Good day, and welcome to the Marks & Spencer analyst call. This meeting is being recorded. At this time, I'd like to hand the call over to Archie Norman. Please go ahead, sir.
Morning, everybody, it's Archie here. I'm here with Stuart, Jeremy, Fraser, and the gang, and it's a pretty miserable day out there, but I can assure you it's not miserable, it's M&S. As the results get stronger, my remarks get shorter, but don't worry, Stuart has got a few words to say.
Shall I kick off? Well, good morning, everyone. Thank you for joining us. Just before we open up for questions, I thought I'd touch on the results we've published this morning, and touch on our transformation. Firstly, the plan we set out two years ago to reshape M&S for growth is starting to pay off, and as I said many times, we consider ourselves a growth business. Our vision is to be the most trusted retailer, with quality products at the heart of everything we do. We're obsessed with product. We share a passion for Food, and clothing, and home, and putting the very best product, quality, and value in front of our customers. During the last year, we served almost 1 million more customers than before.
Over 32 million people shopped with M&S, which is over 60% of the adult population, and as I said, more customers than ever before shopped with us. It's been a year of good progress. Our strategy has delivered growth in sales, market share, margins, return on capital, and free cash flow, with profit before tax and adjusting items of GBP 716.4 million, an increase of 58%. Lots has been done, but you wouldn't be surprised when I say we always remain positively dissatisfied, but that's because there is so much more to do and so much opportunity ahead of us, and one of our new behaviors in M&S is always aiming higher. In Food, our sales increased 13% with market share by 15 basis points and volume market share up 20 basis points.
Performance was driven by volume growth, which outperformed all of our grocery peers, and we attracted more family shoppers. Operating margin improved to 4.8%, which of course is ahead of our 4% target, supported by structural cost reduction in stores, and benefits from the Gist acquisition completed last year. So in Food, I would say we are on track, but now we need to get ahead of the growth curve and continue the momentum. In Clothing & Home, sales increased 5.3%, total market share up 40 basis points, and full price market share up 80 basis points, driven by womenswear. Clothing & Home is attracting new customers, particularly online, which outperformed the market and grew faster than stores in the second half.
Operating margin increased to 10.3%, more or less on target of our 10%, which we outlined at the Capital Markets Day, supported by structural cost reduction in the logistics network and an increase in full price sales. So my summary for Clothing & Home is we're on track, we've made good progress, but there remains a significant opportunity across this part of the business in future years. Just touching on two of our strategic priorities, store rotation. We opened 6 full-line stores and 8 stand-alone Food stores. We're starting to create a very different shopping experience. These stores are performing ahead of plan, growing in their first, second, and third years, and we have strong paybacks and above our hurdle rates. Our second key strategy is, of course, supply chain. In Food, the Gist supply chain integration has gone very well.
During the year, we had GBP 70 million of Gist savings delivered, meaning the payback is ahead of plan. In Clothing & Home supply chain, we focused on our ranges, consolidation of our factories, and sourcing partners. Across both of our businesses, we're on track, but so much more to do in modernizing our supply chain and automating our networks. There are some parts of our business that are a bit more challenging. International progression has been slower than we would have liked and not as fast as the UK, so that is a focus over the coming year and years ahead. In data and digital technology, we know progress has been slow, and we're playing catch up. Of course, as you know, Ocado is not consolidated in these numbers, but encouragingly, sales are growing, in particular M&S sales on Ocado.
We're behind expectations on profitability, but there's an opportunity, and I still believe strongly that M&S Food can do very well online. In fact, recently, we've been 30% of the Ocado basket. Despite these challenges, high profits and disciplined investment choices are translated into increased return on capital employed. As a result, we've increased free cash flow, strengthened the balance sheet, and we are in positive net funds position. The financial health of the business is the best it's been in decades, and this will enable us to step up investment in growth strategies this financial year, whilst also restoring a final dividend of GBP 0.03 per share. Just on outlook for this year, our focus remains on growing volume and market share by delivering what I call the M&S magic to our customers.
Great exceptional quality, great service, great value, and of course, innovation that's part of our DNA. That said, we know we have some headwinds. Cost inflation remains elevated. We're planning for structural cost reductions and other efficiencies to offset these costs. But given our increased confidence, our track record over the last two years in delivering growth, we're planning to make further progress in this year and of course, beyond. We have a clear vision for the future, a plan in place, and we all believe the opportunities are ahead of us. With our current trading momentum, this gives us some wind in our sails, and I think we're at the beginning of a new M&S. I will now hand over and we'll do questions.
