESG Committee
are realised as part of their ESG strategy.
on a quarterly basis on progress against targets.
– Accountable
 for managing climate-related risks and
opportunities. Includes representatives from Group
Finance and Group Risk to ensure ESG considerations are
being appropriately reviewed and considered within risk
management and financial planning.

46 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Processes used to determine which risks

STRATEGY and opportunities could have a material B) DESCRIBE THE IMPACT OF
financial impact on the organisation. CLIMATE-RELATED RISKS AND
This year, we supplemented our risk OPPORTUNITIES ON THE
A) DESCRIBE THE CLIMATE-RELATED management process with a detailed ORGANISATION’S BUSINESSES,
RISKS AND OPPORTUNITIES THE business-wide review of climate risks and STRATEGY, AND FINANCIAL
ORGANISATION HAS IDENTIFIED opportunities over the short, medium PLANNING.
OVER THE SHORT, MEDIUM, AND and long term. This review included This year, our workshops across the
LONG TERM. workshops with risk, finance and business identified potential implications
sustainability leads across the of climate risks and opportunities on our
We know physical and transition climate- accountable businesses to identify key
related risks and opportunities can products and services, our supply chain,
risks and opportunities. As part of this our adaptation and mitigation activities
manifest themselves to different review, we utilised this groups insight to
proportions over a longer-term time and own operations. Climate-related
map potential impact and likelihood over risks and opportunities specifically
horizon. To ensure we have a resilient the different time horizons to determine
organisation fit for the future, it is associated with the acquisition of Gist
relative materiality. have been considered (more information
important that the management of our
climate-related risks and opportunities Determining materiality can be found on page 32 of our
is not only integrated into our existing The business determines the severity Sustainability Report) and, other
three-year strategy and planning of a risk by considering two factors: acquisitions are in line with our sectoral
processes as an ongoing consideration the likelihood of the risk materialising risks of clothing and home. Our focus on
but also that we supplement current in a given timeframe and the potential research and development is embedded
processes with reviews focused on an impact(s) such as financial, reputational, in our Food and Clothing & Home
extended time horizon. This process operational or regulatory. A combination businesses. During the year our
better informs our assessment of of these two factors provides an overall innovation teams have included a focus
emerging risks and opportunities and risk severity score of either ‘minor’, on climate-related opportunities as part
identifies the appropriate actions to ‘moderate’, ‘major’ or ‘critical’ which aids of their horizon scanning processes and
strengthen business resilience. the business in determining the investment, and we have also relaunched
materiality of a risk. We applied this our climate focused innovation fund, the
We have used the following definitions approach to our climate focused ‘Plan A Accelerator Fund’ (see Sustainability
of time horizons for the purposes of business-wide reviews to determine the Report page 16). We know having an
identifies and managing our climate risks materiality of risks and opportunities automated system in place to manage
and opportunities. These time horizons identified. and report on our greenhouse gas (GHG)
are informed by the Paris Agreement emissions data is key to managing risks
which influences global policy responses, The review considered two scenarios: on a ongoing basis. This year, we have
the UNFCC data on physical risks and our – A
 low-carbon transition scenario implemented Sphera, a system that
own company’s science aligned net zero focusing on the rapid policy, we are now using to collect, analyse
targets. regulatory, technological and market and report data on Scope 1 and 2 GHG
changes that will be required by 2030 emissions.
TIME HORIZONS to restrict emissions to a level which In addition to summarising the risks and
limits global warming to 1.5°C. opportunities identified, Table 1 outlines
Short <3 years – A
 physical climate impact scenario our business response to the impact on
Aligned to our risk management and assuming limited policy or regulatory our businesses, strategy, and financial
financial planning processes. support for emission reduction, planning in line with the considerations
leading to a world with increasing outlined above. We have also mapped
Medium 3-10 years physical climate change impacts. our targets to the impact areas to
highlight how we are building resilience
Captures transition risk and opportunities, A summary of this review can be found
into our business strategy.
linked to both our science-based target in Table 1. Table 1 categorises the risks
and the emerging risks included in our risk and opportunities in line with TCFD The above actions are reflected in the
management disclosure. Guidance Table A1.1 and A1.2. We agreed inclusion of net zero in our corporate
that our business risks and opportunities strategy and transformation priorities,
Long > 10 years are most appropriately considered from in the strengthened governance now
a sectoral perspective. For M&S that is in place for ESG and net zero and in the
Captures physical risks and opportunities
predominately agricultural, food and roadmap towards net zero influence on
over the long term. Linked to our long-term
clothing & home and property. We built our financial planning processes of our
net zero goals and the emerging risks
up a group wide view following individual budget and three-year plan.
included in our risk management disclosure.
workshops with our businesses. We have
highlighted the relevance of our risks
and opportunities in Table 1. Given this
sectoral focus is of most relevance to our
organisation, this year we have not felt it
appropriate to break risks and
opportunities down geographically.

Annual Report & Financial Statements 2023 47

STRATEGIC REPORT

TCFD REPORT CONTINUED Quantified

Immaterial
Short-term:
Medium-term:
<3 years
3-10 years
Not yet quantified Long-term: > 10 years

TABLE 1: BUSINESS WIDE RISK AND OPPORTUNITY SUMMARY

RISK/OPPORTUNITY SECTOR TIME POTENTIAL FINANCIAL BUSINESS RESPONSE2 TARGETS

& CLASSIFICATION HORIZON IMPACT ON THE BUSINESS1 Icons relate to Net Zero Priorities – see page 51

TRANSITION RISK Group wide Increase in operating costs Group – mitigation – 55% reduction
– Policy and Legislation Agriculture to manage environmental - Validated our science-based target, for 2030 in absolute
compliance such as which guides our goal setting process for net Scope 1 & 2
1. Current and new Foods carbon tax. zero targets as part of our business emissions
environmental Clothing transformation. by 2029/30
compliance including Summary of relevant
& Home quantitative scenario analysis Supply Chain – mitigation from 2016/17
legislation and tax. base year.
Property which looked at the impact - Built net zero as a consideration into our
Examples include the across different sectors – 55% reduction
introduction of a Fleet sourcing strategy for Food and Clothing
(Food, Clothing and Home & Home. in absolute
carbon tax to M&S and Property) can be found Scope 3
or our supply chain in Table 2. - Identified the suppliers who have greatest emissions
sectors (agriculture, impact on emissions in our supply chain as by 2029/30
food production, a key focus for engagement. from 2016/17
clothing & home) and Increase in capital - Communicated our expectations – measure base year.
the decarbonisation expenditure required to and report emissions, develop net zero plans
of our estate and fleet address emissions areas in and switch to renewable energy sourcing.
driven by legislation. M&S owned assets such as - Continued our partnership with the HIGG Index
refrigeration, energy to support the management of supply chain
consumption and diesel fleet. emissions in Clothing & Home. Foods have
Capital expenditure on signed up to Manufacture 2030 to support
LED lighting, store controls the management of supply chain emissions.
upgrades, voltage See Sustainability Report pages 23 to 25.
optimisation, fridge doors, Our operations – capital investment
electric vehicles and other - Planned asset replacement process in place
areas can be found in page 179 and integrated into our 3-year financial plan
of the Financial Statement. to phase out our F gas refrigeration systems.

TRANSITION RISK Foods Short/Medium Term – Our own brand food and clothing – Increase sales
– Market and Reputation Clothing Revenue opportunity from & home products and services of plant-based
& Home climate conscious customers - Sustainable preferences and perceptions are products to
OPPORTUNITY who want to choose low integrated into our customer insights tracker. £75m by
– Products and Services carbon products. 24/25.
- Ongoing investment in innovation and new
2. Ability to keep Sales from plant-based product and proposition development to – 100% of cotton
pace with customer protein found in the ensure we develop suitable low carbon used in C&H
trends and behaviours Sustainability Report products to maximise customer preferences. products
as we see an increase (page 47). - Current focus areas are alternative protein in from more
in consumer Food, and alternative raw materials in Clothing sustainable
preferences towards & Home. We are testing and trialling new sources by
more sustainable Medium Term – Revenue loss business models such as clothing rental and 25/26.
product choices. if we do not keep pace with resale however we have identified this as a – 100% of
customer trends and develop medium term opportunity and therefore polyester
suitable low carbon product does not appear as a revenue stream. used in
offerings. See Sustainability Report pages 31 and 47. C&H products
from more
sustainable
sources by
25/26.
– 100% of
MMCF used in
C&H products
from more
sustainable
sources by
25/26.

1 Quantification of financial impact will focus on short term risks and opportunities in line with our current financial planning process.
2 More information on specific programmes can be found in our Sustainability Report.

