Could the Chairman comment on the article in the Financial Times recently?
I cannot comment on the article specifically but I can confirm we have delivered sales in line with expectations. The General Merchandise business is improving despite difficult trading conditions; and product improvements will appear in the Autumn/Winter collections. The Food business delivered a strong performance, with sales up 4.5%. Similarly, sales through M&S.com are up 29.9%, 13% ahead of the market; and International sales are up 8.7%.
When and how will the clothing underperformance be rectified?
Our main focus is on womenswear for our Autumn/Winter collections, which will be launched in store and online from the end of July. This re-launch of womenswear will reassert our leadership in quality, stylish, upgraded products; and will be supported by a full marketing campaign as we move through September. We have spent a large amount of time with our customers and Shareholders, and also looking through our archives, as sources of inspiration. We are clear who our core customers are and what they want.
As with the 2005 and 2009 Ashes, will there be a similar t-shirt celebrating should England win against Australia?
Where possible we look to respond to products that we believe our customers want. As such, we will once again keep an eye on the cricket results. Further to this, we have also printed a small quantity of t-shirts celebrating Andy Murray’s win at Wimbledon, which will be available in selected stores this week.
Was it necessary for the Board to visit Istanbul when the focus should be on the UK?
The Board visited Istanbul as part of the overall focus on the future; and was a trip that provided great insight into the future of this company. However, our focus is still primarily on the UK. The Board also visited the facilities at Castle Donington and Cheshire Oaks showing we are firmly focused on the UK. The Board is committed to getting it right, not only for this quarter, but so that we have a sustainable, valuable business that you will be proud of.
What does the Board mean by “revolutionary change”, as mentioned in the Annual Report?
This refers to transformation that does not affect the fabric of M&S so much as its ability to compete in a modern, multi-channel world, in a timescale that is consistent with proper assessment of risk. As announced in our 2013 Full Year Results, over the past 3 years we have worked hard to address the legacy of under-investment in our infrastructure, with the aim of transforming the business for the future and turning it into a leading international, multi-channel retailer. Significant strategic progress can be identified through the 359 newly refurbished ‘concept’ stores, the consolidation of our warehouses down to 3, which will enable us to cut delivery times to store and online shoppers; and strong online sales through M&S.com.
Do the Board intend to implement a shareholder discount in stores? If so, when and how much discount can be expected?
In March 2015, in partnership with Equiniti, we introduced the innovative Payment Plus Scheme, an initiative which no other company has put in place, as we understand that our shareholders are our most loyal customers. This scheme rewards shareholders for their investment in M&S, offering them to the opportunity to use some or all of their dividend payment to purchase credit on a ‘Shareholder Card’ at a discount of 10%. This card can then be used in our stores in much the same way as a gift card. The scheme aims to benefit all shareholders who shop with us, and is in addition to the range of vouchers that we currently send to shareholders each January.
With regard to your wish to grow your international presence, as mentioned in the Chairman’s Statement, are the Board aware of what has happened to Tesco with its past American subsidiary?
We believe our international strategy is built around a clear geographic focus, supported by the right business model for each market. There are two aspects to it. Firstly, in well over two thirds of the countries in which we operate, it is actually our partners who are putting their capital into our business to grow the franchise. Secondly, we will not be rushing headlong into those where we are not currently present. We are developing our presence in India, China and the Middle East region, including in Russia and Turkey, as well as developing a multi-channel proposition to customers in a number of Western European countries. This approach is being delivered by a best-in-class international management team, comprised of high calibre external talent, M&S experience and valuable local expertise. The international experience of our Executives, particularly our Board members, is also of critical importance. As a result, we reported this morning that total international sales were up 8.7% based on constant currency; and 11.6% based on actual currency. International sales performances were positive across all regions, with Asia and the Middle East delivering the strongest growth.
What is the Board’s strategy to win the hearts of the 350 million middle-class people in India?
In 2010 we agreed to prioritise certain international markets, with extensive focus on where the stores are located. We defined India as priority number one because we felt it was a good opportunity for the brand. Together with our partner in India, Reliance, we have set a clear plan for the roll-out of future stores in India, with more than twenty stores opening there over the next twelve months. If we look to the next three years, we expect this number to multiply. The Reliance Group are passionate about our partnership, which is important and has changed dramatically in recent years. It is good to have a partner that really wants to invest in and promote our success in the Indian market.
How long until the Shareholders see results?
This question is at the heart of what we are about in this business. We are here to make the right decisions for this business for the long term. If it takes time, we will do it right and get it right.
When and how will M&S deliver a sustained 5 year Shareholder return that outperforms the FTSE 100?
Our strategy has been specifically developed to maximise Shareholder return. As of 5th July 2013, over five years M&S has shown a total Shareholder return of 169% compared to the FTSE 100 rate of 42%; over three years M&S has shown a total Shareholder return of 56% compared to the FTSE 100 rate of 47%; and over one year the total Shareholder return was 47% compared to the FTSE 100 rate of 16%. As such, M&S has consistently outperformed the market. A dividend of 17p per share for year end 2012/2013 will be paid on 12th July, in line with our dividend policy. Our strategy will continue to be to become an international, multi-channel retailer, with the aim of maximising the dividend for our Shareholders in the future.
The attitude of M&S towards smaller Shareholders appears to be changing – would the Board comment.
We very much value you, our loyal smaller Shareholders; and will continue to engage with you and take your comments on board. We also continue to offer our popular Shareholder voucher scheme to all Shareholders, regardless of the size of their holding.
I fear for the M&S brand. Is there going to be a takeover?
As a public listed company, we would inform our shareholders and the market through the appropriate channels were any such bid to occur.
The Annual Report contains a lot of information on Executive Remuneration – should there not be more focus on product?
There is a certain amount of information that we are legally obliged to provide to all of our shareholders. We are leading the way on transparency, particularly with regard to remuneration; and are keen to get the balance right in the Annual Report between product and financial information. We trust there is no aspect of our financial information you are unable to find out about. Extensive details of our products are contained in both our website and other publications, such as the M&S Magazine, which is available to all our customers.
The Remuneration Committee awarded Marc Bolland a bonus – is there justifiable criteria for this when the performance is poor?
The Remuneration Committee set relevant and stretching bonus targets, which were both financial and non financial, within the context of the business strategy and the challenging market place. It is important that the targets do not discourage directors from making difficult decisions about the investments that are required to support the ongoing transformation of M&S. Mr Bolland’s short-term bonus was justified based on the relevant criteria and targets set. The Remuneration Committee are very diligent and take a hard-line approach to remuneration.
How many people work for M&S Bank? How many customers does M&S Bank have? How much have M&S invested in M&S Bank?
M&S Bank has been a wholly owned subsidiary of HSBC since 2004, which is made clear in all customer communication; and Marks and Spencer plc has a share in the profits. It is one of the most trusted brands in the world and we work closely with HSBC to provide a compelling and convenient offer for our customers. M&S Bank has approximately 1600 members of staff, following its launch in July 2012. There are currently approximately 3.7 million customers.
Does the Board of the M&S Pension Fund also understand the relevance of long-term planning and sustainability to financial performance?
The Pension Fund is a very important part of our business consideration. The Chairman of the Trustees regularly attends our Board meetings and provides his point of view directly. The Pension Funds also has its own advisors, Hermes Equity Ownership Services who take a similarly long term view of life as we do. Hermes helps the Trustees to fulfil their fiduciary responsibilities as a long-term Shareholder, and to provide the highest standard of stewardship on behalf of the beneficiaries. This work provides a focused, value-orientated approach aimed at achieving sustainable investment returns through the development of long-term, responsible business strategies.
As more customers elect to use Shop Your Way and collect in -store, why has in-store signage not been made clearer?
We are constantly reviewing our signage policy in stores to ensure that it remains in line with customer requirements. With the positive online sales reported today, we will continue to ensure the weight of signage dedicated to promoting our sales via all our channels is sufficient. Shop Your Way has been fully embraced by all our colleagues in-store; and our new store formats will also add to the clarity of messaging across the store. Further, with Laura Wade-Gery and Sacha Berendji responsible for our retail stores, we are confident that should there be any issues with signage this will be rectified swiftly.
With the widespread use of internet shopping, why are you still expanding store footage?
We have spent a large amount of time discussing this question. We believe that the future of shopping lies in offering convenience for our customers to shop in the way they want. By being able to offer more convenience for our customers through a variety of shopping formats, we are doing what we know works well for them – 56% of our online business is collected in-store. We will continue to open stores in accordance with our strategy to grow space of around 2%. However, after 2015 we do not intend to grow our General Merchandise space at all. We do still feel there is room for us to grow physically in our Food business and we are very clear about that.
There is a conspicuous absence of staff on the shop floor – why not employ young people who are unemployed as apprentices?
We recognise youth unemployment is a serious societal issue. We recently announced our commitment to take on an additional 2% of our total UK workforce – approximately 1400 people – in our Make Your Mark scheme. The scheme will work with The Prince’s Trust to help people aged between 16 and 24 to build confidence and skills, and support them into long-tem sustainable work by gaining work experience with M&S. We have challenged other businesses to do the same, particularly those that work with us. So far nearly 50% of those that take on the internships do continue into employment. With regard to getting more employees on the floor serving our customers, we are aware of this point and are committed to resolving the issue through our GM Ready plan, which is aimed specifically at increasing customer assistants on the shop floor.
Can the Board outline some of the improvements to Corporate Governance since 2009?
The role of Chairman and CEO was split in 2011. There has been an orderly refresh of the Board, with the aim of enhancing independence. Jan du Plessis was appointed as Senior Independent Director in March 2012. We engage with the Institutional Shareholders through our annual Governance Event, this year held on 18th June 2013. We are also at the forefront of governance reporting and transparency, adopting new governance regulation early wherever possible, and are keen to impress the role of responsible Shareholders.
What lessons were learnt from the Reading store asbestos case, where M&S was fined £1 million?
We are very sorry for the lapse, we were very disappointed with the result of this case which occurred during a modernisation of the store in 2006. We set ourselves high standards and, when those are not met we will say so and we have learnt from it. The health and safety of all of our employees, customers and contractors is of utmost importance to us. The Board have had a full and frank discussion about the points arising from this case and we have learnt from it. The planning and way in which works are carried out in our stores has been changed and we have increased our compliance monitoring and auditing procedures to ensure our approved specialist contractors adhere to these revised standards.
Can you explain the rationale of M&S moving into banking? With increased regulations the chances of M&S making a return are fairly minimal.
The Board has discussed the move into banking on a number of occasions, we are very cautious in our approach, indeed we have been in financial services for over 25 years and have developed a very good business, the M&S Money business contributed £50 million of profit to M&S last year. M&S Bank is a natural next step for M&S Money and will provide customers with a credible, alternative choice in the banking sector. We continue to partner HSBC and they will deal with the day-to-day running and regulation of M&S Bank, furthermore we have taken a great deal of care to ensure that all the steps are in place to minimise the risks.
The balance of male and female directors on the Board is not equal in terms of gender
Developing a diverse Board has been a key focus, ensuring that we have the right mix of skills and experience to drive our strategy. Although not equal we have a good representation of women on our Board, making up c30% of the Board, twice the average of the FTSE 100. In addition 35% of senior management are women. We are clear in our approach to diversity on the Board, including gender, indeed our Board diversity policy, which clearly sets out our direction on this matter, is set out in the annual report.
Will shareholders get a vote on whether or not Marc Bolland gets a golden goodbye on his departure?
There are no plans for Marc Bolland to leave the business.
The remuneration given to executive directors of major companies has reached obscene levels. Annual increases in salary and benefits have been reported to be in the region of some 12%, whilst wages of workers on the shop floor have either remained static or are reduced. Many shop workers barely receive more than the minimum wage. CEOs and their fellow directors meanwhile are rewarded with millions of pounds. What are your comments on this matter?
The company’s Remuneration Committee is fiercely independent and will implement pay and reward structures that it thinks are right for the business. Two years ago we completely redesigned the remuneration framework at M&S, on the basis that we all agreed it was inappropriate, this is now its second year. Executive pay is an area in which there is enormous public concern and it affects all of industry. We are in the middle of a debate in business about not just what is competitive, but what is fair – an important word. It will continue to change, and we can give you absolute assurance that the M&S Remuneration Committee will independently make sure that we keep up with best practice and make sure that we have an executive pay policy that is both fair, rewards what we want to be rewarded in this business, which is success, but also makes sure we are acutely aware of the relativity of all the employees at Marks & Spencer.
In this year Next have overtaken M&S in terms of market capitalisation, what is M&S going to do to expand?
We have outlined out strategy to grow the business and we should be judged by how well we achieve this.
What multiple of base salary is appropriate as a maximum bonus in the retail sector, given the current debate about excessive executive pay?
The new bonus structure put in place last year, reduced the amount of bonus that can be earned as a percentage of salary from 250% to 200%. Although this appears a large number, these potentials are subject to demanding targets. We consulted thoroughly with our shareholders ahead of its implementation and we benchmark extensively on our total remuneration package. Actual bonus paid to Executive Directors was between 54% and 72% of salary.
Transparency in revenues earned and taxes paid is fast becoming an important corporate social responsibility and reputational issue for companies. I note from the annual report that Marks & Spencer reports the amount of tax paid in the UK and the amount of tax paid overseas without providing a breakdown of the countries comprised within the overseas heading. Could you let us know in what countries other than the UK we pay corporation tax and can you confirm whether the Company would be open to providing a country by country breakdown of taxes paid in future annual reports?
The majority of our profits are earned in the UK and therefore by far the majority of our tax is paid in the UK. We do not give a further breakdown country by country, as outside of the UK does not form a significant part of our tax bill.
When and how will M&S deliver a positive total shareholder return?
We have a clear strategy which has been articulated here today, to grow the business over the long term and transform M&S into a leading international multi-channel retailer. Our strategy remains unchanged and we are making good progress, but successful execution requires us to adapt to both market opportunities and current market conditions.
Given the success of ASOS in increasing sales dramatically why has M&S been so slow to embrace the internet and what actions are being taken?
This is one area on which the Board is absolutely focused, we need to move at pace in this area. We have set clear targets to grow revenues in multi-channel by 2013/14, we are investing £150m over 3 years and we have appointed Laura Wade-Gery to drive this business forward. This is already a £600 million business, which during Q1 of 2012/13 has performed well, up 14.9% ahead of the market and is absolutely crucial to the success of this company. We are focused on continuing to build our own platform ahead of the move away from the Amazon platform. In addition we have launched a number of new initiatives aimed at improving our customers shopping experience, including Style Online, In store Order Points as well as building a number of new international websites, in France and Ireland.
Can M&S clarify their competitive strategy in relation to both food and clothing and how does this fit with the wider high street competition?
Our strategy is absolutely clear, to become a leading international multi-channel retailer. In Food we are focused on freshness, speciality and convenience and we do it extremely effectively. We innovate constantly; we introduced 1,900 new lines this year. We offer value, without compromising on quality, through the rolling out of 500 Simply M&S food lines and the fantastic Dine In promotions. The newly designed stores offer freshness through the bakeries and the deli. In clothing we have made it clear that where we get things wrong, we will say so, there have been areas in our availability and in our product range where we have not got it right. We are rolling out new store formats, making the products inspiring and easier to shop, which will make a profound change. We have re-launched all of our sub-brands, giving them more distinct values and identities, including core M&S clothing brands of M&S Man and M&S Woman.
There have been no improvements in the range of organic bread on offer?
The performance of our bread department has been one of the most successful departments over the last 12 months since we overhauled not just the product range but also the in store bakeries, which we have done in nearly 400 stores. However, due to very poor demand for organic bread, we only have a very small offer in this area. We do constantly discuss the range with customers and do a great deal of customer research. Clearly, if there is sufficient demand, then we will introduce more organic products.
Why is there a lack of stock in the menswear department?
We work very hard to ensure availability across all of our departments, both in store and online. We have recently rolled out Shop your Way to improve our availability and flexibility to our customers.
Why are there problems at Kensington High Street with a lack of open tills, unavailable auto tills resulting in long queues. The successful product offering is being lost by these problems.
We are committed to providing an efficient service to our customers at all till points to minimise waiting times. During the year, we have worked to reduce queuing times by installing more self checkout till points and by improving our scanning procedures at the till point. However, we will pass on the feedback.
Is it true that you send fabrics from Italy to China to be made into suits and then shipped back to the UK?
We source fabrics from leading fabric mills, these include UK fabrics for Inspired By Savile Row and Italian fabrics for Collezione. It is true that a lot of our suits are made up overseas, we would love it if there were more made in the UK, however, we do have to be businesslike in our approach to production costs and we have to find a suit at the right price for our customers.
Did any of the Board hear the LBC phone-in this morning, specifically on M&S? The feedback covered all aspects of the store, product and customer services. What are you doing with this feedback?
The Board did not listen to the phone-in on LBC. However, we always listen carefully to our customer and shareholder feedback. We also receive a huge amount of product and customer insight every year through our Customer Insight Unit, in addition to holding a vast number of focus groups all of which we listen to and take onboard.
Why is the Dine In for £10 meal such a variable feast? It is variable in terms of the variety of the products on offer and the overall discount.
The Dine In for £10 meal has remained incredibly popular with our customers and we would not have pursued it were it not to be the case, indeed this month is the fourth anniversary since we launched this very successful promotion. If you consider what has happened to food price inflation over the last four years, the fact that we are still able to sell what we consider to be a fantastic quality offer at £10, the price that we launched it at four years ago, is a testament to the very successful promotion that the team have put together. It is a deliberate policy to have some variation, because when something has been running for as long as four years, customers would ask why we could not introduce more innovation and more variation. 60% to 70% of the core items within a Dine In promotion are regularly available, such as steak or chicken. There are occasionally some inconsistencies from store to store in terms of availability and that is something that we recognise still needs further improvement across our food business.
Are you aware of the amount of sales lost by having insufficient staff in stores, for instance, as a result of people giving up waiting to pay for their goods?
We are committed to providing an efficient service to our customers at all till points to minimise customer waiting times. The installation of more self-service tills has gone some way to reduce queuing times, we do try and get the balance right, however we don’t always get it right. Our scanning procedures at the till points have also been improved which has helped to speed up the queuing process, but we will continue to focus effort in this area.
The load music in the store I visit drives me away. Would the Board at least consider changing the irritating songs to something more tranquil?
Our song selections in store are compiled from customer feedback on a selection of tracks taken from the easy listening charts. In light of your question we will review the current selection.
The appointment system for bra fitting is not working, we are losing sales to competitors, are there any plans to change this?
We welcome your feedback, we are actually gaining market share in lingerie from 27.3% in 2011 to 27.4% in 2012. The appointment system is designed to give our customers a dedicated time to receive an expert bra fitting service, there are no plans to change this service at the moment, however we will feed your comments back to the lingerie department.
What have you done with per una as it lacks focus, innovation and imagination? Most of the clothes look like recycled versions of last year’s line.
We continue to listen to customer’s feedback in order to improve our ranges. We have recently conducted an extensive piece of research to improve per una, taking into account customers views in store and through focus groups. You will see evidence of these improvements in our Autumn ranges which are available online and in store from the end of July. We are proud of the per una brand and its heritage and hope our customers will be delighted with the changes which have been made.
On page 35 of the Annual review it is unclear what your statement means “Retail staffing costs were well managed despite increases in selling space”. In the retail sector wages have gone down but employee numbers have gone up. But I still have problems finding staff in M&S stores, I don’t think that you have enough.
We are committed to continually improve customer service in stores, indeed we recently introduced our zoned areas in our Food halls which has been hugely successfully in changing the way our staff on the shop floor engage with our customers. We are now looking to replicate this approach across GM to give our customers the very best possible experience each time they shop with us. Whilst staffing costs were well managed, reward packages for our employees remain highly competitive in the market. We will take on board the comments about numbers of staff on the shop floor.
Why can’t M&S pensioners use our discount online? We should also be supplied with an additional card for our spouse or partner so that we can shop at the same time in different stores.
We are actively working on an online solution and will be communicating with our pensioners who receive the generous benefit of discount in retirement by the Autumn. We do allow for an additional nominated user on the card so that a pensioner and their nominated user can use it, although not at the same time.
I would like to see Marks & Spencer start a trend of not opening until 2pm on Bank Holidays to enable staff to enjoy the time off.
We are always caught in the balance between offering convenience to our customers. We know that Bank Holidays are a popular time for our customers to shop with us, and looking after our employees. We look carefully at where our stores are located, which other retailers are trading and where it makes commercial sense to open we will do so. We try to get flexibility between our employees to allow them to cover one another on Bank Holidays, indeed, over the Jubilee weekend we wanted our employees to have the chance to celebrate, so we asked for those who wanted to, to cover the Bank Holiday working and all eligible employees received an extra day off. However, ultimately we are there to serve our customers, who do want us to be available at times that suit them.
Today is a bonus day for your staff, varied between £50 and £100. In the future what are you going to do to improve this, as you talk about working together as one team?