Okay, thanks, Stuart. That's great. And now, I'm looking on the screen for Clive Black, but perhaps he's stuck on a train somewhere, because I can't see him. Anyway, look, let's take some questions. Could you ask one question at a time? Because we can only cope with one and... Oh, there's Clive. And we can only cope with one, and then you can have a follow-up, or two. We'll see how it goes. Let's start with Izabel Dobrev a from Morgan Stanley. Izabel, do you want to chip in?
Hello, good morning. My first question is on availability in Clothing & Home. I was wondering if you could give us a sense of where your availability metrics sit at the moment, and how much further room there is to improve on this, so that we can understand how much more of a tailwind there is for market share, once you improve availability further, while maintaining the full price sales discipline, of course.
Well, it's a good question, Izabel, thank you for that. I can only wonder if you've been shopping in our stores and not found something that you wanted, but let me know. Availability was up in Clothing & Home overall, but I should tell you that in some of our ranges, we have struggled, in particular on smaller sizes. And that's really because it's not really the Red Sea. People have been asking me, the Red Sea has had minimal impact, and we've managed around that. But we have outperformed on a lot of our small sizes, not just in womenswear, but also menswear. I was going through the buy just a couple of months ago, and when we talk about smaller sizing, normally that ratio is about 20% of sales. That is actually growing to be more like 30%-35% of sales.
So the action, we're buying deeper, especially as our product is getting more stylish, more fashionable, and therefore, we're backing the volumes of those smaller sizes in particular. So it has been an improvement year-on-year, believe it or not, but we have been selling out of smaller sizing. I don't know if that answers your question, but that's one particular thing we're focused on.
Izabel?
Okay. I had a follow-up question just on the gross margin . So it did improve very strongly across both businesses. Can you help us understand how much of that was the cyclical headwind from last year getting lapsed, and essentially mean reversion, and how much of it was structural improvement?
Yes. Shall I give Jeremy first?
Yeah, thanks. Hi, Izabel. So it's a slightly different story in the different businesses. In Clothing & Home, part of it was down to FX, part of it was down to price increases actually from the previous year, just wrapping around. But a big chunk of it was in the focus, as Stuart's already mentioned, on focusing on full price, taking away the promotion element and getting full price stock into sale, which was at 81% last year. So it's around that discipline. Within Food, it was in the cost out program.
The guys have been working very hard on working on costs out in the business, working on waste, big investments in, in value and quality, and then partly around the leverage actually from the volume growth. So, so slightly different, mechanic in the two businesses. I think heading into this year, I think, you know, for the moment, I think we'd be expecting both of those gross margins to be flowing through at the rate that we were delivering in 2023, 2024.
Thank you-
I think just to add as well, the benefit in clothing was full price sales, so 80% of our sales were full price, and definitely the plan Richard, and I, and the team share, is less sale and less product into sale, and we're working hard on that. So that's one other thing, and logistics costs in both businesses added some benefit to margin as well. So I think we're in pretty good shape. We see that sort of playing out in the same way this year.
Okay. Thanks, Izabel. Right, well, Clive's now appeared on my, our screen. So, Clive, give us a bit of boom boom.
Well, congratulations to-
... And, I have to say, it's very nice in Liverpool today, so, good news all around. Could I just ask Stuart, where do you see the key opportunities for M&S here? And then just associated with that, for you and Archie, what about the priorities from a capital allocation perspective? So one question with two parts for me.
Well, I think it's the same sort of question and answer, Clive, but good morning and good to hear from you. I mean, the opportunities, if you just stand back and look at both businesses, the first is our store estate. We are targeting, as you know, 184 full-line stores through that rotation strategy, 420 Food stores. And if you think about today, we only have 104, I think it is, Renewal Stores, all performing well, all strong paybacks, and even at the end of this year, only 26% of our store estate will be renewed.
So I stand back and think, can you imagine when we get to that future, all stores in the right place, a better shopping experience, double-digit growth year after year, good 2-3-year paybacks? That is a big growth opportunity in Food, but also Clothing & Home-
And that is where we're going to put our capital.
That's point one. Point two, of course, is supply chain. Supply chain, we've made some headway, especially around efficiencies, but actually we need to now invest in our supply chain. If you think about Food, our acquisition of Gist will go down in history as one of the best acquisitions we've ever made. We've already had benefits of GBP 70 million in the Food number, but actually the hard work really now does start in rationalizing our networks, automating our Food networks, and preparing for future growth, volume growth in Food. Our F&A program is halfway through. Alex and the team are doing a very good job of this. It's been well run, well managed. By September, I think, we will be completed that forecast ordering and allocation rollout. Normally, in a business, that's the only thing you would do in five years.