48 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Quantified Short-term: <3 years

Immaterial Medium-term: 3-10 years
Not yet quantified Long-term: > 10 years

RISK/OPPORTUNITY SECTOR TIME POTENTIAL FINANCIAL BUSINESS RESPONSE2 TARGETS

& CLASSIFICATION HORIZON IMPACT ON THE BUSINESS1 Icons relate to Net Zero Priorities – see page 51

TRANSITION RISK Group wide Increase in capital and Group – mitigation – 2.1 million
– Technology Property operational expenditure - Short term rapid decarbonisation target for tonne
required to source the 2025/26, to focus on investigating the need reduction
3. Availability of Fleet necessary low carbon for new low carbon technological solutions in carbon
technological solutions technology and infrastructure and infrastructure to support our journey emissions
and infrastructure to to achieve our net zero goals. to net zero. in 2025/26.
support low carbon
activities for example Our operations – 55% reduction
low and zero carbon - Through our acquisition of Gist, we are able in absolute
fleet options. to work more closely with the wider logistics Scope 1 & 2
industry and manufacturers to ensure we have emissions
a transition plan for a net zero fleet. This year, by 2029/30
we have expanded our LNG fleet to 35 vehicles. from 2016/17
See Sustainability Report page 34. base year.
– 55% reduction
in absolute
Scope 3
emissions
by 2029/30
from 2016/17
base year.

TRANSITION RISK Group wide Increase cost of fuel caused Supply chain – mitigation – 55% reduction
– Market Property by climate-related market - Working with suppliers to reduce energy in absolute
disruption. Potential risk of consumption and move to the use of renewable Scope 1 & 2
OPPORTUNITY Foods blackouts and brownouts energy. Examples of this include our emissions
– Resource Efficiency Clothing which in turn impact trade participation in the Carbon Leadership by 2029/30
and Energy Source & Home and waste. Programme and the use of the HIGG Facility from 2016/17
4. Energy efficiency Environmental Module. base year.
and resilience in See Sustainability Report page 25. – 55% reduction
our operations and Reduction in operational in absolute
supply chain. costs if energy consumption Scope 3
is effectively managed. emissions
Opportunity to reduce by 2029/30
reliance of grid electric by Our operations from 2016/17
facilitating on-site renewable - Continue to integrate energy efficiency base year.
energy generation. measures such as improved metering across
property estate and investment in energy
efficiency projects to lower energy
consumption in lighting and fridges.
See Sustainability Report page 33.

TRANSITION RISK Group wide Reputational impact due to Group – 2.1 million
– Reputation failure to meet our net zero - Net zero goal has been incorporated into the tonne
targets. Leads to lower sales strategic pillars of our Business Transformation reduction
5. Failure to meet our and makes it harder to attract with a set of clear metrics for accountable in carbon
public climate change and retain customers and business leaders. emissions
commitments. colleagues. in 2025/26.
- Enhanced ESG governance process with
the introduction of an ESG Business Forum. – 55% reduction
See Governance Structure on page 46 for more in absolute
information. Scope 1 & 2
- Relaunch of our climate focused innovation emissions
fund, the ‘Plan A Accelerator Fund’ by 2029/30
from 2016/17
base year.
– 55% reduction
in absolute
Scope 3
emissions
by 2029/30
from 2016/17
base year.

1 Quantification of financial impact will focus on short term risks and opportunities in line with our current financial planning process.
2 More information on specific programmes can be found in our Sustainability Report.

Annual Report & Financial Statements 2023 49

STRATEGIC REPORT

TCFD REPORT CONTINUED Quantified

Immaterial
Short-term:
Medium-term:
<3 years
3-10 years
Not yet quantified Long-term: > 10 years

TABLE 1: BUSINESS WIDE RISK AND OPPORTUNITY SUMMARY CONTINUED

RISK/OPPORTUNITY SECTOR TIME POTENTIAL FINANCIAL BUSINESS RESPONSE2 TARGETS

& CLASSIFICATION HORIZON IMPACT ON THE BUSINESS1 Icons relate to Net Zero Priorities – see page 51

TRANSITION RISK Group wide Increase capital and Group

– Market operational expenditure - Collaborate closely with the industry to ensure
required to meet our net we are working towards the same goals. As part
OPPORTUNITY zero goals e.g. increased of this, we are on the Steering Committee of the
– Policy cost in renewable energy British Retail Consortium’s Climate Action
6. Reliance on third procurement if grid Roadmap and lead on the Logistics Pathway.
parties, local decarbonisation is - Proactively engage with government to ensure
government and not delivered. that broader policy and infrastructure will
broader infrastructure support us on our net zero journey. Examples
to achieve our include input into the Independent Review of
mitigation actions. Net Zero led by Chris Skidmore, and signatories
on a letter to support the decarbonisation of the
grid in line with our operational net zero target.

TRANSITION RISK International Reputational impact due Our operations

– Reputation to failure to meet the - Apply learnings from both the COVID-19
requirements of our partners. pandemic and the invasion in Ukraine as to how
PHYSICAL RISK Loss of revenue from not we are able to adapt our supply chain to ensure
– Acute & Chronic being able the provide we are able to meet partner requirements,
7. Failure to meet the necessary stock to partners. irrelevant of the cause of the distribution.
requirements of our
franchise partners
based on the impact
of climate change on
our supply chain.

PHYSICAL Agriculture Increase in sourcing costs Supply chain – adaptation Maintain 100%
– Acute & Chronic Foods based on supply chain - Strengthened our focus on supporting fairtrade-
disruption caused by producers as they transition to net zero. We’re certified tea
8. Volatility in the Clothing increased likelihood of putting a greater emphasis on resilience in our and coffee.
supply of raw materials & Home extreme weather. standards and partnerships like Fairtrade.
caused by the impact 100% of cotton
of climate change. Summary of relevant - Increased focus on regenerative agriculture, used in C&H
quantitative scenario analysis through our Farming with Nature programme products from
can be found in Strategy c). and work with the Better Cotton Initiative. more sustainable
See Sustainability Report pages 19 and 21 sources by
2025/26.
Loss of revenue if we are
not able to source specific
products due to the impact
of physical climate risks.

PHYSICAL Group wide Loss of revenue from increased Our operations

– Acute Property likelihood of extreme weather - To support with the management of extreme
events (e.g., flooding, extreme weather events in stores, distribution centres
9. Managing Fleet temperatures) leading to and key transport hubs such as Chittagong
infrastructure and closures of shops, distribution port, Bangladesh, we have in place robust
operations (both owned centres and key transport hubs. business continuity procedures.
and supply chain) in
extreme weather. Summary of relevant
quantitative scenario analysis
can be found in Strategy c).

How climate-related issues serve as an For example our capital investment in For required spend in years subsequent
input to our financial planning process replacing fridges and freezers to become to FY2023/24 to meet interim and
Where required, the spend associated compliant with the F gas Regulation, as 2029/30 targets, this is currently
with certain projects linked to climate- well as other operational efficiencies included within capital expenditure and
related risks and opportunities is included in our 3 year budget. operating cost increase assumptions in
incorporated into the FY2023/24 budget This financial planning process form the the three-year financial plan rather than
and the three-year financial planning cash flow projections within our going being included specifically. This spend
process, both approved by the Board. concern and impairment assessments will be built into future budget
We have done so by including the capital (see page 157 for more details). The specifically each year. This is due to the
expenditure required to manage the financial framework will be developed three-year financial plan being built from
impact of our climate-related risks in our during 2023/24 to align with the overall the FY2023/24 budget as a base year
operations and the profit impact from climate strategy and net zero target. with years 2 and 3 being built on
climate-linked products and services. assumptions.

50 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Our Transition Plan This ambition is supported by a set of Our roadmap towards net zero contains
Since its launch in 2007, Plan A, interim targets that align with climate the key milestones which are reflected in
our sustainability programme, has science to limit global warming to 1.5°c our group strategy and transformation
underpinned the resilience of our (see roadmap below). This year, to priorities. This is supported by enhanced
organisation’s strategy, ensuring support us on our journey to net zero, governance, improved tracking and
that we are proactively managing the we had our 2029/30 reduction target measurement, collaboration and
environmental and ethical risks and validated by the Science Based innovation funding.
opportunities we face as a business, Targets initiative.
The 10 roadmap workstream icons can
including climate-related issues.
Our initial transition plan is focussed be found on Table 1 to highlight how
In 2021, we reinvigorated our approach
on the short term to mobilise the the specific priority areas support the
to sustainability and outlined our
organisation, reduce emissions across impacts identified.
ambition to become a net zero business
key hotspots and start to build capability
across our entire value chain by 2040.
to address the opportunities identified.