We do pay our staff within the upper quartile of the retail industry and we have a very competitive overall package. We did pay a discretionary bonus this year which was well received by the majority of our employees, we wanted to acknowledge the huge effort they had made to the business this year. However we do have to balance the amount paid against our profit and overall performance. Employee pay and bonuses is something the remuneration committee is very mindful of when it makes its determinations on the matters that are before it. We know that our staff are absolutely the beating heart of this business and we have to ensure that we engage with them properly.
At last year’s AGM I asked if our company was paying at least the living wage to all staff in London, which is currently £8.30 per hour. A year later we are no nearer to adopting this policy. Will you please give a commitment today that you will recommend that the Board adopts the living wage?
We do have a competitive pay package for our employees which remains in the upper quartile against our retail benchmark. The definition of a living wage is subject to discussion. We cannot give you a commitment here today, however, we continue to have a dialogue with a number of groups and our commitment to the welfare of our employees remains as strong as ever.
Why do M&S manufacture clothes in Sri Lanka where the factories are in breach of international labour standards?
At M&S we source clothing from across the world, wherever we operate, our suppliers are required to adhere to our strict ethical standards. These standards include providing good working conditions, paying good rates of pay, putting limits on overtime, treating workers with respect and allowing freedom of association.
I am questioning the danger of bonus structures in corporations. It is not clear what measures M&S has in place to award a bonus. In order to drive directors to focus on medium to long term objectives, should the bonus scheme for directors be set at a maximum 50% of basic salary?
It is really important to have bonuses aligned with the business strategy, and that is precisely what, over the course of this year, we have spent a great deal of time doing. The short-term bonus has been reduced by the order of 20% and the long-term incentive has been somewhat increased, although the maximum has been cut by 25%. Instead of, as in previous years, the whole of the long-term incentive being derived from earnings per share, it is now derived by 50% earnings per share, 20% by return on capital employed and 30% on the growth of individual components, which are Multi-channel, International and the UK business. The Board has spent a great deal of time with major shareholders and shareholder institutional bodies to ensure that they are comfortable with what we have been doing to the structure. All designed to hold the Executive accountable for the delivery of our long-term strategy.
Does M&S have any connection with Woolworths in South Africa?
The M&S family connections go back many decades. M&S does have an agreement to provide services to Woolworths such as product knowledge etc. If we can learn from them or them from us, then we do. Sir Stuart Rose is now a non-executive director of Woolworths South Africa.
Who were Messrs Marks and Spencer?
The best way for that to be answered is to look at the M&S Heritage section of our website. A link can be found on our homepage. We are in the process of moving our corporate archive to Leeds, where the company was started and will be opening to the public in the autumn providing a fantastic insight into the history of M&S.
Is it the case that the M&S Management make use of tax avoidance accounting procedures by the use of foreign tax havens? Are you using ‘tax havens’?
Marks and Spencer operates in a number of countries around the world, and our invariable policy is to comply with the tax laws and pay our taxes accordingly.
Can the layout on the AGM stage be improved with Executives on one side and Non-Executives on the other?
We are actually all one Board, all responsible for delivering the strategy, even though some are executive and some are non executive directors. We therefore do not make any distinction when we set the seating plan.
How can Marc Bolland take money from M&S for losing his job at Morrisons?
During Marc’s time at Morrisons, he and his team added over two billion pounds to the market capital of that company. Marc’s long term incentive schemes were due to pay out when we asked him to come and work for M&S. Had he stayed at Morrisons he would have been substantially rewarded. He agreed to work for us as long as we compensated him for what he would lose on leaving. Marc gave up schemes that were very likely to pay out in the future and swapped them for new schemes with our performance targets.
The Chairman walked away from the HMV ‘debt disaster’. How can he be comfortable running a business like M&S?
The AGM of Marks & Spencer is not the place to discuss the business of HMV.
From your remuneration report we do not see exactly how Plan A is linked to executive remuneration. Could you provide some more information on that?
One of the changes we have made to Executive remuneration is to make sure that the annual bonus is not just about financial performance but about delivering things that are linked to the long-term health of the company. Each of the Executive directors has four key objectives; two of those are shared objectives and two are individual to the business unit for which they are responsible. One of these shared objectives is specific to Plan A.
How can M&S be an international company when there is no diversity on the Board?
We have real diversity on the Board in terms of age, nationality and gender. Furthermore our recent appointment of Vindi Banga to the Board as a non executive director will strengthen this diversity and bring huge experience in our key international markets, particularly India.
What is your strategy for ensuring that total shareholder return is maintained and that you rectify the decline in total shareholder return? How does your remuneration strategy ensure that any bonus pay is conditional on what is important to shareholders, which is share price growth, dividends and total shareholder return, and not obscured by random operational objectives?
We now have a balance of EPS, with a return on capital employed and growth in important business areas, and they absolutely are not random measures. They are measures as closely aligned as is possible to the achievement of the strategy by which this Executive team will be judged. We will report each year at the AGM on how we have done against the Plan.
The independent directors have to take some judgments in interperating the remuneration strategy. If the results say something should be generated but fundamentally we know the business is not performing in the way that it should, then we have to exercise our discretion in that way. It has to be seen by all to be fair. The Remuneration Committee has spent a great deal of time ensuring that the people who are going to be incentivised, fully understand what the scheme is about so that they can be incentivised by it.
The Annual Report and Accounts consists of 112 pages, has bureaucracy crept in? Can you look carefully at yourselves and try to streamline this?
We have followed the changes brought about by the Companies Act 2006 which allows companies to better tailor the information our shareholders receive. We do not send the full Report to everybody because we think about the environment and the amount of paper that we use. Any shareholder can opt in to receive the 112 page Report if they wish, however an overwhelming majority prefer to receive the shorter update document.
How can the very minimal information that is sent out to shareholders be enough to say ‘yes’ or ‘no’ to the AGM resolutions?
In February we asked shareholders what document they would like to receive. An overwhelming majority now receive the M&S At-a-Glance, a document focused on the private investor. However, the Notice of Meeting, which is a very concise document, provides full details of the resolutions being voted on. Of course, for those who are able to get online, the full accounts are on our website. We do our very best to balance the amount of paper we use against giving shareholders what is required, but we can always do better.
Are more of the larger shareholdings represented here today - those holding more than 1m shares, including Stuart Rose?
I don’t believe Stuart is here today. I have had a conversation with all of our major shareholders and have encouraged them, if they can, to come to this meeting. A number are either here physically or watch via the webcast. Obviously a number of them have investments in several companies, so it is quite difficult for them to cover all meetings. However we do have a process of continuous engagement with our major shareholders throughout the year, and this year held a very successful governance meeting which was well attended by both shareholders and representative bodies.
What measures are going to be taken to ensure we learn from past mistakes regarding international growth?
In the past we didn’t necessarily approach international expansion in a co-ordinated way, it was more of a scattered gun approach. The development of our international business is central to our strategy but will also be targeted and consistent. We have appointed a hugely experienced Director of International, Jan Heere who will be developing this area of the business. We have learnt lessons from the past, our announced return to France through a store in Paris and via a French website has incorporated some of that learning, we have been self confident in our return but also humble and culturally sensitive.
Do you have a target earning per share for this financial year?
There are analysts who estimate what our earnings per share are likely to be and the consensus is about 34.5p with a range between 33p and 36p, but those are not our estimates. We have not published any target.
Within M&S Cafes, can we have ‘Count on Us’ products available with Weight Watchers points’ values on them?
When we put ‘Count on Us’ products into our M&S Cafes our plan is to put Weight Watchers points on our packaging wherever possible.
Most of the M&S extra loyalty vouchers are only valid for six days. Would it be possible to have them valid for three months and also for there to be no minimum spend value?
We target our loyalty voucher promotions around certain times of the year. There is a limited redemption period in order to complement our promotional plans and reward our customers at the same time. We find that a great number of our customers redeem the vouchers during the 6 days. It would not be commercially viable to reduce minimum spend levels on loyalty vouchers. However, we do offer a number of vouchers through our premium club which have a much longer redemption period and we will continue to think about our loyalty offers.
Why doesn’t M&S sell a high quality crusty loaf like other supermarkets?
We are intending to increase our bread offer and are working very hard at upgrading our range of breads at the moment. We are confident that within the next few months customers will see a much improved range of fresh crusty bread in our stores together with other new bakery ranges.
Why when a member of staff believes an area of the store might be unsafe, is the area not immediately closed to the public while awaiting investigation?
We take health and safety very seriously. Health and safety regularly comes to the full Board for consideration. We avoid putting our customers at risk in any circumstances. When problems are identified, we deal with them as soon as possible and investigate any specific incidents thoroughly and follow up on the findings.
What is M&S doing to cater for clothes for women over 60 which as a demographic group are growing in number?
We try very hard to cater for our over 60 customers. We have focus groups within our business almost every week, and we do take on board their comments and requests. We do work hard to ensure we are covering fit, comfort and style for the over-60’s. We are continuing to grow our market share in our 55 plus age category, which we watch extremely closely. In fact, we look at that group in some detail because it is our biggest share within the business. We are all very aware that this customer group is extremely important to us.
Why can I not buy a pair of eight and a half inch socks?
We have a very large assortment of socks because this is what our customers have asked for, but there is always room for more. We group our sizes together and believe that the stretch and quality of our socks would fit across sizes grouped together. (e.g. size 8-10)
As part of our segmentation strategy, do we intend to introduce kosher food into those stores which have large Jewish populations?
We are planning to extend our Food range in total by about 1,000 products this year. Kosher foods form part of the consideration that we are currently working on.
M&S employees are the real assets of the Company. How are your staff that have made this company so great being looked after and how do you assess their performance through independent mystery shopping?
Our people are one of the most important parts of the business. We have a very competitive reward package that includes salary, bonus and share ownership schemes, as well as an unlimited staff discount of 20%. We also have a number of additional employee reward schemes that our employees can benefit from. Indeed a quarter of our staff has been with us for more than 10 years and a further half have been with more than 5 years.
We do run an independent mystery shopper programme for our stores. This helps us to understand the service our customers are receiving in all of our stores. The system works very well and has been embraced by our staff as it helps employee development by highlighting certain aspects of our store service which can be improved.
Does M&S have a policy of paying the living wage to its employees and contracted staff at the present time? If it does not have such a policy, is there an objective that we will work towards this as soon as we can?
We are proud of our history and of being an exceptional employer. We pay in the upper quartile of employers in the retail sector. We are aware of the comments that are made about the living wage issue and we have an ongoing discussion about that.
Oxfam, notwithstanding the good work they do, often take, a less than impartial stance regarding overseas disputes, making its claim to be non-political a little suspect. Can you provide an assurance that M&S will remain above politics and faithful to its founding philosophy?
We can give assurance on this.
Why has the period of payment terms to our suppliers as disclosed in the Annual report been increased over the last few years (19 to 26 days in 2009/10 and 26 to 60 days in 2010/11)?
We have a continuing relationship with our suppliers. The payment terms vary from time to time however we have a responsible attitude to maintaining business and links with our suppliers. We have worked with our suppliers and we continue to work with our suppliers and our banks in relation to terms of financing. Over the year we have, together with the banks, worked to assist our suppliers on the basis of our balance sheet strength. That is a part of the relationship which is not seen in these creditor days. We are working very closely with our suppliers and we are aware of the responsibilities we have.
What action will the Board be taking to ensure workers at the supplier Thanet Earth are employed on more secure contracts, rather than on a long-term agency basis?
The GLA (Gangmasters Licensing Authority) has conducted a full and detailed investigation into the alleged practises at Thanet Earth, which we have input into. We understand the findings will be shared with Unite and we are following the correct procedures in supporting this process.
Can you persuade the City to find someone else to hound and stop pestering you and the rest of the Board and allow them to get on with their job?
Marks & Spencer attracts so much media attention because it is a company with a great
heritage that people care about. When the media and the City are positive and are behind
us, we are delighted to have the publicity. When they are not, it can sometimes be tough.
How long is Marc Bolland intending to stay at Marks & Spencer?
It is rather unfair to ask that question, given Marc has only been with us for 10 weeks. As
Marc said he is looking forward to taking on the challenges this business faces and he has
made it clear that he is here to stay for a substantial period of time.
If executives can be confident of negotiating a ‘golden hello’ from a company they join, it will detract from the incentive to stay with the company they are with. I would welcome some reassurance that the present remuneration structure will lead to a more positive return for shareholders than at present.
The bulk and considerable proportion of Marc’s remuneration is at risk. If the Company
does well, Marc will do well. Equally, if Marc does well, the Company will do well. We are
confident the two are well aligned.
You have paid Marc Bolland £15 million, which we would not have had to pay if we had a culture of promoting staff internally. How can you justify the Board’s salaries and bonus?
We conducted a thorough search for your next Chief Executive. We had a very good list of candidates and we believe we have attracted the best. We have not paid Marc Bolland £15 million, we have appointed him and he could earn that sum of money over a period of years, most of which is at risk, some 85% of the package. Marc will be awarded the higher sums if he achieves stretching targets. Should that happen it will benefit shareholders. The Company’s Remuneration strategy has been clearly outlined by the Chairman of the Remuneration Committee, Steven Holliday in the Remuneration Report.
Why has there been a decrease in the dividend this year?
The Board has a duty to ensure it is financially viable at all times. At the beginning of this recession, we had to look very hard at what might happen.
Your Board took some time deliberating over whether it could or could not afford to maintain the dividend payment. We made a decision in the year 2008/09 to cut the final dividend. What you receive this year is a reflection of the reduction that was made in the second half of the preceding year, on a full‑year basis. We said we would maintain that dividend until we had dividend cover back in the business of approximately two times the dividend payment, we are nearly back at two times. We have announced that we would then grow dividend in line with the increase in earnings per share.
In the past you have admitted that the strategy to withdraw the Company from international markets was questionable. Do you agree that there should be a step change in international expansion?
Marks & Spencer has had a chequered history internationally. We are sad that decisions were taken to withdraw from some profitable trading areas over the last 10 years. However, we believe that our brand has a fantastic international reputation and can continue to grow. We have restructured and reinvested in our core UK business and we said very clearly that we wanted to drive the International business, and indeed we have driven revenue sales from 5 or 6% in 2004 to around 11% over the last six years. Marc will be outlining his strategic review in November at the half‑year results, International may be a part of his strategy.
The biggest three shareholders of Marks & Spencer are all foreign companies and, between the top five, they almost own 25% of our Company. Corporate governance is a matter of great importance, and I wonder whether these five institutions are present? This is a very important point, as we are talking about the independence of this great company.
We do engage our principal investors throughout the year on all governance and remuneration matters, indeed the introduction of the new Stewardship Code will further encourage institutional investors to engage with the companies in which they invest. However there are some institutional investors in attendance this afternoon. In respect to the independence of Marks & Spencer we absolutely hope that it remains that way. Marc Bolland has the opportunity to see where he can grow this business following the repair work that we have put in place over the last five or six years.
Do the Directors feel that M&S Cafés live up to M&S' high standard of customer service?
We recognise that we can make improvements in this area. The M&S Café is becoming increasingly popular, indeed we are the second largest café in the country. As a result, customer service in this area comes under severe pressure at peak times. However our latest mystery shop customer score in this area is 82% and is on an upward trend. We will continue to monitor this area closely and make the necessary improvements to our service level.
Could you make the area where customers clear their trays away more prominent within your café's, as this would help your staff during busy periods?
Our new style of café's give customer's the option to clear their own trays if they so wish. We continually look at ways to make our café operation more efficient and effective for our customers and staff. We have recently conducted a "sparkle" improvement programme across the M&S cafés and this will continue this year. We would expect our staff to be available to clear trays during busy periods and we will look at resource to enable this to happen.
Why do Marks & Spencer socks fall to pieces when you look at them, which never used to be the case, they seem to be made in China?
We make socks all over the world including China. Most M&S colleagues wear Marks & Spencer socks. However we do not think it would have escaped us if the socks had fallen apart ‘on sight’.
During the British apple season why do I have to go elsewhere to buy British apples at a good price and in large quantities?
We are one of the biggest supporters of British farmers in the UK, and our apples are some
of the best value and best tasting apples in the UK. We do not choose to pile them high,
bruise them, batter them and let customers put their fingers all over them, but this does not
mean they are expensive or indeed have a large carbon footprint.
What percentage of the Company’s business model is outsourced, and how do you work with those vendors to ensure that the service‑level agreements are monitored and the suppliers held accountable?
We do not outsource a huge amount, but we do have some third party providers running our logistics and systems (in both Food and General Merchandise). Indeed where we think a third party can do something better than us, because it is not strategically important to the business, we have outsourced these aspects. We have very tight agreements and service‑level requirements. We do inset specific break clauses, have the ability to terminate contracts etc in circumstances where service levels are not met. We are very comfortable with the level of agreements we have and the services which we are receiving from those third‑party providers.
In previous years, I have raised issues about the fit of Marks & Spencer’s women’s clothing and shoes but feel that this has not improved. Will you now listen and make some improvements?
We are currently experiencing record market share in Womenwear, so it is concerning
that you are still having problems with fit. We have dedicated fit technologists working with
our suppliers and buyers to ensure we achieve the best fit, we use real people of varying
sizes to trial our clothes and footwear. That said we are always reviewing our products to
ensure fit standards are being met and will continue to work hard to address any concerns our customers might have.
One of your core values is quality. Why have you reduced costs to the point where quality is being compromised?
We never compromise on quality. We have had the lowest number of complaints and returns in Womenswear relating to quality. This demonstrates the improvements we have made in recent years. In order to achieve better pricing on our products without compromising on quality or design, we have been focused on what we call 'garment engineering', one example of this is where we are working with our fabric suppliers to increase the width of their weave, this enables us to get more from a roll of fabric. We have a rigorous testing process and use over 300 independently accredited test laboratories worldwide. To assure the quality of our clothes they test their performance during wash, wear and colour fastness. We believe in offering all of our customers great value products without compromising on quality and are confident we are delivering this.
Why have you chosen to withdraw free plastic bags when purchasing items of food?
Our actions to reduce carrier bag usage is a part of our wider Plan A commitments on improving performance across a wide range of social, environmental and ethical issues. We introduced the charge for carrier bags in our Food business primarily because it is our biggest single user of bags. The policy is designed to encourage customers to re-use bags, as a result we have reduced our bag usage by over 400 million, a reduction of 81% in Food and 64% overall. The £2m generated by the sale of Food carrier bags has been donated to the environmental charity Groundwork, which has helped fund 79 parks, gardens and play areas across the UK. This approach has been positively received by the majority of our customers and in many parts of Government. Indeed the Welsh Assembly is intending to introduce a law to charge for all carrier bags from next year and in Northern Ireland bags are already charged for.
As a long term institutional investor in M&S, we are concerned about the continuing governance and operational problems experienced at M&S. We are aware that the ongoing uncertainty regarding the future structure of the Board and Sir Stuart's successors present an unwelcome distraction for the company and its shareholders. Our preference has always been for the issues to be resolved in an expeditious and transparent manner. It seems to us that one positive step the Board could take to allay many shareholders concerns is for Sir David Michels, who is for all intents and purposes acting as Chairman, to be appointed as Chairman. Sir David has made no secret of his desire to rise to the challenge and we would ask Sir Stuart why he is against this move?
The Board has set out a clear and transparent succession timetable for the appointment of an independent Chairman, a decision that the Board will take at the appropriate time independently of Sir Stuart. If Sir David or another Chairman was to be appointed before a new Chief Executive is in place, the assumption that Sir Stuart would revert to the role of Chief Executive would have the effect of squeezing the space which has been created for executive directors and senior management to be nurtured and for their skills and talents to develop. That was the genesis of the decision the Board took in 2008, when we concluded that it would be in the best interests of the Company to retain Sir Stuart Rose until July 2011.
In opposing resolution 16 (resolution requisitioned by LAPFF – that the Board takes all reasonable and practical steps to bring forward the appointment of an independent Chairman to July 2010), the Board says it is concerned that Sir Stuart might consider his early departure as Chairman to be the right time to leave the Board entirely. Whilst some might view such a prospect with alarm, others might think it’s a good idea. Please would Sir Stuart clarify his intentions?
The primary intention is to ensure that there is an orderly succession in the business and that a new Chief Executive and the right Chief Executive is appointed in 2010. The rationale for combining the roles was to allow internal executive directors and senior management more space to develop to maximise the prospect of an internal candidate emerging as a future Chief Executive. M&S is not in a position today, in July 2009, to announce a new Chief Executive, it’s most important that this position is in place first, after that the Board has decided it would like me to stay for a short period of time, before a new independent Chairman is appointed.
Will Louise Patten resign as Chairman of the Remuneration Committee given her appointment as a non-executive director of other companies?
Louise Patten is an exemplary Chairman of our Remuneration Committee. We are here to discuss Marks & Spencer this afternoon, not any other companies that Louise is involved with. Louise enjoys the full support of the Board and she has made it very clear how the Remuneration Committee runs at M&S.
Why won't the city media and investors leave Sir Stuart alone to get on with the job?
We understand that M&S gets scrutinised, we must not complain, because in good times we get a lot of positive publicity, and in bad times we must grin and bear it. What is absolutely vitally important is that your Board and the senior executives who run this business, are given the space and the time to concentrate on getting through the recession. That is what we will try and do and what we will get done.