To us, it's just one of many things.
But when that finishes, you can start seeing how the benefits will start playing out and the efficiencies. And in Clothing & Home, again, there's some really good work in Richard's area around logistics efficiencies, automation, consolidation of some sites, but we have got a big job to do around central merchandise planning. We've only just started that. It's a five-year program. And the other thing we're now thinking about, Donington being one example, we're actually looking at the growth in five years and 10 years and saying: What is the next step for Donington? And that means point 2 in our priorities for growth is also where we are going to apply our capital. And the final one is on data, digital, and technology.
We did release more spend in the second half. I reckon when I talk to colleagues and people outside of M&S, everyone seems to have challenges around D&D and IT.
But for us, we've got a big job to do in our technical infrastructure that's kicking off with SAP now.
We're already working through that program for the next two years. We want a better data and digital experience. We want to use the data better to drive more personalization, especially to drive our online performance in Clothing & Home. And on digital, we've done a lot on our website and our app, but actually there's much more to do when it comes to a more digital experience in-store and online, and that is also where we will be investing our capital and our resources.
Stuart, just by way of-
Sorry, Stuart and Archie, just by way of comeback, I mean, you've done an incredible job of setting margin targets last year, that in Food you've beaten, and in clothing you've beaten, that is the 4% and 10%. Would it be correct to say that you're more likely to reinvest future gain on that front, as opposed to rebase your margin targets higher? Or are you happy for margin targets to be rebased higher?
No, you were right in your first comment, which is we laid out the Capital Markets Day , the 4 and the 10, and we did that quite scientifically. I did add, after 6 months, greater than, but, that can mean 4.1 or 4.8. We need to constantly reinvest.
Reinvest in value and also, just make sure we're reinvesting in quality as well, and we will do that. That's why this year, it's very, very low inflation in Food. I was just reflecting back with Jeremy the other evening, when we started to invest in value, you know, four years ago, three years ago, it always pays off in the following year.
Mm.
Last year's investment in value in Food of GBP 60 million has already started to pay off as we think about this year. The same in clothing, our clothing prices are relatively flat. Our back-to-school launch this year will be flat again for the fourth year in a row. So we will constantly invest in products, in quality, and value for customers, and drive volume.
That's, that's really clear. It's very encouraging, and Jeremy reminded me last night, the last time you had such a strong balance sheet was 1997.
... which is the year Darren and I started covering Marks & Spencer's, so come full circle. Well done.
You're a young man, Clive. Some of us were around a lot before that. Thank you, Clive. Good questions. So, shall we go to Sreedhar Mahamkali from UBS?
Hi. Good morning. Can you hear me?
Yeah. Yes.
Hello? Very good. Thank you. Actually, I'm sorry. I was just gonna pick up on Clive's point, actually, on Food margin, specifically. You're talking about greater than 4%, clearly, I think, sure, you did say could be 4.1 to 4.8. But at the same time, I think you're clearly sounding very optimistic about Gist optimization further to come, potentially some big improvements in cost to serve. If you could just square those two, i.e., are we looking at consistently kind of mid-4 or higher than that in Food, aided by your GIST cost serve improvement opportunity? Or do you see a bigger opportunity to reinvest, and we shouldn't be thinking mid-4s and things like that, more, more like just ahead of 4?
That, that's really the main question for me, but if I'm allowed just one other, which is, if you could just talk through-
Sreedhar, why don't we take one at a time?
Fine. Yes. Thank you.
Good question.
Yes, yes, yes, yes. Yes. Thank you.
I mean, just a point of clarification on Gist is the-
It's a 10-year program, upgrading the network.
Yeah.
So obviously, the capital implication is that, too, it would probably add a lot of the short-term benefits from integration, but Stuart-
Well, I'll kick off, and Jeremy can chip in as well. I think the first thing is, I don't want us to get too obsessed with margin rate. Every time my team talk about a percent, I draw them to the cash straight away. So whether it's 4, 4.1, 4.5, we know to have a good, healthy boost, Food business, we want to generate a rate of over 4%, greater than 4%.
If you look at the bridge of last year, and you go to the base of 2022-2023, at 3.4, obviously, we had gross margin benefit, some good efficiencies in store colleagues and resources with better productivity, and then distribution, supply chain added another 0.2 to that operating margin and other central costs, which took us to 4.8. What I really want us to focus on is, as Archie said, when it comes to supply chain, there's so much opportunity for investment as well as opportunity to take costs down, and supply chain is one, of course, as Archie said, a 10-year program. So I think that Gist margin, that, which supported it by about 80 basis points, that should continue, but we need to now invest in the network.