NET ZERO TRANSITION ROADMAP

Short-term: <3 years Medium-term: 3-10 years Long-term: > 10 years

OUR BASELINE 2025/26 TARGET 2029/30 TARGET 2034/35 TARGET 2039/40 TARGET

6.2m 2.1m 55% reduction Net zero Net zero

tonnes (34%) reduction in carbon emissions versus across our own across entire
tonnes of carbon emitted in carbon emissions our baseline business value chain
in 2016/171
SBTi APPROVED2

TEN IMMEDIATE PRIORITY AREAS FOR TRANSFORMATION

PLANET

HOW WE SOURCE HOW WE MAKE HOW WE ARE REDUCING DRIVING EFFICIENCY

OUR PRODUCTS OUR PRODUCTS WASTE AND PROTECTING ACROSS OUR STORE
RESOURCES ESTATE

Zero deforestation Increasing the range of Circular economy Zero emissions property
– 100% of soy to be sourced plant-based protein Enhancing our clothes Deliver a more efficient
from verified deforestation Double the sales of vegan recycling scheme with new store estate.
and conversion-free regions and vegetarian products incentives for Sparks
by 2025/26. by 2024/25. members.
– 1 00% segregated
responsibly sourced palm
oil by 2025/26. Zero emissions transport
Moving to low-carbon
logistics with reduced
Suppliers and business Reduce food waste dependency on diesel
partners on net zero journey – 100% of edible surplus and increased use of new
Looking beyond our own to be redistributed technologies and cleaner
Sustainable sourcing operations to spark change by 2025/26. fuels. Contributing to
100% verified recycled and support decarbonising – Food waste reduced cross-industry action
polyester by 2025/26. across our full value chain. by 50% by 2029/30. through collaboration.

Low-impact farming Reduce and recycle

We support our farmers to packaging
enable them to grow low – 100% of packaging to be
carbon, responsible food, use recyclable by 2025/26.
fewer pesticides, enhance their – Remove 1bn units of plastic
soil, protect natural resources packaging by 2027/28.
and drive innovation.

Restated in line with methodological changes and Gist acquisition.

1 2
See Metrics and Targets C) for official science based target wording.

Annual Report & Financial Statements 2023 51

STRATEGIC REPORT

TCFD REPORT CONTINUED

This year’s business-wide review of We ratified our scenario analysis for

C) DESCRIBE THE RESILIENCE OF climate-related risks and opportunities cotton and protein and this year have
THE ORGANISATION’S STRATEGY, endorsed the selection of specific areas disclosed the potential financial impact
TAKING INTO CONSIDERATION for quantitative scenario analysis, to the business if no actions were taken
DIFFERENT CLIMATE-RELATED highlighting the policy and legislation to mitigate the risks. The results of the
SCENARIOS, INCLUDING A 2°C risk of environmental compliance on both scenario analysis are included in Table 2.
OR LOWER SCENARIO. our operations and our supply chain in a We have aligned our financial impact
Quantitative scenario analysis transition scenario (Table 1 – Risk 1). In last criteria to our group risk assessment
Quantitative scenario analysis is a year’s disclosure we identified carbon criteria as follows:
valuable tool to explore the potential pricing mechanisms as the greatest
impact of risks and opportunities environmental compliance risk we face in FINANCIAL IMPACT
identified by the business. Last year we the medium term. The acquisition of Gist
undertook scenario analysis on three during the year resulted in us reviewing Critical >5% impact on sales
areas of our business, Property, Protein our Scope 1 and 2 emissions to include
those previously excluded from M&S >10% impact on PBT
and Cotton. These areas were selected
following a materiality assessment which operational emissions. As this increased Major 3-5% impact on sales
considered both the potential climate- Scope 1 and 2 emissions by c.20%, we
extended our existing quantitative 5-10% impact on PBT
related impact and the impact on
financial performance to M&S, whilst scenario analysis of this transitional Moderate 1-3% impact on sales
ensuring fair and balanced reporting risk from financial year 2021/22 to include
the non-dedicated elements of Gist 1-5% impact on PBT
across the accountable businesses.
The analysis looked at the impact of two (dedicated elements previously included), Minor <1% on sale and PBT
plausible future states – a low-carbon and expanded our analysis to cover M&S
transition scenario (average global (including Gist) fleet.
temperature increases of 1.5˚C due to
climate change by 2100) and a physical
climate impact scenario (average global
temperature increases of 4˚C due to
climate change by 2100).

TABLE 2: QUANTITATIVE SCENARIO ANALYSIS SUMMARY

AREA & SCOPE RISK/OPPORTUNITY RISK IMPACT OF QUANTIFICATION TARGETS IN PLACE TO

CATEGORY MODELLED CLIMATE RISK ON OF IMPACT MANAGE THESE RISKS
(AS IDENTIFIED OUR ORGANISATION’S
IN TABLE 1) FINANCIAL
PERFORMANCE
IN 2030, ASSUMING
NO MITIGATION ACTIONS

PROPERTY TRANSITION RISK Carbon tax on Potential operating 55% reduction in absolute
(Updated – Policy and Scope 1 and 2 profit impact of Scope 1 and 2 emissions by 2029/30
following Gist Legislation emissions £20m to £30m from 2016/17 base year.
acquisition)
Current and new
UK Property environmental
Estate compliance including
(including Gist legislation and tax.
properties)
PHYSICAL Flood risk Immaterial N/A
– Acute
Managing
infrastructure and
operations (both
owned and supply
chain) in extreme
weather.

FLEET TRANSITION RISK Carbon tax on Potential operating 55% reduction in absolute
(Added – Policy and Scope 1 and 2 profit impact of Scope 1 and 2 emissions by 2029/30
following Gist Legislation emissions £15m to £25m from 2016/17 base year.
acquisition)
UK fleet Current and new
environmental
compliance including
legislation and tax.

52 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

TABLE 2: QUANTITATIVE SCENARIO ANALYSIS SUMMARY CONTINUED

AREA & SCOPE RISK/OPPORTUNITY RISK IMPACT OF QUANTIFICATION TARGETS IN PLACE TO

CATEGORY MODELLED CLIMATE RISK ON OF IMPACT MANAGE THESE RISKS
(AS IDENTIFIED OUR ORGANISATION’S
IN TABLE 1) FINANCIAL
PERFORMANCE
IN 2030, ASSUMING
NO MITIGATION ACTIONS

PROTEIN TRANSITION RISK Carbon tax on Potential operating 55% reduction in absolute
UK and Ireland – Policy and agricultural profit impact of Scope 3 emissions by 2029/30
sourced beef, Legislation emissions (to the £35m to £50m from 2016/17 base year.
lamb, pork, farm-gate) Increase sales of plant-based
chicken and Current and new
environmental products to £75m by 2024/25.
turkey products
compliance including
legislation and tax.

PHYSICAL Extreme weather Immaterial N/A

– Acute & Chronic events and chronic
climate change
Volatility in the impact on
supply of raw agricultural
materials caused production
by the impact of
climate change.

COTTON TRANSITION RISK Carbon tax on Potential operating 55% reduction in absolute
Globally – Policy and agricultural (seed profit impact of Scope 3 emissions by 2029/30
sourced raw Legislation to farm-gate) and £45m to £60m from 2016/17 base year.
material used in manufacturing 100% of C&H Tier 1 & Tier 2 suppliers
our clothing Current and new (all steps in cotton
environmental with Level 1 Higg FEM module result
production) by second annual audit.
compliance including emissions
legislation and tax.

PHYSICAL Extreme weather Immaterial N/A

– Acute & Chronic events and chronic
climate change
Volatility in the impact on
supply of raw agricultural
materials caused production
by the impact of
climate change.

Resilience of our business We have strengthened our governance We also quantified the physical risks
Our scenario analysis identified transition approach and internal tracking as well as outlined in the table above and the
risks as material in 2030, with a potential investing in a system to digitally capture analysis has identified the financial
operating profit impact across Property, Scope 1 and 2 GHG data. Finally, to support exposure to 2030 to be immaterial.
Fleet, Protein and Cotton associated the requirement for greater collaboration Our business-wide review did highlight
with the introduction of a carbon tax of and research and development we have volatility in the supply of raw materials
between £115m and £165m assuming relaunched a climate focused innovation caused by climate change and the
no mitigation. fund, the ‘Plan A Accelerator Fund’. management of infrastructure and
These actions in the short term all play operations (both owned and supply
Identification of such risks in the chain) in extreme weather as key
a role in strengthening the resilience
medium term highlights the continued physical risks. Therefore we will consider
of our organisation’s strategy to the
importance of meeting our 2029/30 focusing further quantitative scenario
climate-related risks and opportunities
science-based target. As an own analysis on these areas next year to
we have identified.
brand retailer with in excess of 94% better understand the implication of
of our emissions in our value chain it Moreover, even if there were to be
this beyond the current risk of volatility
is important we focus on supply chain significant issues that meant we were
in supply chains that we have been
emissions reduction. It is with this unable to deliver on our mitigations such managing for other issues e.g. Covid,
focus that we are ensuring that our as lack of technological solutions, given
Brexit, the invasion in Ukraine.
2029/2030 target is influencing our the health of our balance sheet, we
strategic sourcing strategy to ensure would be able to absorb the impact a
we are working with suppliers who have carbon tax as calculated in Table 2.
the capability to reduce emissions.