When will Marks & Spencer generate a total shareholder return (“TSR”)? How soon in Clothing will M&S emulate Next and in Food, emulate Tesco? How soon will M&S more dramatically increase its foreign sales?
The report and accounts quite clearly show that we have a significant TSR, and in fact for the last five years have beaten most of the FTSE 100, albeit less so in the past year. You mentioned Next and Tesco and you mentioned positioning; We are M&S, we are not Tesco, and we are not Next, our demographic is the widest demographic of any retailer in clothing in the UK, and we position ourselves to ensure that through our good, better and best pricing, we offer our 21 million customers, the very best that they can afford. We will never compromise on when we talk about Food is quality. John Dixon has introduced a ‘Wise Buys’ range, that is now 18% of M&S Food sales demonstrating that our Food business has reversed its decline. The bulk of our profit decline last year was margin that we sacrificed to ensure that our customers stayed faithful, I think they understand what we are trying to do, and I believe we will go back to a better position in the forthcoming four or five years.
In respect to overseas I am disappointed that we have only got around 10% of overseas sales at the moment, but we have gone quite a long way in quite a short time. We have a strong team in place, we have quite an aggressive plan. I am confident that this business will have a vibrant and strong international business.
Was the reason for profits being down by 40% due to your inability to control operating costs?
The reason why profits were down last year was not as a result of an increase in operating costs, but primarily because we decided, consciously, as a Board to reduce our profit margins across a wide range of products, particularly in foods, to ensure that we kept faith with our customers during difficult times. It is true to say that we also suffered some additional mark-downs in clothing as a result of stock levels that we held in a declining market, but Ian Dyson and his team have done a great job in keeping stocks under control, and in the current financial year on a like-for-like basis our costs will actually be down 1%.
Why has the dividend been cut by 21% when you have been awarded a 55% increase in salary?
The Board very much regrets having to drop the dividend, but our duty as directors of your company is to ensure we have the right financial strength on the balance sheet. The decision to reduce the dividend was taken after a very difficult debate, however it was the prudent thing to do. Stuart did not receive an increase in salary during the year. The Annual Report is transparent in respect to directors’ remuneration.
Why is the process at the till point more difficult for chargecard holders than other card users?
We process all chargecards in the same way that we process all credit & debit cards. There are no differences in the transaction. Therefore our chargecard holders should not experience any difficulties in making payments at all of our General Merchandise and Food till points.
How do Marks & Spencer decide on levels of staff per store? I never find enough staff in my local store?
This is an issue we monitor on a weekly basis and something we constantly try to improve. Staffing costs are our biggest discretionary spend, we plan each store separately based upon a range of factors. The main determinants are planned sales, the level of corporate or local activity in the store, the range of services that are offered and the operational complexity of the store. This is at the top of our agenda and we will continue to focus on it.
Can customers have better availability on Food and General Merchandise, specifically thermal underwear and wholemeal bread?
This is a very important point, the essence of the business. In Food we have changed our merchandising structure to address this issue and have also focussed on our most popular lines and increased our purchase of such items, availability has increased and waste has decreased but we recognise that we must continue to make progress.
In General Merchandise, availability on seasonal merchandise is more difficult to predict as we balance availability against excessive seasonal reductions. A colder snap will obviously mean increased thermal sales and reduced availability later in the season. However we will take your comments on board and look at our thermal product purchase for next season.
Are there any plans to modernise Weston-Super-Mare store, particularly the toilets and the M&S café?
We will send our estates and store environment teams to the store to assess what urgent work needs to be done.
What is being done to improve your Menswear fashion?
We do have a lot of men in the fashion area, many of us including the head of menswear are our customers, so we have a direct interest in it. We are disappointed that we are not satisfying needs; we know we have work to do to strengthen our Menswear business, which is why we have gone back to the things that make us a destination shop for our customers : value, innovation and availability. We have retained our number one position in Menswear in spite of challenging market conditions.
I don't think you are listening to your customers regarding the fitting of your clothes and shoes. I can go in to numerous other shops, your competitors, and buy clothes and shoes that fit and yours don't. Are you going to do something about it?
I am disappointed that you are not a satisfied customer, because we have substantial market share in clothing; we are the largest retailer of women’s clothing in the country, we have substantial market shareholding in footwear. We believe fit is as important, if not more so, than size. We have dedicated fit technologists working with our suppliers and buyers to ensure best fit and these are trialled on real people, not just mannequins. However, we are always reviewing our products to ensure fit standards are being met and will continue to work hard to address any concerns customers may have.
What cost effective steps are you taking to appeal to the "buying generation" - ie late twenties / early thirties womenswear market? I don't feel you are making the most of the market available and you don't appreciate your customers want more value for money
It is the perennial problem. We are pleased to say that over the last year we have attracted much more under 35-year-olds to M&S than the preceding year. It is always a difficult balance to get right. With regard to value; we are over-trading on value, which means that we are selling more value clothing than we have ever sold before, and Kate and her team are on with ensuring we do more. We will not reduce the quality standard at any expense, and we will not go unethical. We will give you the best value that we think is right from the appropriate sources.
Can the introduction of signs in clothing departments be considered? Without them it can be difficult as well as time-consuming to identify the section you require, whether it is shirts, socks, or ties; especially in larger stores. So, ideally, signs suspended from the ceiling, pinpointing each section, would be very helpful to the shopper.
We agree we need to improve our signage, particularly in the clothing area. The good news is that in both White City and in Tamworth we have recently trialled some new signage, and we will be rolling out to 100 stores this Autumn. Signage is vitally important, as running such a wide and complex catalogue it is important that we get you as the customer to the place you want to go.
Are you satisfied that M&S acted with integrity and moral justification when 60 IT staff at Stockley Park were transferred to Cognisant, to work with imported labour from India? If so, why did ACAS say, ‘we could not believe that M&S would so blatantly violate the transfer laws’?
This is a very serious issue. M&S is very satisfied that it completed this transfer in a rigorous and appropriate way and employees were consulted fully. It must be stressed that M&S is not importing labour at all but are working to ensure that we are transferring these skills in the right way to a new supplier. We are satisfied that the TUPE transfer regulations have been applied appropriately. M&S has a very good reputation in relation to these types of TUPE transfer and has acted with real propriety.
When will customers be able to choose between Genetically Modified (GM) food and non GM-food, as already happens in competitors’ stores?
We introduced systems to maintain non-Genetically Modified food ingredients as well as animal feeds for fresh chicken, pork, beef, lamb, conventional milk, farmed salmon and shell egg production in the 1990’s in response to customer concerns. Our policy remains to only use non-GM ingredients in our food.
We continue to monitor customers’ views, but as recently as March 2009, the Food Standard Agency reported that GM remains an area of concern for consumers.
While you are charging 5p for the issue of bags, you are taking large advertisements in major newspapers, is this environmentally friendly?
Our Plan A eco-plan launched in January 2007 was designed to address our key environmental and social challenges and included actions to reduce the usage of single-use carrier bags. Our customers have responded positively to Plan A and have repeatedly asked to be kept informed and given information on how they can help. We have committed to provide this information through a wide range of media, including in-store, on our web-site as well as in the printed form. The environmental impact of newspaper advertising in minimal.
(Our policy of charging 5p for food carrier bags has succeeded in reducing usage in our food sections by 83% and the profits from the initiative, totalling £1.2m, have been donated to environmental charity Groundwork to help fund 46 parks, garden and play areas across the UK).
Why does Stuart Rose think he is exempt from the Higgs Guidance 2003 on Corporate Governance, with his move to become Chairman and CEO?
A. The Higgs Guidance recommended that the CEO shouldn’t become Chairman, however it also established the principle of ‘Comply or explain’.
The decision to combine the role of CEO and Chairman and thereby elevate Stuart from CEO to Executive Chairman was done absolutely in the best interests of the Company and, in line with the Higgs Guidance, we explained our departure from the guidance.
Balancing controls have been put in place to mitigate governance concerns; Limited period of appointment in combined role until 2011; the appointment of a Deputy Chairman; increased responsibility for other executive directors and the Executive Committee; and the future recruitment of additional non-executive directors.
What is M&S doing to improve its succession planning?
A. Succession and continuity of leadership is a priority, especially as we move towards 2011. We have a strong senior team in place which has an opportunity to develop its skills – including a strengthened Board and an expanded Executive Committee. With Ian Dyson taking on significant new responsibilities Stuart can now focus on a more specific set of executive responsibilities, in particular developing and maturing talent within the business.
Would the members of the Board tell us here, in front of this congregation of the owners of the Company, whether they are fully supportive of the decision to combine in Sir Stuart Rose the offices of Chairman and CEO?
A. The Board entirely and unanimously supported this move for a number of good reasons. We believe that it is in the best interests of M&S to retain Stuart in a leadership role through to 2011. It is also worth mentioning that, in these somewhat uncertain economic times, continuity becomes more important. Stuart now has a specific set of executive responsibilities, in particular product and the key growth of M&S direct, and international. He is also particularly responsible for developing and maturing the good talent we have within M&S, many of whom were given additional responsibilities concurrent with the new structure. In particular, Ian Dyson has also taken on significant new responsibilities with the running of our retail and HR operation.
The decision to retain Stuart was made after careful deliberation, and has had widespread support internally and externally. There has been much comment, and some criticism, over the combined role of CEO and Chairman. While we are naturally sensitive to these critics, I repeat, that I and the Board were entirely convinced that the route we chose was the right one for your Company.
The Board has put into place a number of safeguards to ensure the continuance of good governance in your Company, and to act as an independent balance in the new structure. Included in those safeguards is my appointment as independent Deputy Chairman, a role I take very seriously, and a role which will take up at least half my working week. My primary responsibility is to head up the nomination committee, whose job will be, at a point in the future, to choose Stuart’s successor, as well as the senior executive team who will run this business.
Ladies and gentlemen, M&S has always had an excellent record in corporate governance. It is your Board’s intention to ensure that this continues.
Can the Board give full disclosure on the circumstances surrounding the departure of Steven Esom?
A. We are facing challenging market conditions in Food and needed to tackle these by increasing the pace of change on operating and trading initiatives. As a result we had to take action and Steven Esom stepped down from the Board and left the Company. It would be inappropriate to further comment on Steven’s departure while we are finalising details with him. However, the Board wishes Steven well for the future.
Why don’t M&S Directors set an example to the external market by being awarded sensible and reasonable salaries and bonuses?
The M&S directors’ salaries and bonus are set by the non-executive members of the Remuneration Committee. This is carried out by reviewing relevant benchmark information in other FTSE 100 companies and awarding salary increases and bonus levels accordingly.
The executive directors did not earn a bonus in the financial year to March 2008, despite hitting over £1billion profit. This shows that stretching internal targets are set and payments only awarded where these are achieved.
Was Steven Esom sacked because of a decline in the Food business which has coincided with introduction of plastic bag charging? Do the Directors support a charity, and if so shouldn’t they be donating to charity from their own income, rather than charging customers for it?
A. Steven Esom’s departure, which was very regrettable, was not related to the plastic bag charging scheme, but rather to some of the issues in the business. Steven did some good work for us but we need to pick up the pace of change.
Although Board members do donate personal funds to charities, our carrier bag charging scheme helps us to achieve two things. Firstly, by working with our customers in this way we will cut the number of food bags used by 70% - over 280 million bags a year. The scheme also sees profits donated to environmental charity Groundwork so they can create or improve ‘greener living spaces’ such as parks, play areas and gardens in neighbourhoods across the UK.
We have already raised £120,000 for Groundwork, and expect to improve around 40 neighbourhoods throughout the UK in the next year.
Can you please comment on the coverage in the Daily Telegraph on 9 July 2008 by Jeff Randall?
1. He talked about the £3bn value of the business today versus the £9bn value. A year ago our share price was 640p which means today it is down 60%. But if you look at other retailers, Next is down 60%, Debenhams down over 70% so this is not just about M&S – clearly the whole sector has suffered from the uncertainty over consumer spending and the economy.
2. He comments on the cost of the buy-back programme. We’ve bought back 8% of our shares, and returned over £900m to shareholders through dividend and buy-back in the last year. We need to be sensitive to market conditions, our trading performance and our desire to continue to invest in the business – the buy-back needs to be considered in the context of this.
3. Responding to his comment on bonds trading… technically the bonds are being priced below face value. But we are not alone. Financial markets and the economy means the majority of bonds including Tesco’s recent dollar issue are being priced below face value. Few of our bonds are currently changing hands and investors are holding. The fact that we were able to issue 30 year debt in difficult market conditions last December, demonstrates investor confidence in the long term prospects of the group and that we will be around in 30 years time to pay them back.
4. On the subject of debt, this was a deliberate strategy to reposition the balance sheet and make it more efficient – we were over-capitalised back in 2004. The increase in debt reflects the buy-back and investment we have made in the business. Both of these will drive returns and value to shareholders over the long term.
5. He questioned the store refurbishment programme. We had to deal with years of underinvestment in our stores. But we absolutely believe the store modernisation programme was right to do and today we have shops we can all be proud of. We are happy with the returns and our customers tell us they like them too. Having the right store environment is absolutely necessary to be competitive on the high street – the competition will not stand still and is all now investing in their stores too.
6. In terms of negative cash flow, we are a highly cash generative business with plenty of bank facilities in place to support our liquidity and have the flexibility to manage our cash flow over the coming months.
7. On our property portfolio, in 2004 our properties were worth £3.4bn and we have expanded and invested in our estate since. Our property is not pledged to the pension fund and remains under the control of M&S. Our asset base is absolutely not “under water”. Our net assets at the year end were £2bn.
8. Regarding his comparison of Sir Stuart Rose to Gordon Brown… we do not comment on party politics.
9. In relation to our branded goods trial… this is a small trial. M&S will never be a destination shop – but the branded goods trial is about convenience. If our customers don’t want it, they won’t buy it and we’ll review the situation.
10. On the questions of whether Sir Stuart will resign if profits go below £748m… we’re only one quarter into our year, we can’t give a profit forecast.
1. He talked about the £3bn value of the business today versus the £9bn value. A year ago our share price was 640p which means today it is down 60%. But if you look at other retailers, Next is down 60%, Debenhams down over 70% so this is not just about M&S – clearly the whole sector has suffered from the uncertainty over consumer spending and the economy. 2. He comments on the cost of the buy-back programme. We’ve bought back 8% of our shares, and returned over £900m to shareholders through dividend and buy-back in the last year. We need to be sensitive to market conditions, our trading performance and our desire to continue to invest in the business – the buy-back needs to be considered in the context of this. 3. Responding to his comment on bonds trading… technically the bonds are being priced below face value. But we are not alone. Financial markets and the economy means the majority of bonds including Tesco’s recent dollar issue are being priced below face value. Few of our bonds are currently changing hands and investors are holding. The fact that we were able to issue 30 year debt in difficult market conditions last December, demonstrates investor confidence in the long term prospects of the group and that we will be around in 30 years time to pay them back. 4. On the subject of debt, this was a deliberate strategy to reposition the balance sheet and make it more efficient – we were over-capitalised back in 2004. The increase in debt reflects the buy-back and investment we have made in the business. Both of these will drive returns and value to shareholders over the long term. 5. He questioned the store refurbishment programme. We had to deal with years of underinvestment in our stores. But we absolutely believe the store modernisation programme was right to do and today we have shops we can all be proud of. We are happy with the returns and our customers tell us they like them too. Having the right store environment is absolutely necessary to be competitive on the high street – the competition will not stand still and is all now investing in their stores too. 6. In terms of negative cash flow, we are a highly cash generative business with plenty of bank facilities in place to support our liquidity and have the flexibility to manage our cash flow over the coming months. 7. On our property portfolio, in 2004 our properties were worth £3.4bn and we have expanded and invested in our estate since. Our property is not pledged to the pension fund and remains under the control of M&S. Our asset base is absolutely not “under water”. Our net assets at the year end were £2bn. 8. Regarding his comparison of Sir Stuart Rose to Gordon Brown… we do not comment on party politics. 9. In relation to our branded goods trial… this is a small trial. M&S will never be a destination shop – but the branded goods trial is about convenience. If our customers don’t want it, they won’t buy it and we’ll review the situation. 10. On the questions of whether Sir Stuart will resign if profits go below £748m… we’re only one quarter into our year, we can’t give a profit forecast.
In accordance with the Financial Services Authority’s (FSA) Disclosure and Transparency Rules (DTRs), shareholders are required to notify the Company of significant voting rights in our shares. The dates shown in the Report and Accounts are the dates at which these shareholders notified the Company in line with their obligation under DTR 5. They have not been required to make a disclosure since the dates shown.
The FSA recently introduced a disclosure regime for significant short positions in companies undertaking rights issues. These provisions were introduced into the FSA's Code of Market Conduct and came into effect on Friday 20 June 2008.
The disclosure regime states that any short position of greater than 0.25% in stocks admitted to trading on prescribed markets and where the company is undertaking a Rights Issue, must be disclosed by means of an announcement to the London Stock Exchange. There is no need to make a further disclosure if the short position increases, nor is there an obligation to disclose if the short position falls below the 0.25% threshold. The holder may choose to disclose if its short position falls below the 0.25% threshold, however it will be required to make a further disclosure should it subsequently increase its position to 0.25% or above. These regulations to which you refer only apply to companies undergoing a Rights Issue which, Marks & Spencer is not.
Will you be able to maintain the same level dividend next year?
Our philosophy is to have a progressive dividend policy. There is no current prospect of a dividend cut. The decision on dividend is always taken by the Board at the end of the trading period in light of the performance of the business and the conditions prevailing at that time. May I remind you of our starting point which is a very strong balance sheet and cash flows.
Why don't you mention debt of the company in the index of the annual report and what is the debt?
The measure of debt used is net debt. At the year end net debt was £3.1bn. This is disclosed on page 90 of the annual report and is referenced in the index.
Will the remainder of the share buyback be completed?
We are operating, and aim to operate, an efficient balance sheet, with the correct balance of debt and equity. The decision to buyback up to 10% of the share capital was to improve our balance sheet efficiency. We've bought back 8% of our shares, and returned over £900 million to shareholders through dividend and buyback. As mentioned earlier, we need to be sensitive to market conditions, our trading performance and our desire to continue to invest in the business - the buyback needs to be considered in the context of this. We are running the business for the long-term.
To what extent is M&S able to control/direct/influence the quality of customer service at M&S Money? Since its sale to HSBC, there is no comparison in the service, to the extent that I avoid any contact with them unless essential.
I am very sorry you have been disappointed with the service. As you say, we sold the business to HSBC in 2004, although we have a management contract and a profit-share arrangement with them. We have some vigorous monitors on customer service. We track it all the time. I get access to that information with my team. There have been improvements in some areas so I am doubly disappointed you have found it bad. Let us meet after the meeting and look at the specifics. I would love to take it up with them.
Has the Company considered loading the &More monetary and bonus points onto the card itself, rather than issuing paper vouchers which can become out of date or lost?
Thank you very much for this excellent idea which we will definitely be considering further.
I have inherited shares (I am a fifth generation share holder!). Over the last few years I have been unable to find the sizing and styles for a younger person. Particularly, bras – the fabric has changed on my favourite bra. Trouser lengths and large sizes of footwear are unavailable. I have been unable to buy any clothing, which is disappointing as a shareholder. Classics styles are too old fashioned, even for older customers! Food is generally excellent but pricey.
We do have 12% of the womenswear market in the UK and we do have 21 million customers who come into our stores. We have worked hard to interpret the season’s key trends for all age groups. We have segmented our sub-brands to assist customers in finding ranges. Our Autograph and Limited Collection together with Per Una offer great choice for our younger customer.
We have taken steps to improve availability; this includes investment in technology to get a more accurate picture of where our product is in stores.
Both Stuart and Kate offered to take Ms Saul shopping in one of our stores to show that we do have the choice that the customer is looking for.
In terms of food pricing M&S has always stood for value, which is a function of price times quality. The food we sell is of the finest quality in the high street. We do charge a premium. We are acutely aware that our customers’ pockets are a bit stretched, we are looking to see what we can do, however we will not reduce our quality.
Where can I find a cotton dress, specifically with sleeves, a reasonably high neck line and a longer hem-line, suitable for “golden oldies”?
We do have a very extensive range of dresses this summer. We have grown our market share considerably in this area. We do have cotton, linen and silks but we still have not delivered on longer sleeves. We will ensure that we do extend our range and give you more cotton and more sleeves.
Are you listening - I don't think so. Last year I commented about the shoes not fitting and was promised a phone call from your shoe buyer - I am still waiting. I have been involved in the shoe trade so I think I know something about it.
Firstly we must apologise for not contacting you. Marks & Spencer is one of the largest retailers of footwear in the country. Every style we sell is fit approved by an M&S Technologist on an experienced fit model. We have previously undertaken research in conjunction with SATRA, a leading organisation in footwear research and testing, to develop the specifications of the typical M&S customer's foot. The dimensions of all our fit models fall within this specification and are constantly measured to ensure no deviation from this specification. This process ensures the fit of our shoes is correct and consistent.
To enhance the fit offer the vast majority of our range is made in both full and half sizes and we offer a wide range of wider fitting shoes for customers with a fuller foot. We have dedicated fit Technologists working with our suppliers and buyers. We continue to work very hard to offer consistent sizes in a range of styles.