So I wouldn't say that's the easy part done, 'cause actually, Alex and the team have worked very hard on the integration, but it's the first step of a long journey of restructuring our supply chain. I mean, what I should say is we have a very strict capital envelope. Jeremy and I have increased it this year, but we've increased it because we know we have those big strategies, which I referred to in my answer to Clive, for investment. And investing in those three things on stores, supply chain, D&D and technology, will give us good returns in the future. Jeremy?
Yeah, Sreedhar, I'll just give you an FD perspective as well. I mean, we are focused on the percentage, but really it's the cash margin that's the most important, and I think the percentage is the output. And you've got to be very careful in Food and clothing and retailing, you don't let the margin drift too far and become uncompetitive. And I think a really strong part of last year's delivery was the fact that we were, our price inflation was below the market, we were driving volume, we were getting leverage from that volume growth, and it's really about the volume growth, the focus, with the margin just being something we keep an eye on as an output rather than being an ambition in its own right.
Thank you.
Do you want to come back?
Yeah. Really, just one point to follow up on. I think Clothing & Home, anything you could help us in terms of puts and takes for the year ahead in terms of gross margin, quite a lot going on, FX rate, pricing. Pricing, I think you've already talked about being relatively flat, so any help there is great. Thank you.
Yeah, I've listed at least five things in Clothing & Home. It's fairly complicated. So, FX, I think we think will be slightly better. Sourcing and buying in costs should be slightly better with the way some monitors are going. Pricing, we think will be largely flat. We will be investing. Again, you'll see that in the margin bridge from last year, we'll be investing in things like the supply chain improvements. We are looking to turn from negative volumes to positive volumes from last year into this year to drive the overall margin for our own leverage.
But then we have got this large investment in colleague pay that we're making in the year, which we're looking to offset with structural costs. So there's lots of puts and takes. When you take them all into account, and some of them are quite big, actually, both at a gross margin level and a net operating margin level, as we stand here today, at the start of the year, we expect all those to pretty much net out today, and it's really about the volume growth that will drive progress and performance in the year.
... I think the thing just to touch on that's encouraging for clothing, that Richard and I, and the team are excited about for the future, is we've got growth in all our categories. And I think really our clothing transformation has only just started in the last 18 months. But if you look at last year, womenswear growth, menswear growth, kidswear, beauty, et cetera, and there's so much more to go for, whether it's online, we're still aiming for 50% participation. We've only got a handful of Renewal Stores in clothing. The ones we've done have seen very strong uplifts. Our perception in style, value, and quality, has all gone up in the last 12 months, significantly. We're still growing share. We've outperformed the market on share, and we continue to do so, even in the recent weeks.
We are attracting a broader customer base. When I talked about those customer numbers, I mean, lingerie stands out. We have a very high share in lingerie. We've had big growth in customers in lingerie, our most trusted category. I think the work we're doing around the offer, the edited ranges, the style, the quality, and maintaining that price, and that value, is going to put us in good stead for the future.
Okay, thanks, Stuart. We've got quite a few questions outstanding, and we're not getting through them at a great rate.
Acknowledge. So that feedback-
We'll take that feedback.
Right. Let's try and crack on. Warwick Okines at BNP.
Yeah, morning, everyone. Thanks. 2 questions, actually. The first is about the speed of change in Food. I think you're planning to open 9 full-line Food stores in the year ahead, which I think leaves about 85 in the following 3 years, to hit your target. So if that math is correct, are you on track? And perhaps how many of those future openings could come from existing estates of full-line stores?
You're testing me now, because I'm trying to work it out, and I did get it wrong on the last call. But we, as you know, we have 104 Renewal Stores, and Jeremy, correct me if, on any of this, if I'm wrong. We are opening 9 new Food stores, 4 full-line stores, which of course then include Food and Clothing & Home, and we're doing 25 renewals. Now, that may go up slightly, it all depends, but we're gonna be quite agile with that capital allocation, but we have a plan for 25, that's in the pipeline now. So at the end of this year, that will give us 26% of the estate, which will be renewed.
and therefore, there's still quite a way to go, because as you know, we're aiming for 180 full-line stores. At the moment, I think it's 225. I'm looking, 'cause I can't remember.
Yeah.