Annual Report & Financial Statements 2023 53

STRATEGIC REPORT

TCFD REPORT CONTINUED

RISK MANAGEMENT C) DESCRIBE HOW PROCESSES B) DISCLOSURE SCOPE 1, 2 AND,

FOR IDENTIFYING, ASSESSING IF APPROPRIATE SCOPE 3
AND MANAGING CLIMATE-RELATED GREENHOUSE GAS EMISSIONS
A) DESCRIBE THE ORGANISATION’S RISKS ARE INTEGRATED INTO THE AND THE RELATED RISKS.
PROCESS FOR IDENTIFYING AND ORGANISATION’S OVERALL RISK
This year we have implemented Sphera,
ASSESSING CLIMATE RISK. MANAGEMENT.
a system that we are now using to collect,
We consider risks relating to climate The process for managing climate- analyse and report data on Scope 1 and 2
change as part of the group risk related risks is integrated into our group GHG emissions. Our Scope 1 and 2
management process. To further risk management process. Climate carbon emissions, reported in line with
understand our business-wide climate- change and environmental responsibility the Greenhouse Gas Protocol are on
related risks at a more granular level, continues to be called out as a principal page 55 as part of response to the
we supplemented our group risk risk see page 64, as the Audit & Risk Streamlined Energy and Carbon
management process by undertaking Committee and accountable businesses/ Reporting requirements.
a detailed business-wide review of key functional areas have considered
These are verified by DNV Business
climate risks and opportunities with risk, risks relating to climate change, and
Assurance Services UK Limited –
finance and sustainability leads across more broadly the delivery of our net zero
more information can be found in the
the accountable businesses to identify commitment, as part of the group risk
Sustainability Report Independent
key risks and opportunities over the management process.
Assurance Statement.
short, medium and long term as outlined
on page 47. We utilised stakeholder
insight to assess the potential size and
scope of the climate risks. The summary
of these risks can be found in Table 1.
METRICS AND TARGETS
SCOPE 3 EMISSIONS

B) DESCRIBE THE ORGANISATIONS This year we have included our

A) DISCLOSE THE METRICS USED
PROCESSES FOR MANAGING FY2022/23 Scope 3 emissions data
BY THE ORGANISATION TO ASSESS
CLIMATE-RELATED RISKS. (see page 55). More information
CLIMATE-RELATED RISKS AND
on the evolution of our Scope 3
OPPORTUNITIES IN LINE WITH
The business-wide reviews of climate emissions can be found on page 15
ITS STRATEGY AND RISK
risks and opportunities used the TCFD of our Sustainability Report. In line
MANAGEMENT PROCESS.
Guidance Table A1.1 and A1.2 to ensure with our transformation, growth in
a comprehensive view of the issues Our Sustainability Report outlines all our business has increased the scope
impacting our business. Prioritisation of our metrics used to assess our ESG of our emissions, which has been offset
of risks was then assessed based on performance. Those relevant to by emissions reductions programmes
materiality and time horizon. Due to the assessing our climate-related risks and we are able to quantify in our total
recognised uncertainty of longer term opportunities have been identified in reported emissions. However, due to
climate-related risks we prioritised our the data tables on pages 57 to 69 of the modelling approach for supply
scenario analysis on the short-term risks the Sustainability Report. chain carbon emissions (which uses
– details regarding the financial impact industry average benchmarks),
criteria and the outputs can be found on Having undertaken a review of the a number ofprogrammes that we
pages 52 and 53. cross-industry, climate-related metrics, have in place to deliver emissions
this year we have continued to focus our reductions cannot yet be seen in our
The businesses have considered how metrics disclosure on our GHG emissions disclosed emissions. This is something
climate-related issues may impact their which can be found in our data tables we are looking to address through
strategy both in the short term and referenced above. Tables include the implementation of new systems
beyond, and therefore will continue to performance across this year, last year and measurement processes to get
design and implement the required and where appropriate our base year access to and manage primary data
mitigating controls to manage these. (2016/17). We do not currently use collected from our supply base.
Ongoing management of these climate an internal carbon price but continue to For our Foods business, we expect
risks forms one of the accountabilities investigate its potential application to to have these systems (Mondra and
of the ESG Business Forum. Alignment our business. Manufacture 2030) fully operational
with the group risk management process
Details of the methodologies used to in the next Financial Year. For our
ensures that each climate-related risk
calculate performance against targets Clothing & Home business we
at a business/function level, has a
and metrics can be found in the 2023 are currently working with our Digital
designated risk owner and oversight
Basis of Reporting https://corporate. and Technology Team to establish
from the leadership team, as well as
marksandspencer.com/basis-of- how we integrate data from the
using the risk assessment criteria
reporting-2023. HIGG Index into our Clothing & Home
(including parameters for risk scoring)
footprint. Management is monitoring
and actions tracking to ensure risks are Integrating sustainability metrics progress towards our carbon
treated appropriately. More information in remuneration reduction targets via our ESG
on our risk management process can Information on the current position Business Forum on a quarterly basis.
be found on page 56, which includes the of inclusion of sustainability metrics More information can be found on
consideration of climate-related risks. in remuneration can be found in the page 52 of our Sustainability Report.
Remuneration Committee Report
on page 100.

54 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

STREAMLINED ENERGY AND CARBON REPORTING

Energy consumption (GWh) Greenhouse gas emissions (000 tonnes CO2e)

2022/23 2021/22^ % change 2022/23 2021/22^ % change

UK Operations 1,402 1,382 1% Scope 1 emissions 226 234 -3%
International Operations 74 62 20% of which UK 218 228 -4%
Group 1,477 1,445 2% Scope 2 emissions
^P
 erformance for last year has been re-stated, in line with the GHG Protocol and (location-based) 137 142 -3%
M&S’ emissions re-statement policy, to account for the acquisition of Gist in 2022 of which UK 113 120 -6%
and data improvements identified through the implementation of a new digital ESG
reporting platform. Previously, following the operational control reporting Total location-based scope 1&2
363 376 -3%
boundary, Gist’s secondary logistics operations (which account for the majority of emissions
energy use and reported emissions) were reported on, since these operations were
dedicated to M&S. Gist’s primary logistics operations, which were previously not of which UK 332 348 -5%
reported on, have now come into M&S’ reporting boundary, and figures have been GHG intensity per 1,000 sq ft
re-stated accordingly. 17.3 18.2 -5%
of salesfloor
ENERGY EFFICIENCY INITIATIVES IMPLEMENTED Scope 2 emissions from procured
THIS YEAR renewable electricity (location- 117 125 -6%
– LED Lighting: Continued investment in installation of LED based)
lighting, with 24 schemes implemented in UK stores in Total market-based scope 1&2
246 250 -2%
2022/23, and installations now complete across all Gist emissions
retail distribution operations. of which UK 219 229 -4%
– Automated Meter Readers: Now installed in 80% of UK
stores (project started February 2022).
– Initiatives implemented in Q4, with savings to be realised
from next year, included trials of adding doors to fridges,
moves to 100% electric stores using heat pumps to reduce
gas usage, voltage optimisation projects and
implementation of aerofoils.
– Behaviour change: Energy efficiency has been a focus in
our communications to colleagues this year, reminding
colleagues to use night blinds, switch off lights, and review
bakery schedules. At Gist, all drivers have completed
SAFED training on fuel efficient driving.

decarbonisation target to reduce

C) DESCRIBE THE TARGETS USED BY emissions by 34% by 2025/26. Based on
CURRENT SCOPE 3 EMISSIONS THE ORGANISATION TO MANAGE our revised baseline, management have
CLIMATE-RELATED RISKS AND translated this into a 2.1 million tonne
OPPORTUNITIES AND PERFORMANCE reduction target. We now have clear line
AGAINST TARGETS. of sight, based on projects that are
This year, we had our 2030 corporate resourced and underway, to 62% of the
greenhouse gas emissions reduction 2.1 million emissions reduction we are
target approved by the Science Based committed to deliver in 25/26.
Targets initiative: 2025/26 target
6.1m tonnes
CO2e 2.1 million tonne (34%) reduction
Marks and Spencer PLC commits to in carbon emissions.
reduce absolute Scope 1 and Scope 2
GHG emissions 55% by 2030 from a
It is important to note that we will, on
2017 base year. Marks and Spencer
an ongoing basis, continue to review
PLC also commits to reduce absolute
our externally communicated carbon
Scope 3 GHG emissions 55% within
targets. This will allow us to reflect
the same time frame.
ongoing business change (similar to the
approach taken this year following the
Sourcing Operations
Our net zero ambition builds on acquisition of Gist), the evolution of
Manufacturing Franchise our absolute science-based target, carbon measurement techniques and
Packaging Investments aligned to the UN ambition to limit guidance and the impact of emerging
global warming to 1.5˚C: technologies over the coming years.
2034/35 target Our Sustainability Report outlines all
– Net zero across our own business. of our targets used to manage our
ESG performance. Those relevant to
2039/40 target managing our climate-related risks and
– Net zero across our entire value opportunities have been identified in
supply chain. the data tables on pages 57 to 69 of
the Sustainability Report. We have also
To support our net zero ambition mapped these targets to the risks and
we included a short term rapid opportunities identified in Tables 1 and 2.