We always listen to customer feedback on our footwear range and would of course welcome your views. A member of our womenswear team will be very happy to hear your views.
Why is the sale of ‘near waste’ food to customers is not consistently applied?
We introduced selling ‘near waste’ to customers in March this year, whilst there are obvious cost benefits, there are also significant reductions in sending waste to landfill as part of our Plan A commitment. The store policy for dealing with ‘near waste’ was piloted and trialled prior to full rollout and we believe is fit for purpose. There is an element of managers' discretion in the volume sold in relation to store turnover. We know there is variation in how much we recover and we have plans in place through the new retail structure to drive this in a more consistent way.
Why does M&S not sell tinned prunes & evaporated milk? It is a staple for the elderly.
We have a wide selection of food products which we believe offer a good choice to all age groups. We have also extended our range of groceries significantly with the introduction of ingredients; this includes dried fruits, nuts and seeds. We constantly monitor our product ranges according to customer shopping patterns and will continue to research options for all ages this year.
Can you please start to sell basic food items at the correct price and don’t use special offers e.g. 3 for 2 offers?
We are constantly looking at our food prices as well as the types of deals that we offer. We really do recognise that basic single food items need to be competitively priced. We have recently reviewed this and as a result have focused on 175 key value lines. This is the start of a programme to improve our values on basic lines, however we will continue to run specific offers alongside to remain competitive.
What is happening to close the loophole on credit vouchers on sale on eBay?
We issue thousands of credit receipts every year. Only a tiny percentage of them are sold on the internet and store managers will refuse to accept credit receipts if they have any suspicions about their origins.
We do not stand for any form of fraud or theft and take steps to work with the police to prosecute wherever possible.
Like other retailers, we are working with the British Retail Consortium and The Fashion Forum to raise issues around the sale of illegally obtained credit vouchers.
Why aren’t there any M&S stores in Israel, although there are some in Emirates?
Our franchise partners are always looking at potential opportunities in countries around the world (we already have 280+ stores in 39 territories) but this does not signify that we will open stores in all these territories.
We have no current plans to enter Israel.
In the light of the expected Green Paper on equality, what plans do you have? Also have you been to the Croydon store?
It is important to us that we have a workforce which reflects the communities in which we operate and we are proud of the diversity of our workforce. On the forthcoming Equality Act, we welcome changes which streamline and simplify legislation in this area, and we look forward to seeing the final detail of the Act in the next Parliamentary session.
I have visited the Croydon store - most recently in December 2007.
M&S is a member of Ethical Trading Initiative and presumably supports living wage for workers. I am a representative of workers in India producing clothing for M&S. Food costs all over the world have gone up including in India. 70% of wages go into basic food items. I have seen the utter poverty of workers manufacturing for M&S in India. They are not paid enough for a proper meal. M&S profits are going up and M&S is prospering. Why can't it pay workers in India enough to have a basic proper meal?
We have been members of the Ethical Trading Initiative (ETI) since 1999. Being a member of the ETI together with our own Global Sourcing Principles means that we require all our suppliers no matter where in the world they operate, to pay at least the legal minimum wage.
Around 85% of workers in factories which supply M&S in Bangalore and Delhi are paid above legal minimum wages, more than a nurse and the same as a Government employed junior doctor in India. They also receive other benefits including; free medical cover, crèche facilities and subsidised meals.
Can shareholders influence the allocation of charitable funds? I feel that some of the larger/national charities benefit over smaller charities. Small charities should also be considered for example the carrier bag profit.
We are committed to investing at least 1% of pre-tax profits into community projects every year. This builds on a heritage which goes back over 100 years.
We work with a number of main partners who support the aims of our business, for example, Breakthrough Breast Cancer, Shelter and Groundwork, as part of our carrier bag charging and donation scheme.
For our carrier bag reduction programme we chose an environmental project which could make a difference to communities across the country. Groundwork will use the funding for parks, play areas and green spaces. So far we have raised £140,000.
Our stores also have budgets to support smaller local charities.
Waste - both food and packaging. What is the M&S policy on this?
We work hard to reduce waste of all types. Under Plan A we have set targets to send no waste to landfill and reduce packaging by 25%. We reduce in-store waste by discounting food at the end of its display life, selling to employees and donating to charity. We are also working with the Government’s ‘Love Food, Hate Waste’ campaign to help customers reduce food waste as well.
Most clothing and home goods are not made in the UK. Many developing countries are now increasing demands on energy resources. Might this not be payback time for the West getting its goods so cheaply? Perhaps this might be the time to review the benefit of British manufactured goods? Your opinion please.
We buy over 80% of our food products (and over 50% of or food raw materials) from the UK and the Republic of Ireland. Our clothing supply base moved overseas in the 1990s because of lower costs of production – in order to keep M&S products competitively priced. This is still the case with recent sharp increases in energy costs being the same across the world.
Can I suggest a change to the carrier bags - follow the example of the U.S, by putting a flat bottom in it to make it more useful!
We review the sizes and designs of our carrier bags regularly to ensure that they are suitable for the wide range of different products we sell.
Flat bottomed bags are more complex and expensive to manufacture. Our cake bags, available from our food sections have a flat bottom to accommodate large boxed food items.
In the last 12 months we re-designed most of our main clothing, home and food carrier bags and are now made from 100% recycled material. This design was considered the most practical bag for most types of product. We will continue to monitor the bags.
Why was the Board awarded such a high percentage increase of salary and bonus compared to both employees on the shop floor and inflation?
The success of the Company is dependent on the retention, attraction and motivation of high calibre individuals. Pay increases and bonus levels are set to ensure that we are competitive against FTSE 100 companies and other similar sized retailers.
The Remuneration Committee reviews Executive pay on behalf of the Board and takes into account market conditions, level of increase awarded to employees throughout the business and the responsibilities and skills of individual directors. It is comprised wholly of independent Non-Executive Directors and keeps informed of all relevant developments and best practice in the field of remuneration seeking advice where appropriate from external advisors such as New Bridge Street Consultants LLP.
Following the excellent company performance in 2006/07, resulting in significant progress in sales, profit, EPS and share price, Executive Directors received the maximum bonus being 250% of salary, 60% of which was deferred into shares to be held for three years, to align their interests with shareholders.
Our reward package for store staff remains highly competitive against the market. An additional allocation of discretionary bonus totalling £26m was awarded for customer assistants in 2006/07.
Please explain the rationale for changing the Earnings Per Share (EPS) target for the Performance Share Plan, especially for exceptional awards and to assure shareholders that these targets are appropriate for the level of awards.
The three year EPS targets were reviewed because it is unlikely that a company can continue to generate the level of growth at the same rate as M&S has done in recent years. It is likely that we will return to EPS growth that is a little more normal against the market. We looked at what other companies had as targets for EPS and have distinguished the targets for awards at the higher end of the scale. The higher end is now at inflation plus 4 to 12%. To generate the full award earnings growth of RPI plus 12% over the 3 year period will be a very stretching target. We did consult with our major shareholders on the EPS targets and moderated them as a result.
It is the Company’s intention to be fair both to shareholders and executives by setting EPS targets that are motivational and achievable but still high against our competitors. Our reward strategy is very closely linked to shareholders and delivering returns for them through paying for performance. It is worth noting that the annual bonus contains a compulsory deferral into shares of 60% of the bonus paid to align executive interests with shareholders.
With the majority of customers being women, why are there only two women on the board?
The Board members are selected for their wide range of skills and experience. The current Board has a 20% representation of women. Martha Lane Fox joined the Board on 1 June 2007 and Louise Patten joined on 1 February 2006.
M&S also has significant female talent within the executive team, with a 21% representation by women, such as Kate Bostock, Director of Womenswear, Lingerie and Girlswear, Nayna McIntosh, Director of UK Store Presentation,
Jude Bridge, Director of Marketing Communications and Flic Howard-Allen, Director of Communications & Corporate Social Responsibility.
The Nomination Committee keeps under review the required blend of skills, knowledge and experience on the Board. Appointments are made on merit and against objective criteria to ensure that the Board maintains an appropriate balance of skills and experience.
Why was Paul Myners provided with a car and driver for 2 years after he left Marks & Spencer? Isn’t it the responsibility of his new company, Land Securities?
The previous chairman, Paul Myners did an outstanding job during his time with the Company and declined to take the full fee for his services whilst with M&S. The Company felt it right when he left the Company in July 2006 to bridge the period until he had put alternative arrangements in place.
From 1 July 2007 Land Securities has now taken on this cost.
Are the Company’s finances, as distinct from trading operations, vulnerable to interest rate changes?
We are very well positioned as a business in terms of interest rate changes from the point of view of the company’s finances. Approximately 80% of our debt is fixed interest and therefore protected against any upward movement in interest rates. That leaves 20% which is open to fluctuations in the cost of borrowing – a 1% increase in the interest rate increases our interest charge by about £3 million. In the context of a business that makes £965 million it is relatively immaterial.
Do the 170 million shares which you are asking permission to buy back in Resolution 11 represent 10% of the Company’s share capital? Why 10%, that would be an enormous amount and the only way you could do it is by taking on a level of debt which would possibly cripple the Company.
The 170 million shares do represent 10% of the company’s issued share capital. Resolution 11 is a standard resolution which most public companies seek authority for at each AGM. The provisions are contained within the Companies Act 1985 and allow the Company to buy back a maximum of 10%.
However we have not said at this stage that we would use this authority in full, it is simply prudent to seek general authority from shareholders to be able to act if circumstances arose in which the directors considered such purchases to be desirable.
During 2006/07 no shares were bought back under this authority.
Your Dividend Reinvestment Plan (‘DRiP’) minimum dealing charge at £1.25 exceeds the normal 0.5% charge. The significance of this is that you need quite a lot of shares to minimise the effect of this charge. When will the Board standardise the charge in line with other sectors?
Following comments at last year’s AGM we conducted a thorough review of our policy. The conclusions the Board reached were that we are in line with other companies with large registers which do charge and that it would not be appropriate to reintroduce the subsidy, which was substantial and would effectively be borne by all shareholders.
We have 230,000 shareholders, and a further 40,000 holding shares via our corporate nominee. Some 70,000 participate in our DRiP with holdings varying from less than 10 shares to more than 50,000 shares. When the fee was introduced in 2005 negative feedback from participants was minimal.
There are many companies that only charge 0.5% of the dividend as a re-investment fee. There are also companies that advise that the scheme may not be appropriate for holders of a certain number of shares. We believe it is for the shareholder to decide if the DRiP is suitable for them. This is still the cheapest method of obtaining shares in Marks & Spencer.
Why are shareholder vouchers issued with limitations, I mainly buy food at Marks & Spencer and I therefore lose out on money off vouchers on clothing, why can’t we have a year round discount card?
M&S has to consider the interests of all shareholders and whilst we appreciate a small number of private shareholders would like to see a discount card it would not be in the interest of all of our shareholders, many of whom are pension funds, overseas shareholders etc, who would gain no benefit from such an offer. In addition a discount card is very hard to control and would prove extremely costly.
M&S has therefore issued annual spend and save shareholder vouchers our next vouchers will be distributed in January 2008 and be valid throughout February and March. You can save £35 by spending £315 across our ranges. We are also extending the offer to technology products and shopping online via our website.
Have you changed supplier of ladies shoes? They do not appear to fit anymore in the size I have always worn.
M&S uses more than one supplier and is one of the largest retailers of footwear in the Country. We offer a wide range of styles and sizes (including half sizes) and have recently won an award from Drapers Record for footwear.
Why isn’t your main womenswear range as stylish as per una? I want the same flair in womenswear for us oldies as you have in per una and Autograph.
M&S continues to work hard to interpret each season’s key trends and incorporate them in clothing offers for all our customers across all age groups. M&S has recently introduced the new Autograph Weekend range which aims to bridge the gap between casual dressing and occasionwear and is aimed at the 30+ customer and a new golf-inspired range for both men and women.
The classics range remains one of the biggest brands for M&S. Our Classic Collection team recently canvassed the views of over 1,200 members of the Women’s Institute who were pleased with the improved quality of fit and material used within the range.
M&S aims to make sure that every woman finds something that she wants to buy every time she visits our stores.
Why is Marks & Spencer lamb from New Zealand rather than local Farmers?
M&S is committed to both food sourcing within the UK and Europe and
increasing regional food sourcing. On 8 June we announced a lamb price pledge for a group of Welsh farmers supplying lamb to Marks & Spencer stores across Wales. Also stores in Republic of Ireland were selling only Irish Spring lamb from 22 May this year, being 5 weeks earlier than last year.
This year the weather conditions have made it difficult to predict the start of the seasons therefore M&S has extended the season of New Zealand lamb to continue to offer choice to our customers. Local food sourcing remains a top priority.
Why is Gloucester store in such a poor state compared to other
M&S is working hard to improve store environment and currently remodelling 25% of stores. By Christmas 2007, some 70% of stores will have been modernised. Unfortunately, we have underinvested in our store portfolio for many years and it will take us time to refurbish the whole chain.
When will M&S be opening stores again in prime sites in Europe such as Nice and Paris?
M&S is looking at opportunities in Western Europe but has no plans to open there at the moment.
International has performed well and we are continuing to develop the franchise business, opening larger stores and extending the reach of the Marks & Spencer brand. M&S entered four new markets this year being Slovakia, Latvia, Bulgaria and Switzerland.
We also opened our first joint venture store in Taiwain in January 2007 and will open a further two stores in Taipei by the end of the year.
M&S is currently reviewing other development opportunities overseas and is exploring new markets for potential including China.
Please develop smaller and/or single portions with the “grown-up” generation in mind.
M&S offers a range of smaller food options, for example we sell our popular pies in individual portions. We have worked hard to increase our range of single portion total meal solutions including Count on Us range, which is now also free of colours and preservatives together with our range of nutritionally balanced ready meals.
Is it possible for the pension staff to tell retiring pensioners where the nearest clubs are?
M&S already publishes a regular newsletter “Pensions Update” for retired staff who are members of the M&S pension scheme. It’s an excellent suggestion and M&S will seek to include details of local clubs in forthcoming editions.
Given that M&S is among the most popular and successful retailers of fresh food and flowers, should it now consider setting a limit to the number of air miles used in bringing these products to the market?*
M&S has recently launched an initiative called “Plan A” which we have implemented to reduce our environmental impact. We are as concerned as our customers about the impact our business has on our relationships with consumers, suppliers and the environment.
As one of Britain’s largest retailers, our carbon footprint is a large one, the combined result of our own UK and Irish operations, our suppliers’ activities and the CO2 that’s emitted whenever you shop with M&S and use our products.
One of our top five priorities is to reduce our carbon footprint, because if a big business like ours takes action and involves suppliers and customers, we can all do our bit to tackle climate change.
Climate change is a complex area and we do not claim to have all the answers, but we do know that we need to act fast. That is why our goal is to make our operations carbon neutral in the next five years and to help our customers and our suppliers cut CO2 emissions too. The issue of food miles is one we know we need to work particularly hard on.
That is why we aim to:
Source as much food from Britain and Ireland as we can – for example, continuing to sell 100% British/Irish fresh poultry, eggs, milk, beef, pork and salmon;
Double regional food sourcing within 12 months and grow our local supply networks;
Work with growers over the next three years to extend British growing seasons through new varieties and growing techniques;
Continue to research our food’s carbon footprint with the Carbon Trust and setting targets to reduce it over the next year;
Set targets to reduce the amount of food we import by air;
Offset our remaining CO2 emissions from air-freighted food within 12 months;
Label all air-freighted foods as “flown” within six months.
More information on Plan A, including further details of the five areas mentioned above, can be found on our website www.marksandspencer.com/plana
*Question registered and answered before the AGM
Why, Chairman, are you leaving? Chairing any major public company, you say in your statement, is an honour, but Chairing M&S is a special privilege. You reportedly have expressed sadness at leaving. The Chief Executive, at the end of his Annual Report statement, has paid tribute to his collaboration with you, and the support you have given; and he has done so orally here today.
It is true that I am sad to be standing down, but I have had a thrilling two years since taking the Chair at the time of the Phillip Green bid, and having the huge good fortune of appointing Stuart Rose, and then assembling this extraordinarily high-quality Board - not only in the executive directors but in our three new recruits as non-executive directors.
Through a proper process, it was determined that it would be appropriate to change the Chairman. I am glad that I was given an extra year to show that Stuart and I could make the progress which we promised to you that we could deliver when we spoke to you at our Annual General Meeting at the Royal Festival Hall in 2004. Terrence Burns is an excellent candidate to succeed me as Chairman; he brings to the Board remarkable skills in terms of leading a team in a supportive manner - a team with a broad range of skills which is entirely fit and appropriate for the purpose going forward.
Many shareholders would like to know from Mr Lomax why he precipitated the appointment of a new Chairman.
(Chief Executive) We have been through a period of great transition in the business, and the Board did have a very thorough and full discussion about the potential change of Chairmanship during the middle part of last year. We did decide to postpone the change until today. I am absolutely delighted that Paul and I were able to fulfil our obligation to you and to other shareholders, to deliver the value that we said was here in the business - but, equally I am delighted to welcome Terry Burns to the Chairmanship because I know that his experience in business over many, many years will be immensely valuable to us as wise counsel, and we look forward to working with him from tomorrow morning.
Chairman and members of the Board, can I just say I know I speak for all my fellow shareholders to say, once more, what a fantastic support you have been, Paul, to Stuart and his team, holding what was a badly floundering ship steady whilst they got on with their repair jobs. Paul, I know I speak for us all in offering you a very, very big thank you and well done, and to wish you all the luck with your new ventures. Thank you very much.
Thank you very much indeed for those kind words.
Would your successor, Lord Burns, and David Michels, confirm that they will always act in the best interests of the shareholders, regardless of their own personal interests, from now on, with regard to Marks & Spencer?
You can rest assured that they absolutely will.
Why is Lord Burns's pay as non Executive Chairman twice that of yours, Paul Myners? Does that mean we are going to get double the performance we've already had?
(Chief Executive) Lord Burns is being paid the going rate for the Chairmanship of a FTSE100 company. I think you will be well pleased with the value for money that you get from him over the next few years. With regard to Paul, we owe him thanks because Paul specifically asked that his salary was not reviewed at the time of the bid, beyond the £200,000 per annum that he was being paid; and he maintained that stance through the latter part of his Chairmanship, and we thank him for that.
I would like to understand what Lord Burns with his banking and public office background can bring to Marks & Spencer to continue the progress that you have currently made. *
Lord Burns is an excellent candidate to succeed me as Chairman, he brings a wide range of experience of both the public and private sector which will add great value to the Board. The Chairman's role is to bring independence to the Board and to balance the operational skills of the other board members. I am confident that his balance of skills and experience will help to guide the company through its next phase.
*Those questions asterisked were registered but not asked on the day because of time constraints.
At last year's AGM, the Board said they were working on helping their shareholders who hold their shares in nominee accounts. And I have to say thank you very much for my vouchers, which I look forward to receiving through my letterbox any moment now. However, getting the relevant documentation, such as the notice of meeting, seems unavailable to me, from either your shareholders' advice line, your registrars or my stockbroker. I have spent hours on the phone being passed from one to the other without success. Is there any chance I will receive this paperwork next year in advance of, I believe, a new act of parliament. At present, I am made to feel as though this request is: a) unusual, b) not my right, c) a darn nuisance.
Your stockbroker's nominee name, is the name which appears on the share register and that is the name to whom we are legally obliged to send documentation.
However, we want to communicate openly with as many of our private shareholders as we can, including those held in nominee accounts. We do make efforts to get documentation to you, the beneficial owner, indeed a facility is available for nominees to receive multiple copies of the Annual report and Notice of Meeting, however some are reluctant to forward these documents onto the underlying beneficial owner of the shares because it is a cost to them. Those who hold shares within our corporate nominee receive all documentation and this nominee is open to all. Alternatively you could transfer your shares or a share into your own name in order that you will appear on the register. For your information, all the documentation is available on our website including the Annual Report and Notice of Meeting.
Why has a minimum commission and charges fee been applied to the Dividend Reinvestment Plan (DRIP), which means that small shareholders are perhaps paying four or five times the normal fee? Yours is only one of some 20 companies in which I reinvest my dividends, and yours is the only one that has done this; and in fact some of them absorb all the charges.
We must ensure that we don't subsidise one type of shareholder at the expense of another. We are covering our costs by charging a commission of 0.5%. A charge of £1.25 is still significantly less than buying shares through a broker. This minimum charge is to make the DRIP self-financing and recoup the cost, in the interest of shareholders as a whole.
What is the justification for new Article 109 in the Notice of Meeting, allowing only two directors to form a quorum? This could be dangerous.
In line with legislative changes the minimum number of directors required by our Articles has been lowered from 4 to 2. However in reality the Board will develop its own internal rules and practices, and you can rest assured that the Board would not meet with only 2 directors present without every director being supportive of that approach.
Can I, on behalf of Birmingham City Council, welcome you once more to Birmingham. Can I also say that don't leave it too long before you come back to Birmingham - because you will be most welcome.