Thank you. 225, we're... So we're looking for about 180, bigger, better full-line stores, and 420 Food stores. There is one slight confession, we have to get quicker at finding new space. That is really important. We are playing catch-up of 20 years, of not having the right property plan in place, and not getting ahead of trying to find the right space. So we've been playing catch-up over the last few years, and we're still playing catch-up, so we're constantly looking for the right space, especially for our Food stores as well. I mean, just, just to play it back, our full-line stores, at the moment, we're having 2-year paybacks in Food, two and a half to three year paybacks. So I think that's a good opportunity, and those stores are, of course, bigger.
We used to open, if we go back 5 years, the average store was about 4.5-5,000 sq ft. Our average now is 13,000 sq ft.
Warwick, we're probably not gonna be specific on numbers, but we are looking for new sites, and we're probably finding it harder, curiously, in this environment, even though there are not a lot of other people, there are not many retailers out there looking for sites like we are. But at the moment, I wouldn't say we're struggling, we've got a decent pipeline, so it's not the one we'd be ideally looking for. Do you want to come back, Warwick?
Yeah, actually, thank you very much for that. I actually just wanted to ask about International. You've said clearly there's a lot more work to be done, but at the same time, you've got ambitions to become a global brand. I suppose just interested in how you think you become a global brand from where you are today?
Look, it's a good question. I think the thing to touch on is, you know, the International business has been a bit slow this year. Sales are slightly down, and we are behind where we want to be. What struck me in the last 12 months is we have got very strong franchise partners. This isn't going to be an area where we are going to put our shareholder money into. This is about investing capital light, and working with franchise partners, who actually are very ambitious for M&S. Our brand definitely resonates in the countries, and we operate in 35 countries, and our brand resonates. And I think the thing we probably got slightly confused about in the last couple of years is the difference between global and International.
I'm very clear that actually, we have a brand that can extend globally. International is slightly different, when you go to International markets, and you start creating ranges to tailor to the International market. So our position is very clear, capital light, work with our brilliant partners, whether that's in India, or whether it's in Asia, you know, et cetera. And therefore, whether it's stores or online, we want to leverage the M&S brand and take that globally. We've got new leadership in place. I'm hoping that we will be in a really good position at the Capital Markets Day to give a good update on International.
Great. Thanks, Stuart.
Okay. Thanks, Warwick. Okay, we'll go to Richard Chamberlain, and then James Anstead , and keep cracking on. Richard?
Yes, thanks, Archie. Morning, everybody. Got a question on marketing costs, please, particularly for Clothing & Home. I'm not sure you can give any numbers on this, but I just wonder what's happening to marketing expenditures and how the marketing strategy is sort of evolving for M&S, now we're in the new financial year. Thanks.
Richard, thank you. I never thought I'd get a marketing question on this call. But there you go, you've surprised me. Look, I mean, I think our marketing costs were relatively flat year-on-year. I think what we have got, and some people may disagree around this table, 'cause I'm glaring at the chairman, but I am very supportive of our recent marketing campaign. We've been more digital, we've integrated our marketing, 'cause it's not just about TV anymore, it's more through social and how we're communicating to customers in a different way. And our marketing, I think, has been, when I look at the stats, way more effective than prior years. Our Food marketing has always been pretty strong.
I would say we've thrown a lot at the wall to see what sticks, but we've really now doubled down and concentrated on our Food, our magic, the lengths we go to, our quality, our farming, et cetera, and I think the work the Food team are doing is really strong. In fact, this year, we've also got another Cooking with the Stars, and that's not just about a TV show. That translates through social and into stores, and into better promotion of our products. And in Clothing & Home, the recent campaign showing our more stylish clothing has definitely resonated. In fact, when we were looking at the products to put on those adverts, I'm reminded of the Palazzo Jean, for example. We thought, well, 15,000, that might be enough. It went on the TV, and we sold out in 24 hours.
I think our marketing is more effective. It should be trade driving. It shouldn't just be about brand, it should be driving trade, communicating with customers, and I think how we're integrating it through social channels has been much stronger in the last 12 months.
Okay, thank you, Stuart. I certainly agree with that, and I wouldn't be allowed to say anything if I didn't. So, Richard, anything else?
Yeah. Thanks, Archie. Just one more, if that's okay. On the digital side, I just wondered if there's some scope to sort of improve the service options, kind of consistency in terms of, you know, delivery, promise, Click & Collect times. Is that gonna be a focus for the year ahead?
Yes. I think we've got... If you look at our benchmark online and through Click & Collect , there are many things we do better. You know, failure rates, I like to make it more about positive than negative, but our failure rates are a lot less than some of our competition. But our proposition needs to be improved. As you know, at the moment, we have 63% Click & Collect . We're spending more time this year, hopefully looking at how we're going to make the experience online and on the app better. We're doing a lot of work around how we can improve our style guides online, which I'm very passionate about, but also how that translates in stores as well.