Annual Report & Financial Statements 2023 55

STRATEGIC REPORT

RISK MANAGEMENT
Maintaining a dynamic and effective risk management process
is vital to support and strengthen business operations as we
reshape the company and manage the impact of a challenging
external environment.

APPROACH TO RISK MANAGEMENT – identification, measurement and – a formal half-yearly review of all risk
Our approach to risk management reporting of risks against a registers by the Group Risk team to
remains consistent with previous years. consistently applied criteria provide independent challenge and
The Audit & Risk Committee, under considering both the likelihood of support cross-business alignment;
delegated authority from the Board, is occurrence and potential impact – direct reporting to the Audit & Risk
accountable for overseeing the to the Group, with clear ownership Committee by each of our business
effectiveness of our risk management allocated to relevant members of and functional leadership teams on
process. This includes identification of the leadership team; a rolling, scheduled basis – flexed to
the principal risks facing M&S, monitoring – maintenance of detailed risk registers respond to changes or potential
compliance with the risk management and mitigation plans. These are emerging issues; and
policy and periodically reviewing risk completed by each business and – the compilation of an overarching
appetite. To support this, underlying function, approved by their leadership view of group risks, combining both
processes are in place which remain teams and the appropriate Executive top-down and bottom-up
aligned to the M&S operating model, with Committee members. The output is perspectives which consider the
each business and function responsible also incorporated into other related impact of changes in the external
for the identification, tracking and governance processes. For example environment, our business strategy,
management of specific risks. In addition, climate related risks are reported at transformation programme, core
risk activities at our joint ventures are the Environmental, Social and operations and our engagement
captured as part of the monitoring Governance (ESG) committee and fire, with external parties.
processes in place. health and safety risks at the Group
Safety Committee; The output from the above process is
Our risk management process is
subject to periodic review and challenge
underpinned by the Group Risk – proactive monitoring of emerging
with the executive directors as part of
Management Policy which is subject risks by each business and function
our interim and year-end reporting
to periodic review to ensure it remains where the full extent and implications
processes. Following this, the principal
appropriate for our business needs may not be fully understood but need
risks and uncertainties are submitted to
and delivers against our governance to be tracked. This is an integrated
the Audit & Risk Committee for review
responsibilities. The Policy was last element of the processes outlined
and approval prior to being
reviewed and approved by the Audit above;
recommended to the Board for approval.
& Risk Committee in September 2022. – swift action to evaluate changes to
the risk profile triggered by new or An overview of this process is presented
The key activities captured by the
unexpected events, working in in the diagrams on the following page.
Policy include:
conjunction with support functions Details of how the principal risks and
– the development and maintenance such as the business continuity and uncertainties interact with the strategic
of Board approved risk appetite legal teams; priorities of the business are shown on
statements which align with the page 59.
– ongoing assessment of the overall
business strategy, three-year plan, risk profile to reflect changes in the The directors’ assessment of the long-
core operating activities and the business operating model, term viability of M&S is also reviewed
business purpose and values. Our risk accountabilities and reporting – for annually, mindful of the principal risks
appetite statements include strategic example to incorporate the acquisition faced. The approach for assessing
and transformational priorities, of our logistics business, Gist; long-term viability, incorporating
operational activities and core policy
scenarios based on the principal risks
areas. The statements are used to
and uncertainties is set out on pages 66
define and set appropriate risk-taking
to 67 and on page 134.
parameters for business activity;

56 Marks and Spencer Group plc

 INTRODUCTION STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

RISK MANAGEMENT PROCESS AND GOVERNANCE OVERVIEW

The diagrams below provide an overview of the risk management process and activities that allow the business to maintain an
appropriate risk culture to support operations and support the Board in complying with obligations under the Corporate
Governance Code 2018.

Monitoring,
reporting
5 1 Setting and
periodic review
and escalation of risk appetite

Ongoing
communication
Risk response and
action tracking
4 and feedback 2 Risk identification
and ownership

Risk assessment 3

INTERNAL REPORTING EXTERNAL REPORTING

TOP-DOWN
GROUP-LEVEL RISKS
– Consolidation of significant risks from
underlying risk registers Parties involved:
– M&S Board
– Overlay of Group-level risks
– Audit & Risk
– Review and agreement of the principal Committee
risks by the executive directors – Executive
– Review and approval by the Audit & Risk Committee
Committee – Group Risk team
PRINCIPAL RISKS
AND UNCERTAINTIES
BUSINESS AND FUNCTIONAL RISK REGISTERS – Review and approval
– Development and ongoing maintenance of risk by the Board and
registers, including consideration of emerging Audit & Risk
risks, by business owners and leadership teams Committee
– Review and challenge of risk content and the – Full disclosure of
quality of mitigation plans by the Group Risk team principal risks and
Parties involved: uncertainties
– Monitoring of risks associated with our
joint ventures – Group Risk team
– Business and
– Review and challenge of risks at leadership forums
functional
leadership teams
– Policy and
EMERGING RISKS AND ISSUES process owners
– Monitoring emerging areas of change or issues
that may become significant at a Group level
BOTTOM-UP

MAINTAINING AN EFFECTIVE RISK FRAMEWORK

In complying with the process and policy described above, examples of how risk management has kept pace with change during
the year include:
– Evolving the Audit – Completing a review and – Refining the suite of – Integrating a new risk
Committee to be formally refresh of risk appetite underlying business and management tool across
designated as the statements, with full functional risk registers to the business to enhance
‘Audit & Risk Committee’, Audit & Risk Committee mirror today’s operating risk reporting capabilities
strengthening the profile and Executive team model such as the and provide greater
of risk management in our participation, to maintain acquisition of Gist. transparency and
governance framework. alignment with strategy and consistency across
the ongoing transformation business level and
activities, as well as meeting Group‑wide risks.
the core requirements of
business operations.

Annual Report & Financial Statements 2023 57

STRATEGIC REPORT

PRINCIPAL RISKS AND UNCERTAINTIES

Our principal risks and uncertainties have been assessed in accordance with the methodology outlined on the previous
pages which allows the business to remain flexible and respond to a dynamic risk landscape.