Can I say, Councillor, this is a wonderful facility you have here. You and your staff could not have been more welcoming. I don't think there is anywhere else in the country with a large hall like this, where a leading member of the Council would come along to check that a major company holding its AGM, like Marks and Spencer, was comfortable, and that we would be well supported by the community. You and your staff are wonderful ambassadors to this wonderful city. Thank you very much.
Could I make a suggestion that, as you've got such very splendid attendance here, whether you should not follow other companies procedures and have simultaneous meetings in Birmingham and London, linked by video? That would mean that the many loyal shareholders and customers living in the Midlands could take part in the shareholders' meeting if they are held in London.
We are always looking at ways we can improve and enhance our Annual General Meeting. We will look at the suggestion of holding our AGM in London with a video link to Birmingham as part of our preparations for future AGMs, including associated cost and logistical implications of such a move. For those planning to come and join the Board at the AGM on 10 July next year, we will hold the meeting at 2pm - three hours later than our traditional London start time - making travelling both easier and more cost effective, in response to shareholder feedback at this year's and last year's AGM. We will also be broadcasting the AGM live on www.marksandspencer.com/thecompany
Mr Chairman, I am most distressed at the takeover of British industry by foreign companies. Would it not be appropriate for unsuccessful bidders to have to pay, say, 65% or 75% of the defence costs? It seems intolerable that this great company should have been lumbered with £38 million of costs to defend ourselves against an unwanted bid.
We did indeed incur £38m of costs in 2005 defending ourselves against an unsolicited bid approach. The costs referred to were incurred in 2005 primarily for the professional advice we received, in very short period of time, as we developed and implemented a new business strategy in response to the possible offer from Revival Acquisitions Limited. The City Code on Takeovers and Mergers is currently going through a review and this may be an area that is looked at, I am sure you will register your view. Indeed I, on Radio 4 this morning, suggested that the current 90 day limit available for a company to assemble a bid simply isn't, in all circumstances, sufficient time to review the options.
It has been good that the AGM has come to Birmingham for the last couple of years. Are there any plans to hold AGM's in other cities in the North as opposed to the South?
We review the AGM location each year and look at a number of options, although there are only a limited number of locations which can hold such a large meeting. In 2007 we will be returning to London. However, we take all shareholder views into consideration when planning future AGMs.
*Those questions asterisked were registered but not asked on the day because of time constraints.
I would like to understand what consultation went on before the funding was taken away from the Retired Staff Association, and why the members weren't given the chance to be involved in consultation? Do the Board realise that the Retired Staff Association was the only lifeline for some long serving members, and that the increase in retired staff discount doesn't compensate for what was taken away?
We carried out a full review over the last 12 months of the arrangements made for retired staff, to ensure that we were making the very best use of resources and that they were fully and properly appreciated by previous employees. As a consequence of this, we are reducing the amount of subsidy paid to Retired Staff Associations in 2006/07 and will cease to make payments from April 2007. We are, however, supporting RSA branches through this period of change as they choose whether to continue on a self funding basis. Already 66 branches have decided to become self-funding, 43 have decided to close and 72 are still considering what they want to do.
Turning to the point about consultation, last year we received many letters from retired staff about their benefits. We know from these letters that retired staff consider their most important benefits to be their pension and their retired staff discount. Although the Retired Staff Association is valued by some people, around 75% of retired staff either do not belong to or do not regularly attend RSA meetings. So rather than formal consultation, we took into account what we were hearing from employees about the things which really matter to them, and we had to make a judgement on what was the best for the largest number of people. Please have no doubt that we continue to value our retired employees very much. This is one of the reasons why Marks & Spencer pays amongst the most generous pensions of any company in the UK. It is also why retired employees continue, for life, to receive 20% discount on clothing and food purchases in stores, and it is why believe that increasing the dividend was so important, because so many of our former employees are shareholders. We also continue to have a Welfare Department and Helpline which is on hand to support retired employees. Looked at in totality we continue to be very benevolent and very supportive towards our retired staff and since we announced the changes, the letters we have received from former employees have supported, in aggregate, this proposal, by a proportion of about two to one.
What action is the board of directors going to take about the pension deficit? I consider it can do one of 3 things: 1. make the scheme paid up, 2. career average related earnings, 3. increase staff contribution to 50% of regular contribution. *
The Company acknowledges and takes seriously the size of the pension scheme deficit and has a good history of making payments to address the deficit - £515m since 2004.
We also acknowledge that our UK scheme is valued by our employees. An actuarial valuation of the scheme as at 31 March 2006 is currently underway.
Initial results will be available for discussion between the company and the scheme trustees towards the year end. The company will be looking at a range of options as the valuation proceeds, it is too early to comment on what these might be.
*Those questions asterisked were registered but not asked on the day because of time constraints.
Could the M&S labelling on food product and Christmas cards be improved? For example, the M&S on the back of the cards is larger than the greeting inside, which is not a very good idea. The back of the envelopes are also embossed where, if one is sending the card abroad, might write one's own address. Furthermore, on food packaging, one is told to keep the product upright - but the cooking instructions are on the bottom.
(Chief Executive) I share your frustration when it comes to food products. Food labelling is a real problem for us because not only do customers want to know a lot about how they cook the foods, but we have, by legislation, also to put on the back what the ingredients are, etc, etc. So, if you are cooking with your oven, if you are cooking with your microwave, or whatever way you are cooking, we need to get all that on, plus the legislation, plus the information coming on now about health, plus the new Government regulations that will soon be in force about what else you need to know about. One easy way on some of the prepared foods is to take the food out of the sleeve. We will continue to look at it. With regard to the Christmas cards, I will review your comments with the buying team.
Where did the company close the seven stores referred to in the Annual Report? Also, where has the company opened new stores? Is the company investigating the possibility of repurchasing the stores which they sold on a leaseback? Will the company make a statement to the effect that they will not make any more sale and leasebacks? A debenture secured on the leasehold must be preferable.
(Chief Executive) If I could answer that question in reverse order, I don't think it is feasible for us to commit, at any time, to what we might or might not do in terms of signing any undertakings not to either lease things, or undertake any other form of financing. What we intend to do, and it is publicly stated, is to actually retain flexibility in our store portfolio. We don't intend, in the short term, to undo what has been done, but I would never say 'never'.
In terms of the stores that we closed, we closed Margate, Wembley, North Finchley, Stourbridge, Leadenmill, Purley Way and Moorgate. We closed those stores because they were stores where we were making a marginal contribution. We closed them because the demographics in those particular areas were mitigating against the future of those stores. They were tough decisions because Marks & Spencer in the past has not closed stores with any regularity.
Conversely we opened quite a number of new stores. We have talked about the 50 Simply Food stores that we have opened; we have also opened a whole online store at Arena Park Coventry; we have opened at Cardinal Place in Victoria; at Kingston Park Milton Keynes; at Tamworth; at the Fort in Birmingham; at Valley Park Croydon and Galway. and there are a number of other stores in the pipeline which we will announce shortly.
I regret to say I am not wearing one piece of Marks & Spencer clothing. The vast improvement in ladies' clothes over the last few years is very noticeable. Are there any plans for such a programme for menswear? I find the menswear very drab and uninteresting.
(Chief Executive) One of the first things I said when I came to the business was 'I want more colour', and colour applies to men just as it does to women. So I agree with you. I think it is unfair, actually, to label us with that today. When I came to the business two years ago, I was reluctantly in some M&S clothes. I am very proud to tell you that I am practically never out of them and I think that is because we have a fabulous range of menswear.
I would like to invite you and one of my senior members of staff to go and look around the menswear section and see what we can find for you. Now, if you are talking about men's suits, I do concede that we may not have quite as much colour.
When can I monitor my M&S cards online? Also, are you able to monitor what the shareholders and cardholders would like to see in their local stores?
(Chief Executive) We are actively looking at the functionality required to enable Cardholders to monitor their accounts on line. Although we are not yet in a position to offer this at the moment, we expect to make an announcement later in the year.
The information we receive regarding Cardholder transactions provides us with an understanding of what customers are buying and what they are not buying and this is something that we review on a regular basis.
There is nothing more infuriating than arriving at a store and not being able to find the size of the length of skirt that you are looking for. You have an ordering system but, quite often, the warehouse is out of stock. It doesn't seem to be possible for your staff to be able to tell through the computerised system, which store might have the garment, and if necessary I would go and fetch it myself.
(Executive Director, Marketing, E-Commerce, Store Design and Development) Yes you are right, we don't have the capability to do that now. We are working with Amazon to have a completely joined-up ability to be able to track stock right across our entire network. So whether it is in the store you are in, in the warehouse, or in another store, you will be able to access it and have it either delivered to the store you are in, or to your home for a small extra charge. That, sadly, won't be available until the New Year, but by January or February of next year, that will be a facility that will be available to you.
In the days of calls for energy efficiency. Has the company considered a better system for the existing automatic doors in the stores? They seem to be a terrible waste of energy; they open up and let out great volumes of hot air on cold days, and cold air on warm days.
(Chief Executive) Absolutely fair point. It is actually a subject that is much closer to our hearts than you might think. Energy costs are rising and, in addition to that, we are committed, ourselves, to making sure that we do our bit for climate change. Over the last three years, we have opened 44% more stores and we have reduced our energy costs by some 5%. We do have big demand from our customers to have automatic doors. We are experimenting with a number of things, including air blankets etc. We are also experimenting with recycling of hot air coming from other parts of the store and, conversely, cold air when the temperature is in the reverse. There is no simple solution, but I can assure you that it is at the top of our agenda.
I notice that there is £901 million of medium term loans repayable within a year. Are you taking steps to lengthen the debt so that we can lock in to lower interest rates?
(Finance Director) Last year the business was cash generative and we reduced our net debt by over £500m. In March we re-financed the five-year committed bank facility in the light of improved market conditions. A combination of the bank facility together with cash generated from operations will allow us to finance the maturity of the medium term notes.
As we all worship the god of profit (naturally) we are a wealthy country -what will M&S do rather than pay lip service to Fair Trade? Coffee, tea, chocolate, t-shirts etc is an excellent start - but where to for 2007 - 2008? Cheap clothes good but at whose expense? *
Our customers, shareholders and employees have been very clear with us. They want great products, great quality and great value, but not at any cost. Operating responsibly is at the very heart of how we do business, it's the right thing to do but we also believe it makes good business sense. It helps us to attract shoppers to our stores, recruit and retain the best people, form better partnerships with our suppliers, make the communities in which we trade vibrant places and ultimately create great value for our shareholders.
In the last 12 months we have received several awards for our work in this area. Greenpeace and the Marine Conservation Society named us as the leading UK food retailer for responsible fish sourcing. The RSPCA named us as the leading fashion retailer for animal welfare and commended us for our work in Foods. Retail Week named us as the CSR Retailer of the Year and we also received the CSR prize in the Great Places to Work Awards.
We also believe that Fairtrade is a great model for linking UK consumers with farmers in some of the very poorest countries in the world. We only offer Fairtrade coffee and tea in our 202 Café Revives. All the coffee in our stores is Fairtrade and we are converting all the tea this summer. We also sell Fairtrade chocolate and fruit in our stores.
We were also the first major high street retailer to launch clothing ranges made from Fairtrade cotton. Fairtrade cotton has only been available since November 2005, by March 2006 we had socks and T-shirts made from Fairtrade cotton in our stores. We are currently extending our use of Fairtrade cotton to cover jeans, babywear and men's formal shirts. We are also working directly with farmers in India to help more of them to convert to Fairtrade standards.
In addition to this Fairtrade commitment we continue to apply high social, environmental and animal welfare standards to all the products we sell, wherever in the world they are produced. For example, last year over 1,000 labour standards audits were undertaken in factories producing products for us.
With more cooking programmes on TV on how to cook. With more and more women working and therefore having less time M&S plus other supermarkets are selling more pre packaged food (ready to cook). How does the excellent food group know what option to take?*
Our customers shop with us for a wide variety of products, ranging from prepared food to high quality meat and produce that they use for preparing their own food. We are constantly seeking innovative products to meet our customers needs, for example we have launched a new range of semi prepared food, Marks & Spencer Cook!, that is totally free of additives and allows our customers to get involved in cooking.
Why is café Revive more like more old school canteen rather than a comfortable restaurant in which I can relax? The chairs are very uncomfortable and its very noisy. *
We agree that our Café Revives have not been the most inspiring environments. We are addressing this as part of our modernisation programme to improve seating, lighting and menus. We are also looking to enhance our 'eat-in' offer, and by October 2006 we will have 15 Fresh Food Fast cafes and 4 Eat Over Deli's. In addition we will launch our first full restaurant in Newcastle in October this year.
*Those questions asterisked were registered but not asked on the day because of time constraints.
Can you please explain why Stuart Rose, after being given a salary of £850,000, also received a signing on fee of £1.2m? Also could you explain Charles Wilson's signing on fee of £900,000, and how Mark McKeon received £699,000 for 9 months' work? For somebody who earns an average of £15,000 - £20,000 per year, that is 46 years' work.
Last May when Philip Green announced that he was contemplating making an offer for the Company, the Board had to respond to the declining business performance. Over a period of three days we recruited Stuart Rose, Charles Wilson and Steve Sharp. Marks & Spencer shares were trading at 260p - 270p before the offer. When arrangements were being made by Philip Green for an offer, the share price lifted to 360p, where it is today. That is testament to the confidence that the financial markets have in the future of the Company under the management of Stuart, Charles and Steve.
I share with you some discomfort about the 'rewards for failure' but we had to replace some senior management and we had contractual obligations to these individuals. They were old contracts which did not have mitigation clauses in them. When I became Chairman the Board were fully supportive of the introduction of a mitigation obligation to ensure that this does not happen in the future.
The sales are down for the seventh consecutive quarter but the shares are up by 10p, why?
If you look at the top line sales number it is pretty dismal reading, but if you look a little further into the statement we released today, there is some good news. The first is that Food has begun to move forward - it was 3% down in the last quarter, it’s now nearly 1% up. That is a 4% turnaround.
If you look beneath the total decline of General Merchandise sales to the full price sales rate (rate of sales which have not been discounted) they are 2.4% down, this is the best performance the Company has had for three quarters.
Additionally our stock covers are very tight, the amount of stock going into the sale this year is 40% less than last year, which will deliver £100m of markdown savings this year.
What analysts will have been looking for is some comfort that the forecasts in the market will be met. To date I don’t believe there has been any change in analysts’ forecasts for the Company, so they will have taken this statement as good news.
Clearly, we would like to see the top line moving. The next two quarters are going to be very important to us. Let’s see what happens in the next six months
Closing shareholders funds, at 2 April 2005, were £521.4 million. For 2004 they were £2,454 million. How do you plan to increase shareholders’ funds in the future?
Shareholders’ funds decreased last year largely due to the return of £2.3 billion to shareholders. However, the accounts do not reflect the full value of the Group’s property portfolio, which was valued at £3.6 billion in July 2004. Had this valuation been incorporated into the Group’s balance sheet, then shareholders’ funds at 2 April 2005 would have been £1.8 billion.
Going forward, if profits come through in line with expectations, shareholders’ funds will also increase.
Why is Marks & Spencer holding the AGM outside of London? I don’t usually travel north of Watford.
(Another Shareholder present) It is with great regret we hear these comments, which have upset a number of those present. This is my first AGM I have attended as a shareholder. We have had an excellent meeting today and I am proud to have Marks & Spencer here in Birmingham.
A: (The Chairman) May I say on behalf of the Company we have been hugely welcomed by the community of Birmingham and particularly by the staff at The ICC. We look forward to returning next year.
Can you retain the AGM timing to the afternoon so shareholders can attend at reasonable cost?
Yes. As we moved the AGM to Birmingham this year we held the meeting at 2pm rather than 11am to enable shareholders to travel off-peak. We will do so again next year.
An Employment tribunal has recently found that at least some staff of the Company do or did have contracts of employment which failed to include all the information required by law and at least on one occasion has made a punitive award against the Company as a result of that failure. Would the Board explain how the situation occurred, what steps it proposes to take to prevent it happening in the future and what the likely costs will be to the Company of its failure to comply with the law in this respect?
I am not aware of any cases in which an employment tribunal has found that our contracts do not meet legal requirements. We are confident that our contracts fulfil legal requirements. Indeed shareholders would expect that to be the case.
In light of recent media comments, what percentage of the Company’s staff now belong to a trade union. What are the steps being taken either voluntarily or as a result of legal obligation to reorganise any or all of these unions and why does the Board believe that the sudden dramatic increase in union membership has occurred?
Marks & Spencer does not recognise trade unions within the UK and staff are under no obligation to tell us whether they have joined or not joined a trade union. I have no evidence that there has been a dramatic increase in trade union membership. We talk regularly with our Business Involvement Groups in Head Office and Stores and keep in very close touch with what is going on. I am not aware of any significant increase in trade union membership. It is up to our staff to tell us whether they want us to recognise a trade union and I don’t believe at the moment that they are telling us that is the case.
What is the benefit of changing the Chairman, there seems to be no upside from the point of view of the shareholder?
We have a very cohesive Board. Anybody who has the opportunity to witness one of our board meetings would describe them as open, honest and challenging.
The Board is united around a common purpose and we have been extremely fortunate in securing the services of Terry Burns, who will join our Board in October as Deputy Chairman and will succeed me 12 months from now. I wanted to have that extra period to ensure that we had the continuity and stability that I believe Stuart Rose and his colleagues need, as we head through this critical period of delivery. We are making good progress and I have every confidence that 12 months from now we will be able to report that we have made further progress.
Who is Lord Burns? What experience of retail does he have? Considering he holds five other positions (two chairmanships, three non executive positions) this will be his sixth position. When is he going to find time to devote to Marks & Spencer?
Terry Burns is an extraordinarily experienced person in public service and more recently in business. Before my colleagues offered him the position they established with him his availability and time commitment and he has assured us that he will be able to give sufficient time to the business. Indeed one of the reasons why he is not taking the Chairmanship for 12 months is to enable him to reduce his external commitments, allowing him to devote sufficient time to this task. I am convinced that Terry will give us the time that is necessary to perform the office of Chairman to a high standard.
Two years ago Abbey National lost £100m, presumably under the Chairmanship of Lord Burns. That Company was then sold to a Spanish Bank and rebranded Abbey. If he lost £100m two years ago, how is he going to be of any benefit to Marks & Spencer?
I don't think it is really appropriate for me to go into details. However I will say, the Board has made a decision that Terry Burns is the right person to take the Chair. He is also going to be Deputy Chairman at the beginning of October, and is going to spend a lot of time with us before he becomes Chairman. He will do well for you and he has my full support.
Do you have a specific programme to roll out stores internationally?
There is strong demand from both franchisees and others to develop our overseas business. Our brand overseas trades very well and made very good profits last year. However our first priority is to get our core business in the UK back on track before we embark on any further activity.
What is the Group's strategy with respect to the international business that is still M&S owned? In particular Kings Super Markets in the United States? Could you please indicate what plans you and the Board have for the future direction of Kings or do you regard a supermarket chain, however successful, as a non-core business?
Kings has performed well this year in a very difficult market in the United States as a result of actions taken in the previous year to improve performance. Kings continues to be an ongoing part of Marks & Spencer and there's no change to this at the present time.
Why doesn't Marks & Spencer open stores in airports?
Our chain of Simply Food stores is a very good concept and we're anxious to extend them wherever we can. We're already finding our Simply Food stores in railway stations are proving successful. Also, we've recently opened one at Heathrow Airport which has been well received. Conversely we're in the process of closing one at Manchester because it wasn't working. The success of these stores depends on a number of things, including getting the right size store and making sure it's got the right amount of customer traffic.
Should the emphasis for products be on quality and innovation rather than cheap prices?
I agree with you, which is why we don't sell a t-shirt for a few pounds, we sell it for £6. We always consider our quality standards as it's what our customers expect from us and it will always be our driving force.
We are also very particular about where we buy our goods from, making sure we source products that are of great quality and also adhere to our high ethical standards.We have not reduced quality on anything in the business knowingly since I've been here.
Why not eliminate viscose and focus on quality?
We continue to remain committed to quality and aim for customers to find something for them every time they visit - whether it's at the lower or mid-price range or something with a bit more luxury.
We offer garments that are made from materials that are durable and will perform, such as easy care fabrics and cashmere. Not all artificial fabrics are bad and some of the very finest fabrics, in terms of handle and comfort, are in fact man-made fibres.
We have too many stores trading too many hours - not just M&S but the high street in general. Does this mean we have to source cheaper goods abroad to fill our stores? Should more goods be sourced from British suppliers?
In terms of opening hours, there is no business benefit for leaving a store open for too long. In certain areas, such as shopping centres, we have to operate within certain guidelines, but overall we look at what our customer activity and views are.
Sadly, there is not a significant manufacturing industry for textiles in the UK and there hasn't been for a number of years. We took our clothing production abroad because people demand better value and that's where the manufacturing has migrated. However on Food, we remain committed to British farmers - more than 80% of our Food produced is sourced from the UK.
You say that your core customers are 33 to 55 years old, but what about those older than 55?
Even though we are concentrating on 35 to 55 year olds, there is still a place for people that are older than that. In menswear we are currently introducing a good selection of classic shirts, blazers and trousers. We also reviewed our womenswear offer and relaunched our Classic Collection range at the end of last year and will extend it into casualwear later this year.