But there is one thing, our standard delivery is actually not the best proposition in our market, so I would like us to see us move from the 2- to 4-day to the next day. Now, I can't guarantee when that will happen, but that is definitely a target that Richard and I share, and Rachel, when she joins, running our data and digital, will be helping us with. So it's top of mind.
Okay.
Very good. Thank you, Richard. I think we need to keep moving on, so let's make it rapid fire. James Anstead from Barclays.
Yeah, morning. I've got two very quick questions. Firstly, I know you haven't given any updated current trading numbers in your statement, which is fine. It's only seven weeks, and the weather patterns are mixed, and you had the Coronation holiday last year, et cetera. But as you try and look through all those things, are you seeing any changes at all in underlying behavior since the start of the new financial year?
Well, I'll kick off first. Jeremy can add. You've answered it all, James. You know, April was, we called it soggy. I really every time my team talks about weather, I glare and say, "We can't talk about weather," but we always do. But you're right, April was a bit wet. Last year we had obviously the Coronation and Easter last year. Take that to one side. If you look at the latest Kantar, we're outperforming the market in Food and in clothing and therefore, I think we're in pretty good shape. I would like us to get ahead of the momentum. The Food team have got a big job to still continue to improve availability for customers, weekends, late nights. I was in a store recently doing the video, interestingly, for the results.
It was Lakeside, Thurrock, and since we relocated that store, we've had significant growth, but the growth on a weekend is 70% and we can't keep up. In the week, it's 30%. So we've got a big job in Food to get ahead of availability, something Alex and I talk about daily. And actually, the question came up earlier in clothing as well, I think Izabel raised this. We've got to get ahead, 'cause our campaign, going back to the question from Richard, I think, on the campaign, is resonating. And everything we talk about to our customers, through marketing, seems to sell out very quickly. So I think we're in pretty good shape, and our plan for the year is a year of growth.
Yeah, James, the only quick one thing I'd add is, clearly, as we're coming into a disinflation environment, we need to make sure we're keeping a close eye on volumes. And you'll have seen from the market data, as we've kicked into the year, that trend is working its way through, but that's a big issue for us during the year, to keep an eye on that and make sure we maintain that momentum.
Good point. Okay. James?
For Jeremy, perhaps. I mean, you're, as you've said, you're sitting on a net cash balance for the first time in many, many years. I got the impression that your plan was only to grow the dividend really pretty cautiously, but sitting on net cash and, you know, with the share price where it is, offering quite a modest yield, is that something you're kind of rethinking?
Not at the moment, no. I think we've made it pretty clear in the presentation, the focus is on the reshaping, M&S strategy. As Archie said, and Stuart said, you know, we're looking to find new sites. We've had some super returns on the store investments, and there's so much more opportunity to drive that. We just said, you know, we've got a 10-year program around the supply chain renewal in Food, and we've got some super opportunities in digital and technology. So, it's great to have the capacity to invest in that. We'll invest very wisely and in a very measured way, but that's where we see the priority versus the dividend, James.
I think, James, we've got, as Jeremy said, so many opportunities for investment. We've also got other things to do. We've got the payment of Gist, we've got pension things that Jeremy's all over, and therefore, we're very focused on better returns for shareholders in the longer term.
Okay. Thanks, James.
Thank you.
So let's... Yeah, go on.
No, no, that's it. Thank you.
Thank you. Okay, look, I think we ought to go to Kate Calvert, who's been waiting patiently, and then we'll go to Geoff Lowery. And, yeah, we can keep going for the moment. Okay, Kate.
Thanks, Archie. Just two for me. First, on, Clothing & Home. You've made pretty good progress in terms of reducing stock cover in Clothing & Home over the last, I don't know how many years, but, you're down to 12 weeks. Is there potential to take that down further and improve availability? I suppose what I'm asking is, what does best in class look like in terms of number of weeks?
So I think I'll quickly, Stuart? Yeah, so I, I'm not sure there's a massive amount of opportunity in terms of weeks, Kate. I think as Stuart was talking back to Izabel's question, the challenge for us is around availability and making sure we've got the right depth and the right range around the sizes, et cetera. So we're not really focused on the working capital. It's really more about maintaining that, but getting the offer right.
Okay, great. Thanks so much for that.
Thanks, Kate. Okay, Geoff, and then, we'll go to Adam Cochrane, keep going.