OVERALL RISK ENVIRONMENT KEY CHANGES TO OUR RISK PROFILE MONITORING EMERGING RISKS
At an overarching level, a complex set The following key changes have been Our risk profile will continue to evolve
of external factors continue to have a made to our risk profile during the year: as a result of future events and
pervasive impact across the business. uncertainties. The emerging risks arising
– We acquired the food logistics from these are monitored to understand
These include the ongoing cost-of-living
business, Gist. The impact of the the potential impact on our business and
challenges, the continued consequences
acquisition has been reflected in a to allow timely decision-making.
of Russia’s invasion of Ukraine, and whilst
number of our existing principal risks.
diminishing, the legacy of Covid-19.
Most significantly this includes: Examples of emerging risks include:
In addition, the associated economic
uncertainties triggered by these – Business transformation; – The pace of change in relation to
combined events add a further risk – Business continuity and resilience; environmental and other ESG matters
dimension. – Talent, culture & capability; as well as evolving consumer
expectations; and
These factors form the basis of our first – Information security;
principal risk, ‘An uncertain trading – The impact on our business from
– Corporate compliance and changes to the legal and regulatory
environment’, which captures the responsibility; and
aggregated consequences of this landscape, for example the anticipated
suite of events, such as: – Climate change and environmental government legislation on the Border
responsibility. Target Operating Model setting out the
– cost of goods inflation (including – The previous ‘Ocado Retail’ risk which basis for how the UK trades with Europe.
the impact of sterling’s value focused solely on our online food retail
against the US dollar); investment with Ocado Group has
– energy price volatility; been expanded to cover our wider joint
– increasing interest rates; venture investments. This change
recognises our ambition to expand
– the impact of industrial action;
global activities and, as part of this,
– structural instability in the global the contribution of our joint venture
financial system; in India with Reliance Industries. The
– a potential decline in consumer risks associated with our investment in
spending; Ocado Retail and the relationship with
– supplier resilience and viability; Ocado Group remain consistent with
our previous disclosure.
– labour constraints;
– Our business transformation risk
– supply chain pressures and disruption
has been expanded to reflect the
to the supply of materials and
importance of delivering a compelling
products (including concerns from
omni-channel experience and to
animal disease);
transition the business to a simpler
– further global socio-political tensions and more cost-effective structure.
and fragility; The focus on the store transformation
– the risk of recession; programme, investment in our
– changes in central government and/ technology capabilities and
or regional policies; and improvements in supply chain remain
consistent with previous disclosures.
– the threat of new Covid-19 variants
and/or other widespread health events. Our principal risks and uncertainties are
set out in more detail on pages 60 to 65.
All of these factors, individually or in These are set out in the order of current
aggregate, may negatively impact priority for the business, with
future trading performance and have the movement in their ranking since
an overarching affect across our suite our interim disclosure also shown.
of principal risks and uncertainties.

58 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

LINKING RISKS WITH OUR STRATEGIC PRIORITIES

The table below shows how our principal risks align with the strategic priorities described on pages 12 to 27.

Deliver Improve Disciplined Drive

profitable operating investment shareholder
sales margins choices returns

Leading in
Exceptional Omni-channel Expanded Structurally High Accelerating Compelling Disciplined
product, including global lower performance store Modernised customer capital
trusted brand Ocado reach cost base culture rotation supply chain ecosystem allocation

1. An uncertain
trading
environment

2. Business
transformation

3. Joint venture
investments

4. Business
continuity
and resilience

5. Product safety
and integrity

6. Talent, culture
and capability

7. Information
security

8. Corporate
compliance and
responsibility

9. Climate change
and environmental
responsibility

10. Liquidity, funding

and financial
markets

11. EU border

challenges

Annual Report & Financial Statements 2023 59

STRATEGIC REPORT

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

1. AN UNCERTAIN TRADING ENVIRONMENT

The business continues to operate in an environment impacted by an increasingly complex set of external factors. The ongoing cost-of-
living crisis, the invasion in Ukraine and continued consequences of the pandemic, along with the potential for further geopolitical
and economic uncertainties have combined to create a difficult and unpredictable trading environment which could negatively
impact performance.
Context Mitigations
The broader context of this risk is detailed on page 58. While – A strong, varied and complementary senior leadership team.
not repeated in full, key aspects impacting this risk include: – An established operating model with a family of accountable
– cost of goods inflation (including foreign exchange businesses who share M&S brand values, support functions,
movements); technology and customer data.
– energy price volatility; – A three-year plan maintained to remain relevant to the current
– increasing interest rates; challenges, including an effective budgeting process,
– the impact of industrial action; incorporating sensitivity analysis to anticipate the impact of
– structural instability in the global financial system; external uncertainty.
– a potential decline in consumer spending; and – Formal operating reviews enabling effective executive oversight,
– supplier resilience and viability. governance and alignment of each business.
– Prioritised focus and discipline across the business on cost,
range, trusted value and availability.
– Effective business continuity and crisis management processes
to respond to issues as they arise.
– A proactive, structured supplier engagement programme to
anticipate and support management of escalating business-
critical issues such as cost inflation.
– Frequently reviewed policy and procedure framework aligned
to risk appetite in key risk areas such as foreign exchange, energy
Oversight by the Board and Executive Committee and interest rate management.

2. BUSINESS TRANSFORMATION
Ongoing business transformation is dependent on our ability to prioritise capital spend and resources to accelerate and successfully
implement the suite of critical strategic projects to deliver our medium- and longer-term growth ambitions.
Context Mitigations
The business continues to manage a number of significant – Transformation programmes aligned to the business strategy
change programmes that underpin our transformation objectives. and prioritised as part of our three-year planning process.
These include: – Board approved risk appetite statements aligned to our
– modernising our supply chain and logistics operations (including key initiatives.
the integration of Gist); – Transformation programmes underpinned by bespoke delivery
– improving our IT infrastructure, underlying systems and digital plans and leadership-led governance structures.
capabilities; – Dedicated strategy and transformation roles to support focus
– reshaping and modernising our UK store estate; and track delivery of the programmes.
– delivering a compelling omni-channel experience; and – Programme governance principles applied for core projects,
– transitioning the business to a simpler and more cost-effective with clear accountabilities and milestones.
structure. – The implementation of specific Strategy & Transformation
leadership reporting, including ongoing benefits tracking
While each initiative is individually significant and has its own set of in line with spend targets and value outcomes.
inherent risks, the aggregate impact of simultaneously delivering – Periodic reporting on key business and functional initiatives
these challenging projects creates further risks to successful to the Audit & Risk Committee.
implementation.
Oversight by Executive Committee and, where appropriate,
supporting sub-committees

Change in priority No movement Increased Decreased

60 Marks and Spencer Group plc

 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

3. JOINT VENTURE INVESTMENTS

Successful achievement of any joint venture’s long- term performance is inherently complex due to the ownership structure
and the need to align different shareholder perspectives.
Context Mitigations
The value of our investment in Ocado Retail Limited (ORL), – M&S nominated directors form part of the JV boards at ORL and
achievement of our multi-channel food strategy, protection of M&S Reliance (MSR), with collaborative sign-off on strategic and
our brand and delivery of anticipated trading performance is investment plans directing the growth of the business such as:
dependent on maintaining effective strategic and operational – expanding the M&S range at Ocado Retail and optimising
relationships with both ORL and Ocado Group. the national footprint of customer fulfilment centres; and
Similarly, linked to the planned growth of global sales, business – to maintain store opening plans in India.
performance in India will be shaped by the ability to maintain – Appropriately aligned operational and people structures,
strategic alignment and harmonised ways of working with for example:
Reliance Industries.
– a dedicated M&S Ocado delivery team to coordinate
sourcing, product development, ranging, customer data
and marketing; and
– oversight from our International leadership team and/or
secondments of UK resources to support activities at MSR
in India.
– Monitoring of internal audit and risk management processes
at JVs by the Audit & Risk Committee.
Oversight by Ocado Retail Board and M&S Reliance Board

4. BUSINESS CONTINUITY AND RESILIENCE

A major operational or resilience failure at a key business location, including any of our key global sourcing or supply locations (such
as Bangladesh and China), at Castle Donington (our primary online Clothing & Home distribution centre), in our food supply chain or
logistics operations, or at a critical third party outsourced provider could result in business interruption.
More broadly, an inability to effectively respond to large, disruptive global events (such as the pandemic, geopolitical tensions, trade
sanctions or natural disasters) or national issues (such as industrial action) could also impact trading performance.
Context Mitigations
The business has continued to demonstrate resilience throughout – An experienced Business Continuity (BC) team with established
the full range of recent externally driven events and economic Group crisis and incident management processes.
uncertainties. However, risks to business continuity remain, such – Risk-based BC assessments for stores, sourcing offices and
as: warehouses along with validation of key supplier arrangements
– a sustained period offline or an inability to fulfil online orders and disaster recovery plans for technology infrastructure.
due to a major incident at Castle Donington; – Up-to-date BC plans for key activities and scenarios across our
– the loss of, or major disruption at dedicated warehouses in the operations, including offices, warehouses and IT sites that evolve
UK or overseas, at primary supply countries, or at support in response to new threats.
facilities (such as IT); – Proactive testing of plans for key scenarios, with support from
– dependency on key third parties means that significant incidents critical third parties where needed.
and long-term resilience issues for our suppliers could also – A digital platform to support the BC governance programme.
impact our own operations; – Active engagement with external organisations including the
– a major issue impacting one or more of our significant franchise Retail BC Association, government-led forums and membership
partnerships, either domestically or internationally, could impact of the National Counter Terrorism Information Exchange.
future performance and growth;
– unexpected or unplanned shortage of ingredients or materials
as a result of external events (such as animal disease or
inclement weather) could affect the quantity and quality of
our products;
– continued industrial action in the UK; and
– future unknown/new Covid variants or similar widespread
health events.
Oversight by Executive Committee and Crisis Management Team