Sales staff seem to be unhappy with quite a lot of the product. The feeling is that they should be able to speak more frequently to senior management and the Board. I would like to ask Mr. Rose how often he goes into stores, not only to talk with customers, but also to discuss things with his sales staff.
That answer is pretty well every week and if it's not an official visit, I would certainly pop in on a Saturday just to have a look around. I'm very conscious of the need for us to do what we used to call in this business many years ago, probing. That is getting our senior management, not just myself, in stores and finding out from customers, and importantly from our store staff who have very valuable information, what the feedback is and making sure that we react to that. We do listen and we do talk and I think personally my track record is not bad.
I certainly do go out of London. We go all around the country including Scotland, Manchester or where we were in Birmingham yesterday. I'm pretty busy in the office at the moment, but do make the time whenever I can.
Are you doing anything to improve signage?
The answer is definitely yes. We did have a situation in our stores last year where we had too much signage and it was confusing so we started to declutter the stores. As part of our new programme we've got some very clear branding coming through and we've got new and exciting signage, which you can't miss, that will be going into some of our stores very soon.
I feel that you are not looking after your older, previously loyal customers enough. For example I used to buy most of my shoes from M&S but can't find any to fit my requirements. I have also looked for dresses and I have not really found anything suitable for the mature lady.
As it happens, our Classic Collection, the range that we introduced with specific focus on the more mature lady who wanted fashion, has been very successfully received. So either we haven't got it in enough stores yet or we're not doing enough to please everybody so we'll see what we can do.
I'd like to ask about the window displays. Having visited more than 100 branches in the last 12 months and having worked seven weeks on the Food section at Nottingham, I'm absolutely appalled at the standards of the windows.
It's a concern we share with you. We are not using our windows to the best advantage - our most obvious advertising space. They are the eyes into the store from the customer's point of view and we must make better use of them. Steve Sharp, our marketing director, is working hard on improving them. Actually, I think we've made some significant improvements over the last three months and you are absolutely right, we need to get better.
How can we prevent trolleys going missing from stores?
We take this as a serious issue, as trolleys are expensive and not good for the local environment if abandoned or not returned to stores
Isn't newspaper advertising ineffective and expensive - could the money not have been better spent?
Our advertising in all media is a part of our brand strategy with strong messages to our customers about our products and values. The results have been very encouraging in terms of sales and how our customers perceive Marks & Spencer and we will continue with this approach.
Can we improve service levels in stores?
Any lack of service is unacceptable. We have reiterated to our staff the importance of making sure the customer comes first. We have just introduced one of the biggest training programmes on the high street. Over the coming months all of our store staff will take part in a special one day customer service training programme. We have a fantastic team of store assistants and managers across the country and their job is to look after our customers.
What about our land and property?
We have undertaken a review of our property and stores in Marks & Spencer across the UK. There are still some opportunities for us to fill gaps, for example in retail parks. And in Birmingham you will see a refurbished main store and new stores at the Fort in Birmingham and the Coventry Arena.
Since most of your customers are women and women's clothing is the biggest issue, how are their views represented on the Board.
With the recent senior management changes we have no women directors on our Board. However, women are well represented at senior levels below this. With the appointment of Lord Burns as Deputy Chairman, the Board can now work on completing the task of broadening the diversity and skills present around the table.
There are too few cash tills in the stores - you often have to search to find one and inevitably have to queue. There are not enough staff serving.
We know that we have to improve service to our customers and are introducing one of the biggest training programmes on the high street. Over the coming months all of our store staff will take part in a special one day customer service training programme. We have also improved staff scheduling to ensure that more customer assistants are on the shop floor at busiest times
Middle income, middle aged and middle of the road are the sorts of people who shop in M&S not young people. How are you meeting their needs?
We have been listening more closely to our customers and we're working hard to give them what they want. For example, we have listened to our customers who said that our Classic ranges were dull and not stylish enough. We have introduced new fabrics and better styling into the new ranges launched just before Christmas. These have been well received and our share of the 55-plus market is increasing. We are continuing to strengthen this offer and will be launching a Classic casualwear range this Autumn.
Continual re-arrangement of location of Food causes frustration to customers and diverts staff from other duties to locate goods.
We are working hard to improve our store environment and make our stores easier to shop, but at different times of the year we do need to rearrange our Food hall according to which products are most in demand at the time. In recent years our Food business had become over-complicated with too many sub-brands and product proliferation. We cut 500 lines so that we could concentrate on our core strengths of quality and real innovation.
We are delivering a step change in our customers' shopping experience by creating stores with a great environment, great product and service that exceeds expectation through our store remodel rollout programme. This will include Food halls that are modern, exciting and distanced from competitors with new flooring, fridges and presentation techniques.
We hope that you start to see the improvements in your local store.
M&S appoint the same auditors year after year. As a national and valued institution perhaps the Company can lead the way in periodically changing its auditors?
PricewaterhouseCoopers LLP has audited the Company for a number of years. The UK Government considered and subsequently rejected the introduction of a requirement for audit firm rotation. There is evidence to suggest that audit effectiveness suffers in the early years of an audit appointment due to the audit team's lack of familiarity with the business.
However, the lead audit partner has been in place for two years and PwC periodically reviews the tenure of senior management within the audit team to ensure that no perceived threats to independence arise.
Am I right in saying that if Mr Green's 400p offer was accepted, it would mean an immediate crystallisation of those shareholders' capital gains tax liability, with no option to defer by using their annual capital gains tax exemption?
There is no Philip Green offer at the moment, but if there were and it was a cash offer, for many shareholders it would crystallise a capital gain. It would also mean they would no longer share in the future performance of this business.
If the Company is taken over what do the Executive Directors stand to gain?
They would receive payments under their contracts (12 months salary & benefits) and the ability to exercise some of their options.
Will the Chairman and CEO publicly demonstrate the Board's confidence by agreeing to waive any share options unless the share price at the appropriate time equals or betters the offer made by Philip Green?
Paul Myners, our interim Chairman, is a current non-executive director and therefore does not hold share options. He is also taking no additional remuneration for assuming the role. Stuart has not yet received the share options due to him because M&S is in an offer period. When they are issued, it will be at the current market price. However, to underline Stuart's confidence in the future value of M&S, he has voluntarily said that he would donate to his charity, an African children's school, the proceeds of any difference in the gain from his share options between the grant price and 400p. Charles Wilson, Executive Director, has made a similar commitment.
In view of the Company share price, and the drop in credit ratings, will the Board explain how they can continue to justify their refusal to meet Mr Green?
The Board believes Revival's proposal of 400p per share significantly undervalues the business and its prospects. We believe that we demonstrated this at our meeting with the investment community on Monday 12th July and again with Shareholders at the AGM.
Is Mr Rose a friend of Mr Green?
Stuart Rose has known Philip Green for many years:- the world of retail is small.
Given Mr Green's experience in turning around retailers and Mr Rose's lack of experience, will the Board explain why they will not meet with Mr Green to discuss his proposal? How does this meet the best interests of the shareholders?
Stuart Rose has extensive retail experience which includes spending the first 17 years of his career at Marks & Spencer.
The Board has a duty, which it takes very seriously, to consider any offers - firm or proposed for Marks & Spencer.
After significant consideration, which has included talking to and listening to (many) shareholders, as well as extensive analysis of our prospects, the Board has concluded that any offer of 400p per share significantly undervalues the Group.
How do we maintain long term interest in the Company rather than going for short term gain?
We are driving the business for long term growth building on the core values we have worked with for over 100 years - quality, value, service, innovation and trust.
Our focus on customers and product will deliver long and short term objectives.
Why are you selling Marks & Spencer Money? Does this include the PEPs?
The sale of the business (which includes the PEPs) is part of the new operational review, to maximise shareholder value. The operations will now be managed jointly by HSBC and Marks & Spencer.
Can you confirm what is happening about the tie up between Marks & Spencer Money and HSBC. Is it just the credit card, or the whole financial services division?
Money has been an important partner for the retail business and will continue to be so. Following the successful launch of the "&more" Credit card in October 2003, we now felt it was an appropriate time to find a partner to further develop this business. This enables us to focus on our retail priorities while Money will benefit from the expertise and resource of HSBC.
The arrangements with HSBC are very attractive for Marks & Spencer shareholders. We will receive a consideration of £762 million and retain £60 million of net assets. In addition, the debt in relation to this business, standing at £1.24 billion on 3 April 2004, will be assumed or repaid by HSBC. M&S will continue to directly participate in the growth and performance of Money through an arrangement that provides for us to receive 50% of profits after charges for capital and overhead provided by HSBC and tax.
We believe HSBC is the right partner for us. They provide the opportunity to enhance top-line growth and enhance profitability and importantly, they share our values and are firmly committed to upholding the M&S brand and taking care of our customers. Together we will increase the effectiveness of customer marketing and loyalty programmes and extend product choice for consumers.
Is the proposed return of capital to shareholders for all shareholders to date including those who just jumped on the bandwagon and bought shares recently?
All shareholders on the register at the time of the tender, details of which will be announced at the appropriate time, will be entitled to participate.
How do you justify buying back shares that are priced above net asset share value, have a dividend yield of 3.2% (over 4% would be available from banks)?
We will buy back shares if we have surplus cash flow, above operational and investment needs. (Shares will only be bought back if the net impact is to increase earnings per share).
Can you assure me we will not lose the Marks & Spencer store chargecard and have to take a credit card?
There are no plans to discontinue the store chargecard.
If Marks & Spencer need money there are other ways of raising money rather than selling freehold and leaseback, provided that there is good performance.
The return to shareholders will be financed by the sale of Marks & Spencer Money, the repayment of inter-Company loans, existing resources and new bank facilities. Our property portfolio is a valuable asset and has recently been valued at £3.6bn, giving a surplus over net book value of approximately £1.4bn.
If the management wish the shareholders to back the Board, is the simple way of doing this to buy shares in the market and not distribute the cash to the shareholders?
The tender offer process will result in the Company buying shares, while giving shareholders the choice as whether to participate in the process or not.
In 2002 we had to redeem our shares and lost out, for every 21 shares held we got 17. What's happening with the tender offer and how will this benefit the private shareholder?
The return to shareholders in 2002 enabled shareholders to continue to own the same proportion of the Company before the return as afterwards. It was quite complicated, and we hope the tender offer will prove simpler. It will be by way of tender offer, with all shareholders given an equal right to participate. It will benefit the private shareholder by giving them the choice to sell their shares or to keep them. If they decide to keep them they will own a little bit more of the Company as the number of shares in issue will reduce.
Where is the money coming from to return £2.3 billion to shareholders?
The sale of Marks & Spencer Money, repayment of inter-Company loans, existing resources and new bank facilities.
Does Mr Rose think 18 months to two years is an acceptable, personal target to get this business moving again?
That has to be what we are judged by, and we will be very disappointed if we do not see like-for-like growth within 2 years. Clearly, the economy has slowed down and the level of growth of the last few years has reduced, but like-for-like growth is our objective.
When will we start seeing managers at all levels in the business taking accountability for poor performance within their areas?
A framework will be set that we will all operate within, and then hold people accountable for delivering. Morale in the business is good. Our people are ready for the challenge.
Can you tell us what each main business area contributes in terms of profit?
As you will see from the accounts, we do not break down the profitability of the individual business units. This is because we run the stores as one Marks & Spencer business.
The balance sheet of the group in the section Capital and Reserves shows, under the heading Other reserve, that there is a negative figure of £6,542.2 million. What is this?
This reserve was created as part of the capital restructuring that took place in 2002. It represents the difference between the nominal value of the shares issued prior to the capital reduction by Marks and Spencer Group plc (being the carrying value of the investment in Marks & Spencer plc) and the share capital, share premium and capital redemption reserve of Marks and Spencer plc at the date of the transaction.
How does the Board report to shareholders for the cost of share options given to Directors, and why isn't the answer in the accounts?
The Company is committed to full disclosure in the Annual Report and will continue this approach in the future. We do disclose the number and cost of all options for our Executive Directors within the Remuneration Report. We will continue to improve this disclosure following the changes under the International Accounting Standards.
Would it not be better if we kept the 1000 staff and sacked the Board?
The reference you make is to the Head Office Change Programme. It is clear that, as a business, we are carrying too many Head Office overheads. This review will achieve a more streamlined and efficient operation and we anticipate that this may result in approximately 650 job losses this financial year. We are committed to consulting with our employees on these proposals to ensure that we treat people with dignity and fairness. As part of this process we will consider voluntary redundancy.
Should not the long serving members of the Board share the responsibility for the state of the Company? Why have there been no changes?
We have seen significant changes to the composition of the Board this year, ensuring that we have the right talent and skills to take the business forward.
Could I ask about the large termination payment Board members have received?
Directors leaving the business only received what they were contractually entitled to and no more. It was vitally important that we recruited the best talent and at the time it was necessary to provide a competitive package to do this.
I would like to ask about the composition of the Board which is currently six executives and five non-executives, which is against best practice recommendations.
We support the recommendation of the Combined Code. We are currently seeking a new chairman and a further non-executive director as part of our successional arrangements to return the balance between executive and non-executive directors on the Board.
Will you be thinking carefully about the on cost to the Company of recruiting senior directors that only stay for the short term e.g. Vittorio Radice?
We have given serious consideration to how contracts should now be structured. Stuart Rose and Charles Wilson have demonstrated their commitment by including a mitigation clause and phased payments in their contracts.
The current interim chairman and his Board appeared to have supported the previous CEO. Why should they now expect us to accept their recommendations?
The former CEO had the support of the Board until circumstances made it clear that a change was needed.
The Annual Report and Accounts were sent to shareholders with reports of the then Chairman and CEO. One must presume the Board approved these.
The Annual Report and Accounts were approved by the Board in May 2004 and relate to the last reporting year, up to 31 March 2004.
Where did the CEO spend his career from the time Philip Green took over Arcadia until now?
Since leaving Arcadia in December 2002, Stuart remained a non-executive director of a number of companies and last year became Chairman of the British Fashion Council.
Could you tell us where Mr Rose has been involved in establishing a new business or building up an existing business?
Stuart is a hugely talented retailer, and committed to the business. He has significant experience of turnaround and bid situations, and 17 years' Marks & Spencer experience. We believe he is the right person to lead the company at this time. He has a rare retailing talent and an excellent track record. He achieved great success for shareholders at Argos, Booker, and Arcadia. Equally important, he knows and is passionate about M&S, having spent the first 17 years of his career with us, joining us as a trainee in 1972. Quite simply, Stuart thinks, talks, and acts like a shopkeeper.
He has already brought with him key colleagues and started building a new team. In particular, he joined your Group with Charles Wilson and Steven Sharp, who worked with Stuart for more than a decade. Together, they represent a formidable team.
Stuart's background meant that he picked up the reins very quickly when he arrived six weeks ago; he has wasted no time. Many important actions have already been taken, and a whole programme of significant change is underway.
What would the Chief Executive say to a change of the directors?
The current composition of the Board has been reviewed and enhanced with the appointment of new executive and non-executive Directors. The Nomination Committee, led by Paul Myners, will keep it under review and may consider future changes to maximise the performance of Marks & Spencer.
Can you elaborate on why you think your track record is better than Philip Green's? If you think that £4.00 a share significantly undervalues the Company, why will you not have your option struck at £4.00 or above? What level of shareholder requests do you need to open the books to Philip Green?
Paul Myners, our interim Chairman, is a current non-executive director and therefore does not hold share options. He is also taking no additional remuneration for assuming the role. Stuart has not yet received the share options due to him because M&S is in an offer period. When they are issued, it will be at the current market price. However, to underline Stuart's confidence in the future value of M&S, he has voluntarily said that he would donate to his charity, an African children's school, the proceeds of any difference in the gain from his share options between the grant price and 400p. Charles Wilson, Executive Director, has made a similar commitment.
We believe Stuart is the right person to lead your company at this time. He has a rare retailing talent and an excellent track record. He achieved great success for shareholders at Argos, Booker, and Arcadia. Equally important, he knows and is passionate about M&S, having spent the first 17 years of his career with us, joining us as a trainee in 1972. Quite simply, Stuart thinks, talks, and acts like a shopkeeper.
He has already brought with him key colleagues and started building a new team. In particular, he joined your Group with Charles Wilson and Steven Sharp, who worked with Stuart for more than a decade. Together, they represent a formidable team. Stuart's background meant that he picked up the reins very quickly when he arrived six weeks ago; he has wasted no time. Many important actions have already been taken, and a whole programme of significant change is underway.
With the proposed cash repayment, or Philip Green's cash and share payment, will there be an opportunity for shareholders to have a loan note or other alternative to structure their capital gains tax arrangements?
On 12th July 2004, Marks & Spencer announced that it proposes to return £2.3 billion to shareholders in September 2004. The return will be funded by the proceeds from the sale of Marks £ Spencer 'Money' and the repayment of inter-Company loans, existing resources and new bank facilities.
The return is to be implemented by way of a tender offer for the ordinary shares, which is one of the mechanisms used when companies wish to buy back shares from shareholders. A tender offer is totally different from the B Shares used as the vehicle to return cash to shareholders in 2002.
In a tender offer, the Company sets a price range within which eligible shareholders may tender their shares. The advisers to the tender offer will then set what is known as the 'strike price', which is the price within the price range at which the ordinary shares will actually be purchased.
In a tender offer, shareholders are not obliged to tender any of their shares if they do not wish to do so. If they do, they dispose of their shares and may be subject to Capital Gains Tax. Shares may be traded in the normal way during the tender offer period.
Full details of the tender offer, including its terms and conditions, will be sent to shareholders in due course.
Why don't shareholders get a discount?
We will examine very positively the case for introducing a shareholder benefit in terms of a discount or special offer in our stores.
In light of current events, what steps do the Board intend to take to consult with and listen to the small shareholder?
Today's AGM is a very important forum to gauge the feeling of our private shareholders and we have shared the presentation we gave to institutional investors with you. We also put it on the website and mailed it to all shareholders. I have given you an e-mail address to communicate your views, which we look forward to hearing from you.
Are any of the American institutions or other major shareholders represented here today?
To the best of my knowledge they are not.
We had to queue in the rain for the AGM. How are we to judge your ability to run the Company if you can't organise this?
Our Events team did arrange for awnings to be put up, should it rain. Due to the large numbers attending this year, it took longer to get everyone into the building and some of you may have been caught in the rain, for which we apologise.
Could you notify shareholders, and most importantly, long service members of staff like myself, who have lost our free shares, that the Board will not be awarded huge golden handshakes if they fail to perform?
We do very much respect the work you put in. Unfortunately, last year we were unable to give bonus shares, as the Company did not perform well enough. I believe in reward for success and not reward for failure. Let us hope next year is a more successful one for all of us.
Will the Pension Trustees ask Stuart Rose and the current Board of Marks & Spencer to fill the pension gap that they are requesting Philip Green to satisfy if he purchases the Company?
The Company cannot reply on behalf of the Trustees who act independently. However, they have made it clear that they will be concerned about the financial strength of the employer, as the continuing support is vital.
The Company did inject a further £400 million into the pension scheme last year, which demonstrates its commitment to continuing to provide security for pension provision. This Board regards that as being of utmost importance.
The Trustees will be writing to employees and pensioners.
How secure is my pension as an ex-employee, particularly in the event of a takeover?
The Trustees of the pension scheme are independent, and their obligations are to the members of the scheme. They have taken professional advice to arrive at correct and proper decisions in respect of their obligations to their members. We care enormously about our pension and will ensure to the best of our ability, those commitments are honoured.
Would the Board confirm the size of the pension fund's deficit and outline their plans to make good the shortfall with timescales?
It was valued on 31 March 2003 as having a deficit of £585 million. We made a £400 million contribution in March 2004. The next valuation is due in March 2006.
It is hoped that stock market performance will improve the deficit position in the meantime, but the Company has committed to a contribution rate which is designed to eliminate the deficit in the longer term.
If we are a business in crisis, how can we pay millions to fund Board changes when many employees did not get a pay rise or store bonus payment?
The salary review budget for all employees was 2% this year, reflecting disappointing business performance. For the Board changes, exceptional circumstances meant we needed to move swiftly to put the best talent in place.
How will the pension scheme be affected by any possible takeover bid?
A bid does not, of itself, affect the pension scheme. The pension scheme assets are separate from Company assets and looked after by trustees acting independently of the Company. Whatever happens to the Company, the scheme will be run by Trustees who have obligations to the members.
The Company is now facing substantial legal costs and financial penalties as a result of actions being brought following the outsourcing of almost 200 loss prevention staff. Can you comment?
After careful consideration, the decision to outsource store based loss prevention to Securicor was made to further our drive to concentrate on core capabilities and to use external expertise in non-core areas - we still believe this was an appropriate business decision. We carried out a process of consultation with affected employees and a recent Tribunal Decision has confirmed the Company's position, that this was a TUPE transfer. However, we are unable to comment further, as this matter is subject to on-going litigation.
Is Marks & Spencer going to change its refund policy in the near future?
There are currently no plans to change it. It does help differentiate us from the competition.
The current advertising campaign seems to be ashamed of the name as the choice of colour seems to make it invisible?