Lovely. Good morning. On M&S.com, your margin is eight, at the moment. What's the right number? And what is the unlock to get you there? Thank you.
Good question. It's a good question. It's 8.3. I think the first thing top of our mind is improved supply chain. As you can see from the results, our stores margin is about 11%, our online margin is 8.3. Logistics is the big unlocker for that. The other thing, we invest quite a bit in data, digital and technology, and that is a slight drag when it comes to online margin for us, but it's very important we have further investment in this area, because I think we've got a big opportunity online in the medium to longer term, so we're gonna have to invest a bit more than others. One, to catch up, and also to overtake when it comes to more digital and better experience online and on the app as well.
I've mentioned personalization before. So our long-term aim is to really match the stores' margin, and overall, that 10% or greater than 10% that I talked about before.
Yeah. Jeff, just to comment on that, it, it's quite a noisy number, that online margin, because, you've got in there, well, you've got furniture which is moving, obviously, literally. You've also got our brands project-
Yeah.
and the brands raising our margin-
Yeah, good point.
The margin on the underlying core M&S products is better than the average.
To reiterate both those comments, Jeff, I'd say we focus on cash margin, not percentage, so the percentage is the output. The brands is potentially dilutive, but if we can grow brands and grow that as part of the overall offer, that's the aim, not to grow the margin for its own sake.
Understood. Thank you.
Thanks, Geoff. Okay, so shall we go to Adam Cochrane from Deutsche Bank, and then Georgina Johanan from J.P. Morgan?
Good morning. Thanks, guys. Question I've got, firstly, can you just talk about the like-for-like sales outperformance of the Renewal Stores? What the difference between that is and the remainder of the core estate? And then the second question is on International, can you just explain a little bit, is it certain markets where there's a particular issue? And is this related to product or is it something else? Just a little bit of an understanding of the International piece, please. Thanks.
Thank you, Adam. Look, I'll touch on International first, and Jeremy and I come back on renewal. The first thing is, we've identified that our partners were saying to us, we want, they want to be more ambitious on International overall, and that's most of our partners that actually expressed that. One of the biggest challenges they've got is supply chain. They order way in advance, more than 12 months in advance, their product, and they're ordering our core stock. But actually, we need to help them and give them confidence on some of the newness that comes in. And our International partners have asked us to work harder on our supply chain to market. That's step one.
The second thing, when you look across our International business, there is a bit of softening in all the markets, and we think we've got an opportunity also with our joint venture in India. Our India market did have a particular problem. It was down on the year. And we did write this in our announcement. We also carried too much stock, and we were very slow clearing this stock, and therefore, we had some write-downs of stock, which we're not planning to ever repeat again. And that did impact our sales and our profitability in India.
So my summary is, when we really look at it, and under Mark, who has taken over this business now, who, by the way, has also traveled now to every part of our International business and met with all the franchise partners, we want to get better stock, a better mix of stock, more newness into our markets, quicker into our markets, and we need to be joined up with our franchise partners on growth strategies and help them deliver that. As we say, for us, it's capital light, but our partners are very ambitious, and we do need to watch the stock control when it comes to India. I think we got just a bit too ambitious, and therefore, we didn't manage our stock very well.
Renewal? Should I do the renewals? Just low teens uplifts.
We're actually getting good year one and year two uplifts. The other comment I'd make, Adam, is not only are we getting good sales, but it really gives us an opportunity to engineer the store and drive the store to be more efficient as well. So there's a good kind of margin improvement as well in terms of how we're managing those stores and when we get into the year two, when it settles down.
Okay. Thanks, Adam. Thank you. Now, we're going to go to Georgina and then last but not least, Simon Bowler, and then we're gonna close. So, Georgina.
Hi, thank you. I've got two, please. The first one was, you've obviously done great work in womenswear. Just trying to understand how much of an opportunity you think there is in menswear and kids at the moment. I know you've made quite a few changes in menswear already, in terms of ad campaign, price points, and, and, and so on. How far through that journey would you say you are, please? And should I ask my second one now or later?
Yeah, do the second, okay, quickly.
Yeah. Second was just a quick one, actually, around the recent delivery delays that you seem to have been experiencing in Clothing & Home. If you could just explain what's driving that and whether that issue has been sorted out, please?