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STRATEGIC REPORT

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

5. PRODUCT SAFETY AND INTEGRITY

A failure to prevent and/or effectively respond to a major food or product safety incident, or to maintain product integrity, could impact
customer confidence in our brand and business performance.
Context Mitigations
The safety of our products – food and all other product categories – Group-wide assessment of all safety risks, with allocated
– remains vital for our business. We need to manage the potential Executive and business ownership.
risks to customer health, safety and consumer confidence that – Safety Policy and Compliance Standards, Terms of Trade and
face all retailers. product safety specifications with clear accountability, including
In doing this, along with maintaining effective internal processes for overseas requirements and within contracts with third party
for managing product safety, the business remains focused on how brands.
external pressures on the food, clothing and homeware industries – Established governance, assurance and risk management
could impact the availability, quality, provenance and integrity of processes to monitor and support the safety and integrity
our products. These include: of our products, such as:
– animal disease; – risk-based store, supplier and warehouse audit programmes,
– inflationary pressure; including for our franchise operations;
– the impact of the invasion of Ukraine; – monitoring of product quality and customer complaints
– cross-border regulatory divergence; with corrective action taken where required; and
– climate related events; and – crisis management planning for safety incidents.
– the related pressures in the supply chain. – Qualified Food and Product Technology teams with access
to external experts where required.
– Regular engagement with expert bodies to understand and
Oversight by Executive Committee, Group Safety Committee and respond to changes in safety standards.
Consumer Brand Protection Committee

6. TALENT, CULTURE AND CAPABILITY

The ongoing success of the business is dependent upon an ability to: attract, retain and develop the right talent, skills and capabilities;
achieve cultural change to support efficient and effective working; meet the financial and wellbeing expectations of our colleagues;
respond to labour cost pressures; and work collaboratively with our Business Involvement Group and unions.
Any shortfall in executing against these objectives could impact the delivery of core operational activities and longer-term strategy,
including aspects of our transformation programme.
Context Mitigations
The business employs more than 64,000 talented and passionate – Continued investment in pay and wellbeing benefits, supported
people and remains an attractive brand to future colleagues. by external benchmarking.
However, key challenges exist due to ongoing pressures: – Investment in internal and external talent to strengthen
– managing our investment in competitive pay for colleagues capability in key roles, develop future leaders and drive internal
in an inflationary environment; career progression, including:
– a tight labour market in specialist areas, including digital, – an established colleague skills framework to support
technology and data science; performance, development and progression;
– integrating the Gist workforce following acquisition of our – maintenance of succession plans for key roles;
logistics partner; – delivery of improvements in core people management
– adapting to a post-pandemic hybrid working model; systems and processes to drive consistency and improve
– demonstrating a cultural alignment in areas such as decision-making, such as performance management; and
sustainability, diversity and ethical values; and – continued focus on driving digital literacy and
– maintaining investment in modern technology capability building.
and underpinning processes to support a high – A well-established Business Involvement Group which is actively
performance culture. involved in business-wide colleague engagement and
representation at Board meetings.
– Active monitoring of gender, ethnicity, disability and
Oversight by Executive Committee age profiles.

Change in priority No movement Increased Decreased

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7. INFORMATION SECURITY
A significant or wide-reaching data breach or cyber-attack, directly or at a related third party, could adversely impact our reputation,
result in legal exposure including significant fines, business disruption, loss of information for our customers, employees or business
and/or loss of stakeholder and customer confidence.
Context Mitigations
The sophistication and frequency of cyber-attacks in the retail – Information security and data protection policies with
industry continue to increase, highlighting an escalating mandatory training for colleagues.
information security threat. This is further exacerbated by the – A dedicated information Security function, with multidisciplinary
increased threat of cyber warfare linked to current global specialists, 24-hour security operations centre, active
uncertainties. monitoring of our threat environment and mature incident
The profile of information security and the overall threat management plan.
landscape for our business is also changing as we use data more – Dedicated Group Data Protection Officers team and a network
intelligently, introduce new technology and digital solutions, of Data Protection Managers in priority business areas.
transition to the cloud, enhance omni-channel experiences, – Access to specialist third party resources, as required.
adopt hybrid working, and build a broader ecosystem. – Prioritised investment in response to increased security events,
breaches and potential threat of cyber-attacks.
Our reliance on key third parties for selected services and/or – Focused security assurance around our digital product lifecycle,
hosting of data also exposes us to risks from vulnerabilities in their operations model and significant change activities, like omni-
cyber and data controls. channel and new technologies.
– Risk-based cyber security assurance programme, including
assessment of controls in overseas locations.
– Information security obligations included in third party
contracts with a risk-based assurance programme.
Oversight by Executive Committee and Data Leadership Committee

8. CORPORATE COMPLIANCE AND RESPONSIBILITY

A failure to consistently deliver against our legal and regulatory obligations or broader corporate responsibility commitments would
undermine our reputation as a responsible retailer, may result in legal exposure or regulatory sanctions, and could negatively impact
our ability to operate and/or remain relevant and trusted by our customers and other stakeholders.
Context Mitigations
The increasingly broad and rigorous legal and regulatory – Code of Conduct in place and underpinned by policies and
framework for retailers creates pressure on business performance procedures in core areas.
and market sentiment, requiring frequent changes or – Group-wide mandatory training programme for higher-risk
improvements in how we operate. regulatory areas, like health and safety, anti-bribery and
Changes in the external environment and challenging economic corruption, data privacy and information security.
conditions also leave ethical and social responsibilities open to a – Established in-house regulatory legal team, including specialist
heightened risk of mismanagement or exploitation, particularly solicitors and dedicated subject-area leaders embedded in the
through our supply chains. business.
– Mandatory sourcing principles set and communicated
The business also continues to monitor and plan for new and to our supply base and other third parties.
evolving regulatory requirements, including: – Risk-based assurance and monitoring systems covering
– further restrictions on the promotion of goods high in fat, legal and regulatory compliance, and ethical and social
sugar and salt; considerations, including for our overseas operations
– anticipated changes in UK corporate governance requirements; and suppliers.
and – A confidential reporting line to allow colleagues and other
– extended producer responsibility for plastic packaging stakeholders to report areas of concern.
recycling targets. – Worker Voice programme in the Food business and
Non-compliance may result in fines, criminal prosecution for M&S transparency initiatives within Clothing & Home.
or colleagues, litigation, investment to rectify breaches, disruption – Active monitoring of customer feedback and public
or cessation of business activity, as well as impact our reputation. sentiment on compliance and responsibility, including social
media trends.
– Proactive engagement with regulators, legislators, trade bodies
Oversight by Executive Committee, Group Safety Committee, and policy makers.
Consumer Brand Protection Committee, Compliance Monitoring
Committee, Fraud and Loss Committee, ESG Committee and Data
Leadership Committee

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STRATEGIC REPORT

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

9. CLIMATE CHANGE AND ENVIRONMENTAL RESPONSIBILITY

Our customers, colleagues, investors and other stakeholders have expectations for the business to operate in an environmentally
conscious manner. This includes reducing the environmental impact of our business over time, progressing towards our net zero targets
(including those linked to Gist and elsewhere within our supply chain) and effectively managing the consequences of climate-related
risks (such as extreme weather events). Failure to achieve this could impact our brand, future trading performance and other business
costs, including financing.
Context Mitigations
There is increasing pressure from carbon-conscious customers, – Established Plan A programme with clear accountabilities
investors and government bodies for the business to operate in for each area of the business relating to our environmental
a more environmentally conscious manner where sustainability objectives.
forms a core part of decision-making. This includes our response – Net zero targets agreed with the Board, with the our
to the growth in the circular economy, waste reduction, low-carbon 2030 corporate greenhouse gas emissions reduction target
products and use of recycled fabrics. approved by the SBTi (Science Based Targets Initiative.).
Future business performance will therefore be impacted by – Established product and raw material standards and processes
our ability to effectively manage the transition to a low-carbon outlining environmental and sustainability considerations for
economy while maintaining value for our customers, particularly own activities and the supply chain.
as they navigate the pressure of the current economic – Clothing Quality Charter and Environmental & Chemical Policy
environment. Key aspects of this include: in place for suppliers.
– balancing commercial decisions with environmental – Business-led forums established to oversee the delivery
responsibility and regulatory requirements; of our carbon commitments and broader ESG risks.
– managing changes in customer preferences; – Early engagement and planning with partners and suppliers
– managing the potential increase in costs associated with to support their decarbonising activities.
sustainable materials, recycling and carbon pricing; and – Business-wide climate risk and opportunity review undertaken
– further technological and regulatory interventions like across all business areas, with risks and mitigations included
developments in Taskforce on Climate-related Financial in business and functional risk registers as appropriate.
Disclosures (TCFD) requirements and potential new reporting
under Taskforce on Nature-related Financial Disclosures
(TNFD).
The physical impact of climate change on the availability of raw
materials and food products, the geography of the locations from
which we source and operate, and the condition of our buildings
will need to be managed effectively to reduce the potential impact
on trade and the income statement.