We test our advertising in research and our new advertising has tested very well. It appeals to the sense that customers of Marks & Spencer are very different from any other Company, and if we let them down they feel personally very disappointed.
Why am I unable to change the PIN number of my M&S Money Mastercard to a more memorable one?
We are discussing this with our new partners, HSBC, and expect to start to introduce changes from Spring 2005.
I am in my 50's, middle class, dressed head to toe in M & S but I cannot find anything that it is not covered in pattern or braiding. I want something, which is plain, but quality. When are you going to ask me what I want?
We would like to think there is some merchandise that we could clothe you with, but clearly you are having trouble finding it. Changing this situation for our core customers is a priority.
I'm pleased to see that you will focus on the mature female. I would like to know how soon we will see your changes?
These customers are very important to us. I said in my presentation that I do literally regard them as gold. Approximately 120,000 people per month reach the age of 50. Changes will be mainly visible from Spring 2005.
Your women's clothes are still missing the mark for all ages and the quality could be bought in other shops for much less.
Stuart Rose is working directly with the clothing teams to improve this. We will be reviewing all aspects of our offer to ensure we return to value and quality, along with stylish product.
Why do you not stock more clothes for women of 5' 6" and under?
Though we need to concentrate on areas of largest sales, we want everyone to find something they love. We agree that this is an important segment and we will be looking at our offer here as part of our overall look in womenswear.
You are intending to concentrate on the core areas of ladies clothes. Can I have the assurance that you are not going to discard men's clothes or food stores?
Menswear is a key part of our offer, and we are committed to it. We will continue to roll out the Simply Food stores, which provide customers with quality food in convenient locations.
Why don't you produce more of the average sizes, that sell out quickly, e.g. 12's and 14's?
We are addressing availability and looking to improve speed of supply chain and accuracy of stock reporting systems.
As part of the rebranding that has been announced, are you proposing to do away with the green carrier bags?
Our brand is one of the strongest in the UK and is trusted by customers. Marks & Spencer remains our core brand. Shareholders will have seen our new "YOUR M&S" logo which will feature on our carrier bags which will continue to be in a shade of green
In the press I have seen that the main target will be women of 35-55 years old - are you going to abandon the rest of us?
We are focusing on this age range as they represent the largest section of customers & sales. But we want everyone who comes into our stores to find something they love.
Where did you buy your suit?
The quality of clothes has deteriorated, with limited choice - you state you are going to make further cuts in stock, which will mean even less choice?
We aim to focus on offering high quality, stylish clothing to our core customers. Autumn Clothing ranges are largely bought but, looking beyond this, we will have fewer lines with ranges bought in greater depth.
Less is more - there will be less proliferation but with more choice.
Bras for the 'not so young'- may we please have more 34 size and no under-wiring?
All Bras are offered in 34 in various cup sizes from A-G. There is a broad selection within Boxed Bras and we are introducing a broader offer of non-wired bras into Collections (matching sets) from September.
Why does the Company use incorrect English on the notice on the Express tills in foods stores? It should be "Five items or fewer" not "Five items or less".
While you are technically correct, this colloquial expression is widely recognised throughout the shops of our nation.
Will the admirable payment terms and treatment of our suppliers continue?
Supplier payment terms are within 14 days on general merchandise and food. Our credit policy payment details are outlined on page 26 of the Annual Report.
Why have we broken contracts with suppliers where the previously agreed discount was 3.75% and is now 7.5% and 10% from September 1st?
We are committed to long term partnership and paying fair prices. In recent weeks have had discussions with 70% of suppliers. They have been understanding of our need to improve efficiency in our whole business. We will not allow these changes to affect quality or labour standards.
Will you keep the Simply Food store in Twickenham and Richmond?
The Simply Food format works well, and we have no current plans at all to shut our stores at Twickenham or Richmond. The Simply Food rollout is continuing but focusing on stores that take over £3m a year.
Is the Board committed to providing the convenience stores Simply Food as customers want convenience?
The Simply Food rollout is continuing, but focusing on stores that deliver over £3m a year. We are also looking at layout of main stores and the whole food catalogue to ensure we offer real choice in an easy to shop environment.
Could you clarify what you said about spending money on the Richmond store?
I know that Richmond is a very good area for us to trade in, and I know the store could do with some refurbishing. Within the constraints of our capital expenditure budget for this year we will look at this very favourably.
Why did the Board agree to build a Head Office that does not allow for the current size of the business, let alone the future growth anticipated?
We needed to move to modernise, and have developed a network of offices, which gives us flexibility in a rapidly shifting business environment.
Why does a security officer stop me every time I purchase something at the Watford store?
We take care in protecting People, Property, Profit and Brand. The key focus is in providing a safe and secure environment for our customers and staff, free from crime and the fear of crime. Our losses and our incidents of violence and public order are amongst the lowest in retail.
What impact has the poor performance of Childrenswear had on the business and when will you appoint an industry leader?
We know that Childrenswear has been a weakness for the last two years, but we may have seen the beginning of an improvement in the past two weeks. To quantify that, two quarters ago it was diluting our overall clothing performance by 1.5 %. In the most recent quarter that impact had reduced to 0.5%. However, we still have a lot to do.
We have had pockets of success to date, in particular the David Beckham ranges which continue to perform strongly.
Our focus right now is on the availability of schoolwear and initial signs are encouraging.
Marks & Spencer has always been able to attract able and talented people and we aim to do this for Head of Childrenswear. It's worth waiting for the right person.
We have a new design team and design processes in place, and are consolidating ranges in order to provide a clearer, stronger offer. It's also important to remember that while Childrenswear is important to us, it accounts for only 8% of clothing.
Why do we operate some Simply Food stores through a franchise with the catering company Compass?
The arrangement with Compass relates only to railway stations, where they have control over those sites. Compass has given us the access and the opportunity to open Simply Food stores in these locations and we have an agreement to open 40 such stores.
We are very careful to ensure they are operated to our standards, and we trialled three locations, monitoring them closely before proceeding with any more.
Even by sharing the profits with Compass we make a comfortable return that we otherwise wouldn't have had access to.
Are we destroying our potential customer base by closing UK factories?
In our supply chain, we are aiming for better goods, delivered faster, at lower costs.
We worked with our suppliers to move their manufacturing abroad for the benefit of our customers, and today around 85% of our supply is from overseas.
We are now strategically positioned to take advantage of centres of manufacturing excellence, lower production costs and proximity to the UK.
Of course we regret that jobs in the UK clothing industry are being lost but our first responsibility is to our customers, our employees and our shareholders.
We believe it is irresponsible to keep an industry alive artificially. We hope most employees have been able to find work in other industries or with other companies
Have you considered offering private shareholders store discounts or other incentives?
We could not do so on an equitable basis, since each shareholder holds a different number of shares in the Company.
Unfair to those shareholders unable to participate in discount schemes, e.g. insurance companies, pension funds and overseas investors.
Best way to reward shareholders is through dividend payments based on individual share ownership.
We are looking forward to rewarding you as customers through our new combined credit & loyalty card, when we launch nationally later this year.
Could you explain the downturn following the turnaround?
The final quarter of the year did show some slowdown, but the most recent quarter has shown some reassuring growth, especially in Food.
Could you explain what I read in the Times about losses in Europe?
We have ceased activity in Europe. We believe the article you are referring to relates to a case that we have taken to the European Court, where we stand to set a precedent. We are trying to recover £30 million against our UK taxes on approximately £100 million of losses we incurred in Europe some time ago.
Can you guarantee you will still be paying suppliers promptly, given the reference in the report about changing to 14 days?
As a 100% own brand company it is not in our interests in any way to pressurise our suppliers.
The report states our payment terms remain at 10 working days - the 14 days referred to is just sowing the same figure taking account of weekends.
I've read locally about Marks & Spencer having a problem with high numbers of shoplifters and bulk theft. Do you have figures on this, the cost of trying to prevent them, and the effect on our dividends?
The actual figures you ask for are not published, but theft is a concern for all the high street, not just ourselves, and we are very conscious of it. Our experience compared to other retailers is favourable.
We do a lot to ensure that we pick up the big risk areas and control them as far as we can.
Could you tell me what you are doing in relation to quality and fit, as I think there are still issues to be resolved with a number of items?
Customers' perception of M&S quality and fit continues to be ahead of the rest of the high street in adult clothing. In Womenswear the lead has increased to 14% on quality and fit. In Lingerie we have maintained our significant 35% lead on quality.
Customer returns for quality have continued to fall and are now at the lowest levels for 9 years.
We fit our garments on real people, to ensure consistency and relevance for the product's end use. We take into consideration the customer profile when designing our products from the easier fit Classic garments to the ranges aimed for the young at heart.
However, we recognise that we are far from perfect and that we can always do more and are continually striving to improve the quality of our clothing.
Our Customer Services Team are happy to deal with any specific issues you may have.
Does Marks & Spencer still have a public image problem in relation to some of its womenswear ranges?
The trading results speak for themselves, that our image is good in the eyes of the vast majority. Also according to various retail studies, our image has improved tremendously.
Will David Beckham's move to Real Madrid affect the DB07 brand or its name?
There are no plans to change, especially as I believe number 7 will still be David's number in the England team. It is a very successful range for us
Why are your fresh fruit and vegetables overpriced in relation to other local competition?
The products are not necessarily comparable, and we justify our prices with high standards of quality and freshness.
We audit our prices every month against all major supermarkets.
I think your work regarding food allergies, for example wheat-free, and on labelling is very good, but why are there are so few 'meal for one' options for people with allergies?
There is certainly a growing demand for meals for one, and we will certainly take note of your request.
Our decisions to proceed with certain items do depend on scale, on us being able to sell enough to make production viable. If there is demand, we will respond.
Could we have plain white kitchen towels?
This will fall within Vittorio's responsibility for Home and Kitchen and I'm sure he has plans for all our ranges.
Financial Services Why are your Euro Travellers Cheques difficult to cash in smaller banks abroad, in particular in Spain?
Thank you for your comments, which will be useful for us. I am not sure about that particular situation, but I think a solution would be to use the new Marks & Spencer credit and loyalty card, which you will be able to use anywhere in the world. That is probably a better and cheaper way than traveller's cheques, which have become less popular recently.
Will Marks & Spencer still offer ISAs after 2005
It is currently our intention to do so.
My local store was chaotic during the post-Christmas sale, could I suggest a price-coding system would help people find what they want?
I must admit that a Christmas sale is not exactly the ideal time to visit a store, and this is probably also true for any other retailer, but I am sure we can do better. So thank you for your suggestion, which we will look at.
Will Marks & Spencer improve its trolley fleet, they all seem to have square wheels?
Will Marks & Spencer improve its trolley fleet, they all seem to have square wheels?
When will Weybridge Simply Food store open?
It will open in September.
Why do you still have a problem with long queues at tills?
It is not a question of having too few staff overall, but how we utilise our resources, and we are aware that customers are concerned to see more staff available.
We are currently undergoing a restructuring programme that will ensure we have enough sales advisors on the sales floor at the times our customers need them most.
Why do staff in my local store turn lights out and put trolleys in front of the doors before closing time, and why can't I find a manager when I want one?
These things shouldn't happen. I'm sure our Chief Executive will wish to follow them up with the specific stores, thank-you.
Do you think there is a danger that you will become too self-satisfied and stop listening to customers?
We have a very wide customer base and we try and take into account all our customers. We are aware we don't get it right all the time, but we are aiming for continuous improvement and like to think we satisfy most customers most of the time.
Do you have an ethical policy on sourcing?
Yes, we source products from over 80 countries, and only the best will get to Marks amp; Spencer. The best is not limited to the product itself. It also includes ethical standards such as the kind of people we employ, and the pay and practices our suppliers apply, wherever in the world.
What is your position on sourcing and labelling products from the occupied Palestine territories?
We try to get the best possible quality for the best possible price, and that has driven us to look for the best sources of supply all over the world, and we have absolutely no favouritism or discrimination in this.
In answer to your specific question, we are following strict legislation determined by the EU that tells us which countries are officially recognised in the world. In this particular case, the country of origin is Israel, but if that legislation was to change, then obviously we would be the first to implement that change.
We clearly label all our products with country of origin to enable customers to make informed decisions.
Could we have some clarification of the policy relating to directors' remuneration?
Business has performed well over last year with increase in Earnings Per Share of almost 40%.
Our success is dependent on the attraction and retention of high calibre individuals who can drive performance and secure new paths for growth.
We have a remuneration policy to pay our top management on what we call 'upper quartile', compared to our peer group of other companies.
50% of every executive potential pay package is performance related and dependent on tough financial measures and personal targets being met.
Shareholders are protected by the fact that reward is linked to performance and the delivery of business objectives, which creates shareholder value.
The company's philosophy is that all employees should be appropriately and competitively rewarded, in particular, for the delivery of superior performance.
All eligible directors are investing 100% of their bonuses into shares under the share matching plan, thus aligning their interests with those of shareholders.
Why is the AGM taking place at the same time as BT's?
It is pure coincidence. We have no control over BT's AGM.
Our AGMs are planned on a three year rolling programme so this date was booked several years ago.
Is there any provision in your service contracts for mitigation of damage in case of directors leaving?
All directors are on a one year rolling contract (except Vittorio Raddice who will be on one year at the end of his first year).
Vittorio began on a two year contract, which decreases by a month every month. He will, therefore, be on a one year contract at the end of his first year.
It is not something we have provided for, but something we can look into.
The Government have established a consultation paper on 'reward for failure' relating to directors remuneration, contracts, performance and severance, and we will review our practices against any further guidelines published by the DTI.
We received a number of questions regarding our proposed outsourcing of store related loss prevention, as follows:
We are outsourcing our store-based Loss Prevention resource to Securicor, entailing the transfer of approximately 200 employees. I believe we are the last of the major retailers in this country to take such a step.
We want to be the standard against which all others are measured in the core areas of our business. We recognise that in certain areas, as other retailers have done, whether it is in security or head office catering, we simply do not have the scale to do as good a job as we believe contractors can do for us.
Securicor is a leader in its field and can offer staff a career path and expert training as well as access to industry qualifications.
If this is an invitation for us to consider union representation at Marks & Spencer, then I have to decline the invitation simply because we respect what our employees want. If tomorrow the majority of our staff were to insist upon union representation, then obviously we would welcome that initiative. So far, virtually none of the 67,000 staff at Marks & Spencer are interested in joining a union. I think that they are well represented today, through the Business Involvement Groups, where we have an ongoing dialogue with our staff. These are democratically elected, and so they are a fair representation of our staff. We have no need to create another layer of communication with our staff at this time.
Our employees are protected through a process of consultation in accordance with TUPE regulations. Our concern is to make sure that the best interests of those people and the business are handled as we complete that process.
A third party supplier with whom we want to operate should be fully aware of our employment contracts.
We have to be as efficient and productive as we possibly can, in order to serve our customers well. In some speciality areas, we do not have the scale ourselves to do as good a job as a well established, specialist contractor can.
We are currently in an ongoing dialogue with our employees to handle the transfer between ourselves and Securicor. A key element is protecting the interests of our employees.
How safe are our pensions?
There is no risk to your pension as a former Marks & Spencer employee.
Many pension funds are in difficulty due to the performance of the equities markets.
Therefore we are bringing the required statutory actuarial valuation forward so we are able to deal with any deficit.
Why are your health insurers getting more stringent and refusing payments on tests for certain conditions?
Insurance companies have become more stringent in the kind of things they reimburse.
We haven't changed our policy and to the best of my knowledge have no intention of doing so. We will gladly look into specific instances for you.
There is a note on page 35 of the annual report. Health insurance relates to employees who retired prior to 1988
If the Christmas campaign was so successful, why was it necessary to introduce unprecedented massive discounting in an effort to boost sales?
Our General Merchandise business did not achieve our expectations in the year. We know we have more to do, but we are also aware that we are on a journey. We have spent the last three years investing in this business to make it a stronger business for the long term. Outside of quarter by quarter performance, this is a stronger business today with stronger infrastructure and stronger people.
Why do none of the Non-Executive Directors have any clothing or textiles experience?
We have a very well balanced Board with a huge amount of consumer experience, and, in the executives, we have a lot of textile experience as well. We keep a detailed matrix of the range of skills we need on the Board. This is kept under constant review.
Why is the Twiggy collection only available online, especially as it targets the more mature female who does not necessarily have internet access?
The Twiggy Collection is available to all of our customers online. The older customers are very digitally savvy, and a very large percentage of our online customers are in the older category. Equally, in store, we have well over 2,000 iPads – so that customers in store can also order for delivery the next day. Although it is not in store, everybody who wants to get the Twiggy range can get it, either delivered in store or to their home.
Can we introduce a minimum spend of £30 or less, and a time span of minimum 1 month on shareholder vouchers and credit card vouchers?
We review the shareholder vouchers each year and have found the Spend and Save offer to be very popular with high rates of redemption. Alongside this, we also have a 10% voucher with no minimum spend threshold.
Why are there not as many larger lingerie sizes in store compared to smaller sizes?
I have looked at our sizing in stores, and we do have a huge number. Within our lingerie range, we have approximately 44 different sizes. However, if our customers tell us it needs reviewing then we will review it.
What is being done to improve the performance of GM?
This year we did not meet our expectations, and no bonuses were paid as a result of it. In a business and as a Board, you have to do the things that you think are right for the business to build it for the long term, even if sometimes, that is somewhat inconvenient. A lot of what has been done over the last three years has been complex.
Two examples would be the website and the distribution reconfiguration. On their own, each of them is the biggest project of its sort in Europe. To land both of those at once is almost unprecedented in UK retailing, and that is what we are doing. We are creating a much stronger business and we will see it through.
I am a retired employee. Why can’t my wife and I have two separate staff discount cards?
In recent years your staff discount card has been extended to be used to shop online as well as in store. However, for logistical reasons we only make one card available. We will continue to keep this under review.
It is reported that 82,000 people will not receive a bonus this year. Is this not a failure of leadership?
Nobody in the business got a bonus this year because we did not meet our financial targets. Shareholders and commentators expect bonuses to be paid when outstanding performance is delivered, and we have been very candid that we did not meet the expectations that we set ourselves. Therefore, the Remuneration Committee, chaired by Steve Holiday, made the decision that bonuses would not be paid. This is not necessarily a question of failure, but supports the idea that bonuses are paid for outstanding performance against expectations.
Mr Bolland has also asked for each of the last four years, not to be considered for a salary rise and he has not had one.
Can you tell me how many Chief Executives who earn more than £100,000 have left M&S in the last three years?
No Chief Executive has left the Board in the last three years. The executive team has been consistent throughout the year. What is reported in the newspapers is not always consistent with the underlying facts.
Was there an issue in one of our stores earlier this year on religious grounds?
We have made it very clear we have a policy that is entirely respectful of everybody’s particular beliefs, and it is a very rare event when we get things wrong.
What were the reasons that the Remuneration Committee complied with the request of the executive directors to not receive a pay rise?
The executive directors asked that they should have no increase in salary to show solidarity at a time when staff were not getting bonuses. I think that is a responsible way of behaving, which I hope you would applaud.
What is the view on Jan Heere’s departure?
Jan has done an excellent job. He has been with us for three years, leaves behind an extremely strong team, one of which has been promoted into his role. I am glad to say that we have very strong bench-strength. In the past three years as Chairman, I have seen the skill base of this company increase quite significantly in a number of areas, one of which is the International business.
What is your policy on accommodating the religious beliefs of employees?
We try to accommodate people’s differing beliefs across the various roles within the business.
Why does the Board feel it is necessary to reintroduce ‘innovation’ as a core value when it should already be at the heart of the business?
Innovation has always been one of the core values of M&S. We have tried to encapsulate our core values in four key words, one of which is innovation. M&S is at its best when it is innovating: when it is on the front foot, doing the things that it is great at. There are lots of things in our GM business, all sorts of different innovations that have to be at the heart of this business. And, if we start to forget, which we won’t, there is a portrait of Simon Marks in the boardroom to remind us.
What is M&S doing to improve Shop Your Way signage in stores?
Shop Your Way is such an important part of our business, and over 55% of our online business is Shop Your Way.
One of the reasons why Laura has her increased responsibility is that working together with stores and online; all our channels will be properly focused on the customer.
Are you closing stores that are not profitable and, where appropriate, converting them into food only? If not, why not?
A key part of looking at the business for the long term is what the property portfolio looks like. Our job as a Board is to look beyond the present to where we might be in the future, and we frequently debate how our store portfolio is structured.
We plan to open 150 Simply Food stores over the next period of time. We are fortunate, in a sense, to be able to reconfigure our store estate to focus on Food or General Merchandise in different ways. Stores that do not perform are always reviewed.
Diabetes is a growing problem in the UK. Why does M&S food have such high levels of carbohydrate?
We are the leaders in healthy-eating food, and healthy eating is one of the core principles underlying Plan A. Healthy eating is a huge problem in the UK and in many other parts of the world, and we will play our part in trying to shape healthier habits over the course of time. This is an industry issue as well – but we will be at the forefront.
Will M&S become an accredited Living Wage employer?