Oh, quick. Anyway, go on. You're ahead of most in asking for that. Okay, let me start. I mean, womenswear, there is no doubt, we've been really pleased with how our womenswear is resonating in the market and with our customers. We've grown share in womenswear, and we continue to do so. If you look at last year as well, womenswear was up 6%. Menswear, I think, was up 4, and kids was about 3% up. So all of those key categories are growing, but within that, you know, there are some standouts. Our newness in womenswear is selling incredibly well, but also our core like denim was up 15%, knitwear up 12%, et cetera. So womenswear is strong. We see that becoming stronger. We've got some very exciting work this year.
I think the summer range, the autumn/winter range, is stronger than ever on style, on quality, on value, and we've got some very exciting collaborations, but I've got a gagging order, and I'm not allowed to talk about. But I'm confident that we will continue to see that grow. I think in menswear, being the number one menswear shopper, out of all customers, I think menswear are really doing well. We're getting much better product. Menswear is second in market share in the market after one key competitor. Online is a focus for us because our online market share is fourth, and therefore, we know there's a bigger job to do to talk about and market our menswear online. We're seeing some tick up.
Autograph in menswear is already, in the last few weeks, doing incredibly well, and formal wear last year was pretty soft, but already, our new suits, I've just bought three of them, in different colors, but our new suit range is already resonating in the last few weeks. So I think menswear is on the right track. We've always talked about kidswear, because we know if we get kidswear right, then more moms shop in M&S, and that is a growth opportunity for us. We've made progress last year, but I think now I've looked at the strategy in kidswear, it has to be a year where we see that strategy start to play out, which basically means less promotions, better style, better quality, and better value. Daywear is the big area we're focused on when it comes to kids.
Good.
Delivery. We didn't answer that. I should call out the fact we have had a couple of small problems recently. Donington, we recently upgraded our warehouse management system, and that did cause a slight hiccup in the communication to our other system, which we call WCS. And what really meant, Georgina, is that interrupted, therefore, the service to customers for those four days, and it interrupted our proposition because we had to delay and extend our proposition. The good news is we're through that. We rectified it quite quickly, but it does show us that we have quite a lot to do when it comes to our technology. So it's recovered now. And we apologized very quickly to our customers. We recognized it, and the good news is most of them came back within the week and reordered.
Okay. Thanks, Georgina. Okay, thanks. Right, we're right out of time, but Simon, you've been waiting very patiently, and we'd love to hear from you, so crack on.
Thank you, Rajiv. A couple of quite niche end of call questions, if okay. I'll do them both at the time, because I think they're both quite quick. First one is, it looks like you've delayed a couple of pension payments, and there's some talk around negotiations around them. Can you just add some color around what the nature and status of those conversations are? And then the second one is just on the new M&S Bank agreement with HSBC. If that kind of plays out as you hope, how should we see that playing through your P&L from here? Can we expect some profits from M&S Bank to start reappearing?
Both good ones for Jeremy to end on.
Hi, Simon. So, when, before my time, during COVID, we agreed with the pension scheme, we'd postpone payments into the scheme to protect the balance sheet, but we were committed to putting GBP 200 million back into the pension scheme, roughly GBP 100 million last year and GBP 100 million this year, slightly different phasing, but they're in that order of magnitude. As we look further forward and look into the buyout of the scheme and looking at the kind of current triennial valuation, what I'm looking to do is have a conversation with the pension trustees to look at smooth those flows. We're currently in those conversations. We'll be able to update you once those are completed. But you're right, in last year, rather than the GBP 100 million, roughly, we put GBP 40 million in.
My expectation is if we can get the negotiations resolved, it would be a similar amount this year, and then we'll make contributions leading towards a buyout. But we can update you once those discussions are complete. And then on the banking arrangements, what we're doing with HSBC is looking to give ourselves a bit more flexibility. If you remember that the, you know, M&S's banking arrangements were sold to HSBC back in the day, what we're looking to do is give ourselves a bit more latitude, particularly in the areas which relate to our customers and into the stores. In the short term, there won't be material impact on profitability, but over time, what you'd hope is that we'll be able to drive that financial services part of our business a bit harder.
And again, we can come back to you on that when we settle down. We've only just literally signed the deal, but we can come back to the half year as to what the plans are and where we're looking to take it. Won't be material this year, but we do have some opportunity to drive that further through our core business, as opposed to it being run by HSBC.
It gives us more freedom, a bit, a bit more, Simon, as well, like bringing the loyalty and bank together.
Yeah.
Things we can do now that we couldn't do before, so that's some opportunities for us.
Okay, Simon. Thanks ever so much.
Okay. Well, look, on a bright and cheery note, I think we'll finish. Thank you, everybody, for joining us, and the officer team are available throughout the day to follow up on questions. Thank you.
Thank you, everyone. Have a good day.