Oversight by ESG Committee

Change in priority No movement Increased Decreased

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 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

10. LIQUIDITY, FUNDING AND FINANCIAL MARKETS

Barriers to maintaining affordable short- and long-term funding to meet business needs or an inability to effectively manage associated
risks (such as foreign exchange and/or interest rate changes) could impact our ability to transform at pace, as well as have an adverse
impact on business performance and/or viability.
Future fragility in the financial markets could also impact the business directly (such as heightening counterparty risk or restricting
access to capital), or indirectly (such as triggering liquidity or funding support for the M&S Pension Scheme).
Context Mitigations
As the business continues to navigate a turbulent economic – A £850m undrawn, revolving credit facility and £1,067.9m of cash
climate, focus on our liquidity and funding requirements through and cash equivalents.
active management of cash, liquidity and debt remains a priority. – Review and refinement of our three-year plan, linked to strategic
Availability of, and access to, appropriate sources and levels of priorities, with sensitivity analysis to assess the impact of the
funding remain vital for the continued operation of business and changing economic environment.
transformation activities. – Board-approved Treasury Policy, including hedging policies
to assist in mitigating future fluctuations in foreign exchange
The business is exposed to a number of movements in the financial and energy price volatility.
markets that require active management. They include: – Strong discipline over capital allocation decisions and scrutiny
– foreign exchange volatility due to the significant volumes and challenge of discretionary spend.
of product sourced from overseas; – Focus on working capital to improve cash flow and reduce
– energy cost fluctuations relating to the operation of our estate; reliance on bank facilities.
and – Monitoring and stress testing of projected cash and debt
– changes in interest rates, impacting the cost of debt. capability, covenants and other rating metrics.
Our ability to repay debt and fund working capital, capital – Frequent engagement and dialogue with the market and
expenditures and other expenses is dependent on our operating rating agencies.
performance, ability to generate cash and to refinance existing – Active monitoring and management of our pension fund
debt, where necessary. commitments, including regular engagement with the Trustees.

Oversight by the Board and Executive Committee

11. EU BORDER CHALLENGES

The cost consequences and operational friction from the complexity of border arrangements between the UK and the European Union
(EU) could impact trading performance generally and our Irish business specifically.
Context Mitigations
The business continues to manage the following challenges – Regular engagement with the Board to discuss the actions being
as a result of the UK’s exit from the EU: undertaken to manage evolving border challenges by our
– adhering to labelling requirements for both imports and exports accountable businesses.
to the UK and Ireland; – Broadening our local sourcing scheme in the Republic of Ireland
– monitoring and implementing solutions for any long-term to expand product ranges and reduce cost.
divergence of UK and EU rules that may add additional cost – Strengthening the management and accountabilities of Irish
and complexity to the business, such as the Border Target operations to support targeted mitigation of costs, including
Operating Model; opportunities for local sourcing.
– further increases in the cost base following the introduction of – Operation of a virtual customs warehouse environment and
checks to inbound goods from the EU to UK and the consequent implementation of an EU hub to mitigate tariff costs.
pressure on the supply chain including additional sourcing – Continued engagement with key government departments
requirements and impacts on product availability; and and other external experts to represent M&S views and
– managing the consequences of introducing more locally review our mitigation strategies.
sourced products.

Oversight by Executive Committee

Annual Report & Financial Statements 2023 65

STRATEGIC REPORT

OUR APPROACH TO ASSESSING

LONG-TERM VIABILITY

The UK Corporate Governance Code The Group continues to maintain a The severe but plausible downside
requires us to issue a “viability statement” robust financial position with available scenario includes the following
declaring whether we believe the Group liquidity of £1.9bn, including cash and assumptions:
can continue to operate and meet its cash equivalents of £1.1bn and access to
– There will be a period of economic
liabilities, taking into account its current a committed revolving credit facility
recession in the UK in 2023/24,
position and principal risks. The (“RCF”) of £850.0m.
resulting in a decline in sales of 2.0
overriding aim is to encourage directors
In December 2022, the Group – 2.5% and a decline in gross profit
to focus on the longer term and be more
successfully extended its RCF which now margin of 0.5 – 1.0% across both Food
actively involved in risk management and
expires in June 2026. The facility contains and Clothing & Home business units.
internal controls. In assessing viability,
a financial covenant, being the ratio of – A delay on transformation benefits
the Board considered a number of key
earnings before interest, tax, results in incremental sales expected
factors, including our business model
depreciation and amortisation; to net from the transformation declining by
(see page 8), our strategy (see pages 12
interest and depreciation on right-of-use 7.5%, 15% and 30% respectively across
to 27), approach to risk management
assets under IFRS 16. The covenant is the three-year period across all three
(see pages 56 to 57) and our principal
measured semi-annually. business units.
risks and uncertainties (see pages 58
to 65). For the purpose of assessing the Group’s – In addition, Ocado Retail Limited
viability, the Board identified that, experiences limited customer demand,
The Board is required to assess the
although all of the principal risks with no volume growth in 2023/24 and
Group’s viability over a period greater
detailed on pages 58 to 65 could volumes remaining subdued in
than 12 months, and in keeping with the
have an impact on Group performance, 2024/25 and 2025/26.
way that the Board views the
the following risks pose the greatest
development of our business over the The Board has also considered the
threat to the business model, future
long term, a period of three years is potential impact of changes to
performance, solvency and liquidity of
considered appropriate for business environmental factors which may affect
the Group and are therefore the most
planning, measuring performance and the business model and performance in
important to the assessment of the
remunerating at a senior level. This the future. As set out in the Taskforce on
viability of the Group:
three-year period aligns to the Group’s Climate-related Financial Disclosures
annual strategic review exercise – An uncertain trading environment. (“TCFD”) section on pages 44 to 55, no
conducted within the business and – Business transformation. material impact on the Group’s financial
reviewed by the Board, and captures performance is considered to exist in the
a large proportion of the Group’s – Joint venture investments. short term.
investment into its ongoing – Talent and capability.
transformation programme as well The impact of the severe but plausible
In assessing viability, the Board downside scenario has been reviewed
as the maturity of its December 2023 considered the position presented in the
and June 2025 bonds. against the Group’s projected cash flow
approved Budget and Three-Year Plan. position and financial covenant over the
The process adopted to prepare the three-year viability period. In the event
financial model for assessing the viability of this scenario materialising, mitigating
of the Group involved collaborative input actions would be available, including, but
from a number of functions across the not limited to, deferring or cancelling
business to model a severe but plausible discretionary spend (including
downside scenario. discretionary bonuses) and reducing
capital expenditure.

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 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

As a result, even under this scenario, Having reviewed the current

which the Board considers to reflect performance, forecasts, debt servicing
a plausible, but remote, outcome, the requirements, total facilities and current
Group would continue to have sufficient liquidity, the Board expects the Group to
liquidity and headroom on its existing have adequate resources to continue in
facilities and meet the measurement operation, meet its liabilities as they fall
criteria against the revolving credit due, retain sufficient available cash
facility financial covenant. The Audit & across all three years of the assessment
Risk Committee reviews the output of period and not breach the covenant
the viability assessment in advance of under the revolving credit facility. The
final evaluation by the Board. The Board Board therefore expects the Group will
have also satisfied themselves that they remain commercially viable and the
have the evidence necessary to support Viability Statement can be found on
the statement in terms of the page 134.
effectiveness of the internal control
environment in place to mitigate risk.
Reverse stress testing has also been
applied to the model to determine the
decline in sales that the Group could
absorb before exhausting the Group’s
total liquidity. Such a scenario, and the
sequence of events which could lead to
it, is considered to be extremely remote,
as it requires sales reductions of more
than 15% per annum over the three-year
assessment period compared to the
Budget and Three-Year Plan before total
liquidity is exhausted. Further, it only
includes very limited mitigations,
comprising the removal of bonus,
utilisation of centrally held contingency,
removal of dividends and a modest
reduction in growth capex. While the
occurrence of one or more of the
principal risks has the potential to affect
future performance, none of them are
considered likely either individually or
collectively to give rise to a trading
deterioration of the magnitude indicated
by the reverse stress testing and to
threaten the viability of the Group over
the three-year assessment period.

The Strategic Report, including pages 2 to 67, was approved by a duly authorised
Committee of the Board of Directors on 23 May 2023 and signed on its behalf by

Stuart Machin,
Chief Executive
23 May 2023

Annual Report & Financial Statements 2023 67