M&S will go on being a great employer and paying at the top end, and being at the forefront of employee engagement. We will do our very best to make sure that we get the very best staff, which means that we have to reward them appropriately.
As the Board recognises the importance of a Living Wage through its commitment to implement it in its supply chain abroad, will you extend your commitment to the Living Wage to your employees here in this country?
I cannot make commitments that I cannot promise to live up to. That would not be the M&S way. We can promise to pay at the top end, which is what we do, and we will continue to do that, as well as the other benefits that we give to employees. We do that because they give great service and we want the very best. I cannot promise the particular commitment you request, but I can promise that M&S will be amongst the very best employers in the UK.
Are we witnessing a loss of leadership on the part of Marks & Spencer due to the continuous decline in sales of clothing and increasing domination by the likes of Next and Primark?
The team has confidence in its ability to deliver on our plans, and we hope that what you have seen today at our AGM gives you an equal confidence in the improvements in quality and style that are the hallmarks of M&S.
Can you explain the reason why there is no M&S store in Israel, and are you intending to open one?
We plan to open about 250 stores over the next three years in our International business. We have set out where our priority markets are located. One of the issues with M&S over the past is that we have perhaps been too spread. This Board has to focus on the areas where we think we can grow best in the immediate term.
For the time being, I think you will find that our focus is on the countries in which we are, not necessarily in the countries in which we are not.
Please can you explain the recent management reshuffle, the implications of it and, in particular, whether we are about to see a lady CEO for the first time in M&S history?
There were two particular changes made. Laura has taken on additional responsibility for all channels, working with Sacha, and the reason for that is very clear: you have to have one face on the customer. We have to be modern retailers – multichannel retailers.
The other one, with Patrick taking on the International responsibility, is to give a very common view of the M&S brand across the whole of our International network.
John Dixon, who runs our GM business, has operational performance of all of the P&L account, and the same is true of Steve Rowe in Food. We have a very talented group of executives. Alan Stewart has taken on the additional responsibility of property, which is part of our strategic landscape going forward.
Please can you elaborate on the recent computer glitch that happened in January and, in particular, the impact on M&S profit and revenues and the future success of online trading?
Our new website launched at the end of February, so I think any glitch in January cannot be attributed to our new website. Our Castle Donington e-commerce distribution centre has been rapidly building up. The distribution centre is a 1 million sq ft automated warehouse, which is equivalent to 11 Wembley pitches, and the idea that you build a facility like that with no glitch is highly unlikely. Any problems that arise are dealt with. Very soon, 100% of our e-commerce will be handled out of Castle Donington.
Can you tell us about your operations in China?
We continue to build up our operation in Shanghai. We have made it clear that we are going to open two more flagship stores in different cities, and going to seek partners in China. We are there for the very long term and it will be a step by step process.
Why does M&S make it difficult and discourage staff from join a union?
Employees are free to do as they wish. However, we have a wonderful Business Involvement group, with more than 3,500 elected members who serve the interests of our staff.
Why do you not employ more staff?
We need the right people on the floor. The work that we are doing to get the long-term and youth unemployed into our business and into the workforce is extraordinary. This is something that Marc Bolland has been personally involved in.
Do those responsible for marketing realise that the ever-growing number of snap sales, special offers and more and more discount days, which rapidly appear to be replacing regular, down-to-earth, reasonable pricing, is sapping the confidence of our customers who seek good-quality, fashionable merchandise?
The business is very focused on margin levels and fully recognises the brand impact of excessive promotions.
When and how will this board stop apologising for underperformance and rectify it, after three years of falling or flagging clothing sales?
We have made clear the changes being implemented within the business, making it a stronger, more capable company than it was. There is work to do and we have a very clear plan. We need to deliver on our investment, and we intend to do that.
Do you have plans for a comprehensive Food website, where one can make comparisons with prices?
Selling food online is something that has been considered. However, we will do it only when we think it is a profitable business for M&S, which, on the current basis, it is not. However, it is kept under review because things may change.
What makes M&S different in food is its specialness and innovation. It is not just a comparison about branded products. Branded products are a very small part of our food offer.
We believe that M&S should have a presence in Aldershot and have had to engage in a petition to save our store there.
We would never redesign our estate and avoid a store that is producing really excellent returns, however over time we do have to reshape it. This is not a question of reducing space, because we are not - we are keeping GM space level and will be opening around 250 new Simply Food stores over the next few years. However, there will be instances where the dynamics of the neighbourhood have changed, which has an effect on people’s shopping habits, and our store configuration will need to change as a result. We try very hard to minimise the impact on our staff and local communities when this occurs, but we cannot stay still and retain an absolutely intact store estate over time.
How are you planning to improve ladies fashion in terms of style, size and fit?
We have significantly invested in improving and upgrading quality across Womenswear, whilst maintaining prices for our customers. 30% of our Womenswear fabrics have been upgraded in 2014/15. On fit, our development team, which is unique to M&S, has undertaken a major project to ensure consistent fit across all our brands. This has resulted in a near 50% reduction in customer complaints. We are also offering a wider choice of dress lengths, sleeve options and cuts to suit different silhouettes.
What are you doing to improve your fashion?
In terms of quality and the product in store, in essence I think what customers are telling us is that they can see the strides that we are making with the business; bringing back in-house design, getting back our confidence in fashion, and getting quality and style back into the business.
Our Autumn/Winter 14 and Spring/Summer 15 collections were well received by both the fashion press and our customers, who enjoyed our interpretations of key style trends. The fashion press also identified our Autograph suede skirt (£199) as being a highlight of the year.
For Autumn/Winter 15, our design team have utilised contemporary shapes and simple silhouettes, with luxurious fabrics and tonal colour palette, to create a confident collection that feels contemporary, yet is accessible for all age groups.
M&S is also working with the British Fashion Council in an exclusive partnership to celebrate British fashion, home grown talent and sustainability.
What are you doing about the lack of stock on core ranges in the most popular sizes?
Availability is key and this issue is a key area of focus for the Board. We are currently upgrading our merchandising systems, following which we will be a much more effective business. Although availability is improving, we understand that there is more to be done. The Food business has already been upgraded and its availability has seen significant improvement.
Could the Board please update the Shareholders on what deliberations have been made on the UK living wage since this was raised at the AGM last year?
We do think about things like the living wage a great deal on this Board. We do not just talk about trying to do the right thing, we really do try to do it. We want to lead the way in how we work with our employees and this does not solely relate to the amount of pay they receive. Of course pay is important, but it is also in relation to the benefits they get, for example staff discounts and pensions, as well as things like flexibility. Many members of staff say that it is flexibility for child care, for carers, for paternity leave, for maternity leave, for week-to-week or day-to-day flexibility that we try to help them with that is also really important.
It is not just our employees. Our Marks and Start campaign has been put in place to help thousands of unemployed people obtain employment. Additionally, through our own efforts other companies have now joined in to a similar scheme, which we hope will get 50,000 unemployed young people back into work in the next two years.
Will M&S commit today to making real strides on implementing the living wage on the ground for all their workers?
We are actively engaged on this issue and have offered to meet with key groups. We will continue to listen and engage on this topic going forwards.
I am a shopper; I like clothes, but I have only bought one item in the past year. Again, it is a question of fit.
We have significantly invested in improving and upgrading quality and fit across Womenswear, whilst maintaining prices for our customers. 30% of our Womenswear fabrics have been upgraded in 2014/15. Our development team have undertaken a major project to ensure consistent fit across all our brands. This has resulted in a near 50% reduction in customer complaints relating to fit. We are also offering a wider choice of dress lengths, sleeve options and cuts to suit different silhouettes.
Looking at the Annual Report, there is a huge amount of information on executive remuneration but very little about remuneration on the shop floor. Can we have more basic facts so we can have a rational discussion on the living wage topic?
We publish details of our Board's pay in line with the remuneration reporting regulations, as we are required to, in a very open and transparent manner, which has been recognised externally as being of a very high standard. We also provide details of how the Remuneration Committee takes employee pay into account when determining the Directors' remuneration.
There was once a page in your annual report about the charity and community work the company did, it is not there any more. Is M&S still part of the 1% Club of companies committed to devoting a percentage of post-tax profit to charity?
Yes, we are and we were, in fact, recent re-accredited with the BITC community mark.
What sets M&S apart is how much we is how much we get our employees involved in this. It is absolutely a fundamental way of how our store staff are involved in their communities and in the work that they do. For example, we raise huge amounts of money for a number of charities, including around £1.3 million for Macmillan, £700,000 for Breakthrough Breast Cancer and about £1.3 million for local charities. Thus, I am glad to say we are absolutely there and we are doing our bit, but with our people as well. This is no longer singled out within one page of the annual report, as it flows through and underpins the whole report. A specific report named ‘Plan A’ is also published which focuses on the work we do to support the community in which we operate and the environment in which we live.
Do you agree that we would have had nine pence extra dividend if you had not squandered £150 million on a share buyback programme?
The effect of the share buyback is that it reduces the number of shares in issue. The amount of money the Company pays out as a dividend can therefore be applied to fewer shares. If you look at the discounted value of those dividends, it is a larger amount, so there is an economic point in a share buyback: assuming you do not sell your shares, you will own more of the company.
In 2007 and 2008 the profit of this company was £1 billion. On the basis of your turnaround strategy, when do you think that we are going to have that sort of profit?
We have been very clear over a period of years that what we are about is building a long term, sustainable business. Our dotcom platform saw a 38% increase in sales over the last quarter. Last year, our dotcom platform was subject to a great deal of criticism, however we knew that it would take time to bed in and strongly believe that it was the right thing to do for this business over the long term.
Likewise, the move away from 100 assorted warehouses around the country to a one million square foot automated warehouse at Castle Donington was also the right long term decision for the business. Did it have an effect on last year’s profits? Yes, it did. Do I regret that? No. Do I regret that we could not have implemented it absolutely perfectly? Of course I do. I said at last year’s AGM that it was wishful thinking to imagine that a project of this complexity could be completed with no issues.
We have to build a business for the long term, a business that is sustainable and on which we do not have to preform radical surgery every couple of years.
Can I ask if you would, in future, be prepared to report international sales and profit contribution geographically in order to assess fully this important part of your strategy?
Much of our financial reporting is governed by legislation. In fact, the stores, whether in France or the Czech Republic, are served in much the same distribution way as they are in the UK. We are acutely conscious of the need to make profits in our International business and for the performance of that business to improve. What I can tell you is that we have no intention of deploying large amounts of shareholders’ capital in the pursuit of profits unless we are pretty sure of the return.
Would the board commit to undertaking a calculation of how much they could be set to gain from the long term benefits of adopting the Living Wage (such as earning customer loyalty, increasing employee engagement, reduction in turnover and absenteeism and reducing training and retention costs), and discuss this in the meeting so agreed with Share Action?
We are able to commit to meet with Share Action and continue the debate. We know that we pay very well in the market and have a strong benefits package, which results in high retention and lower turnover than that experienced by many of our competitors.
We work hard to build a strong relationship with our people, offering great career opportunities in addition to a strong remuneration package.
As an M&S customer, I'm delighted by your frequent one or two day 20% off sales, but as an M&S shareholder, I'm alarmed. Is there not a danger that these will lead to situation whereby would-be purchasers simply wait until a sale comes along, thus effectively driving down all prices by 20% - or conversely, of the discounted prices being artificially inflated by 20% to compensate?
We now have greater confidence in our product and the amount of promotional activity we undertake is significantly less than it has been. However, from time to time there will be exceptions to that. May was an unseasonal month for retail as a whole, which meant the market was more promotional - we responded with our own activity to clear seasonal stock more effectively, rather than simply putting it into sale.
We always aim to offer great quality and value with our product pricing and we would not artificially inflate this.
How and when will M&S improve its performance and total shareholder return, particular in relation to GM?
We continue to focus on the quality and style of our GM ranges. We are on track to deliver GM margin growth of +150 to +200bps with ongoing sourcing initiatives during this gross margin improvement.
We have set out our capital allocation policy committing to a progressive dividend policy, broadly twice covered by earnings and returning any surplus cash to shareholders on a regular basis. We will be returning £150m of cash to shareholders through a share buyback programme, but we are not wedded to any particular method of returning capital to shareholders. We will make that decision every time that we come to it, so if it is the right thing to do one year, it will not necessarily be the right way to do it another.
Has Marks and Spencer surrendered the high street crown?
Firstly, why are we meeting out in the outer suburbs instead of the centre of London or even the centre of some other city? Secondly, when will we be going back to Central London?
Wembley has given us first class facilities and a location to deliver our AGM for the past few years and is our venue of choice for many of our Corporate meetings, bringing financial efficiency that we believe shareholders would applaud.
Regarding the marketing strategy for India, what proportion of the profit you make there contributes to earnings per share?
We are very alive to the need to grow and be profitable and, in fact, our Indian business is growing very nicely and is a good business. India is not one of our challenging countries. In fact, we see really good opportunities, but we are going to be very measured in the way that we go about them and the Board has a lot of focus on that.
Can we have more information on individual director’s performance included on the AGM documents sent to shareholders?
Details of our Board evaluation and performance is included in the full version of the Annual Report, which all shareholders are entitled to. However, you raise an interesting point as many of our shareholders elect to receive the much shorter ‘Performance Overview’ document, (which doesn’t contain this information) as the full report runs to some 130 pages. Although this information is on our website I will mention your comment to the team that produce the documentation.
Last year I raised a question about NEDs and measuring their performance. I would like to know whether there is an update in terms of what is happening, and if nothing is happening, why that is the case?
It is happening, and I can tell you that all of our non-executives are appraised. It is an annual process and every three years we carry out an external evaluation; this year (2015/16), it was an internal one. It is very stringent, in particular for the Chairman. You will see in our Annual Report that we set it out in quite a bit of detail, including where we think we are not doing as well as we could be. We are pretty self-critical, and I can tell you that the evaluation is rigorous. It is a very proper annual process.
I would like it to be known that a particular member of your staff was exceptional and I am very pleased with her response.
Thank you, we are delighted and will pass on the great feedback. We’ve always found our people to be professional, positive and dedicated to our customers. Wherever they work they show huge pride in working for this unique business, they are what makes M&S genuinely special.
We know it is not an easy time, and that making sure Marks & Spencer is a great place to work is complicated, but we want to show our appreciation for the big step you have taken in the announcement of changes to staff pay packets, which includes a big raise in base pay – up to £8.50 per hour across the UK, and £9.65 in London – from April 2017. While it is up to staff to say whether they are happy with the changes proposed, we have been impressed by the level of ambition set by the Board. It is highly commendable that you are seeking to set the bar higher in terms of wages while many others are coasting by complying only with the legal minimum. Would the board agree to developing plans in the year ahead to move towards meeting the living wage rates and providing full accreditation?
The Board has spent a great deal of time thinking about this. We recognise that we have some of the best employees in the country. If you remember, I did not make any promises last year regarding full accreditation, but the one thing I can commit to is that we will go on being responsible and being leaders in this field, and we will continue to give thought to it because our people are the heart of our business. Without them we are nothing, and we recognise that. We are in the middle of consulting with our employees on the proposed new rates of pay that are set above the current Living Wage. We are committed to an ongoing dialogue on the Living Wage, but as you can appreciate at this time we will not be committing to accreditation as part of these proposals.
Does the Ladies Fashion Team know who its target customer is?
Since January our buying teams have met with more than 250,000 customers. We are absolutely focused on getting the garments right and have made a number of changes. Our autumn range is absolutely focused on wearable style, on great fabrics, on great fits, and products that flatter all of our customers. By talking more frequently to our customers through panels, focus groups and online feedback our womenswear team are clear on what our target customer wants.
Two weeks ago I was invited to afternoon tea to meet the team and view the new autumn collection. The materials used are much better than recent offerings and the cut and detailing also were far superior to anything we have seen over the last few years. Well done.
We really value the views of our shareholders which is why we are going to engage more going forward.
There is a shortage of fast selling sizes are a concern to me as a customer, but particularly as a shareholder.
Driving better availability is key to our success and we are taking steps to resolve it. We now have a new allocation and warehouse management system which is now fully deployed through the buying department. We are increasing the amount of core wardrobe essentials which will run throughout the season, which will allow us to drive availability and provide the right sizes to our customers. We have extended the range of fits in a number of areas to make sure we can accommodate more of the requirements of the customer base.
What strategic changes will be made to resolve declining Clothing sales?
We have set out the first phase of our plan and addressed how we can better understand our customers and what M&S means to them. On Clothing & Home so far we've improved availability, sharpened our price points and reshaped the structure of our Womenswear team to better reflect the way our customers shop. We have a lot more to do, we will continue to lower prices, put emphasis on styling rather than catwalk trends and we will focus on innovations that are genuinely useful.
How and when will M&S improve its performance and total shareholder return, particularly in relation to Clothing and our competitors?
Over the last five years, the share prices of major food retailers have fallen by, respectively, 62%, 42% and 33%. This has been, as these share prices demonstrate, one of the most difficult times in retail. We accept our performance needs to improve, but the comparison needs to be balanced. We have set out the first phase of our plan to address the recovery and growth in our Clothing & Home business, as well as growing our food opportunity and a review of our cost base. Within Clothing & Home, we have improved availability, sharpened our price points and reshaped the structure of our Womenswear team. We have a lot more to do and will address the root causes of our issues throughout the year.
How quickly will an M&S return to Aldershot given that my nearest franchise store is 3 miles away?
We have no current plans to open a store in the short term but Aldershot is one of the places we are looking to open a new store. We recognise it is a gap in the market for us but we want to make sure we get the right property. We want to make sure we get the right units with the right accessibility for our customers.
When can we have our £800m back and why are we still making contributions to the pension scheme?
The £824.1m benefit surplus is an actuarial valuation based on requirements of the International Financial Reporting standards, these numbers can vary greatly year on year dependent on factors such as corporate bond yields. In February we announced the results of the triennial actuarial valuation which showed a small surplus of £204m. We have a good relationship with the pension trustees and have shared principles about taking a long term view of funding and together we are working to continually de-risk the investment strategy with a prudent view to maintaining a scheme surplus, which also benefits the business with a consistent, long term cash contribution enabling us to manage cash flow.
Could you comment on the recent article in the FT on lack of judgement and in particular the share buyback scheme?
We committed to the share buyback at the beginning of the year as part of our commitment to delivering returns to our shareholders. The share buyback did increase shareholder value, however the shareholder accretion would have been greater if the buyback had been done at a lower price. We have listened to our shareholders, including private shareholders, and we have now switched to a special dividend in light of the share price and our shareholders can now choose if they want to reinvest it in purchasing more shares.
Why do we need a separate M&S credit card and Sparks card in order to earn points? And why do you have to bombard us with e-mails on Sparks offers?
We are exploring ways to bring our credit card and sparks scheme closer together, however, they are different schemes. Our credit cards are offered by M&S Bank. The M&S credit card offers customers M&S reward points on credit card spending. Sparks recognises more than just spend and goes beyond generic discounts to reward members with personalised, lifestyle enhancing benefits. In the nine months since we have launched it, about four and a half million people have joined the scheme, and as their spending habits evolve and we see more of that, we will make sure that we send the right emails.
Can I thank you for supporting the MacMillan Charity.
It is a fantastic charity and has been at the heart of what we have done for many years. The Sparks programme has raised over £1 million in the period Sparks has been going. The amount of money raised is fantastic and we know it resonates with our customers and with our people.
Last week we had the results and an error was then rectified quite soon afterwards - why did our auditors not pick this up?
The trading statements, as opposed to the preliminary results and the half-year statement, are not checked by the auditors. This was our mistake and the thing that is crucial when mistakes are made is that you learn lessons. We have a Board meeting next week and we will learn what those lessons are.
I would like to thank M&S for your environmental impact with regard to community energy fund support.
Thank you for the positive feedback. It really means a lot to us and it is much appreciated.
What steps are M&S taking towards promoting plant based and alternative proteins, as well as encouraging consumers to adopt more sustainable diets? Would the board be willing to meet with ShareAction to explore this further?
Healthy eating is part of our plans for growth and we have a number of interesting innovations that we are exploring at the moment, including plant-based solutions. Our Food and Plan A team would be happy to meet to discuss further.
Are you listening to your own staff on what customers want and are you responding quickly enough?
We have been having hundreds of thousands of conversations with our customers and with our store assistants. They are the people who really understand what our customers want. We are not going on myths of what our customers may or may not want. We are going to listen to them to really understand what they want.
I am unable to see separately the womenswear performance and figures in the annual report. Where can I find this information?
The information presented in the annual report is not disaggregated below the level of clothing & home and food. The reason we do not publish it separately is because you could start segmenting our business into so many different things. Breaking down things into parts is not necessarily in the long-term interests of the business. We have to be judged on our Clothing and Home Business or our Food business in totality.
M&S shares are down and profitability is down. Whilst M&S have good quality clothing it is too expensive and there aren't enough customer assistants on the shop floor. What are the management going to do to change it?
Customers will see more competitive prices across 30% of the range by the end of the year to ensure our price points are sharper and that our products are no more expensive than our key competitors. In one part of the business we have performed exceptionally well, and in another part of the business, we have not performed as well as we should have done. The cash flow in this business is strong and the fact that we have included an additional dividend this year is a reflection of that.