AT A GLANCE FOR OVER 135 YEARS OUR EXTRAORDINARY COLLEAGUES AND CUSTOMERS HAVE FACED CHALLENGES BIG AND SMALL AND COME THROUGH THEM BY SUPPORTING EACH OTHER AND WORKING TOGETHER M&S is a British value for money retailer, focused centres, our warehouses and in our supply on own label businesses, including Food, chain – who have worked tirelessly to deliver Clothing & Home, in the UK and internationally. for our customers. Today we operate a family of businesses, selling Together we have strived to secure the high-quality, great value own-brand products future of the business and, as we emerge, in the UK and in 62 countries, from 1,519 stores our “Never the Same Again” programme and 44 websites globally. will accelerate our transformation and fulfil our potential to deliver long-term, sustainable In the face of an unprecedented global crisis, and profitable growth for our investors, the best has been brought out of our 78,000 colleagues and wider communities. colleagues – across our stores, our support Cover image In April, rainbow bags-for-life started appearing in our stores. Priced at 20p, M&S is donating the entire Read more on p10 Read more on p12 Read more on p27 Read more on p50 10p profit to NHS Charities FOOD CLOTHING & HOME FINANCIAL REVIEW COVID-19 RESPONSE Together to aid its Covid-19 response. © 2019 Friend Studio Ltd File name: Cover_v47 Modification Date: 27 May 2020 4:15 pm GROUP OVERVIEW £10.2bn -1.9% £67.2m -20.2% 22.5% +1.8% Group revenue Group profit before tax Percentage of UK Clothing & Home sales online -70.7% -21.2% 3.9p £403.1m (18/19: 59%) Total dividend paid for 2019/20 Profit before tax and 63% APM adjusting items Food: Value for money perception -48% 1.3p -2.6% (18/19: 68) Basic earnings per share £1.46bn 68 STRATEGIC REPORT APM Net debt excluding lease liabilities Stores: Net promoter score1 16.7p -29.5% 57 (18/19: 54) APM Adjusted earnings per share M&S.com: Net promoter score1 GO DIGITAL Access to more detailed Strategic report Financial statements and interactive content 02 Chairman’s letter 112 Consolidated financial statements The money saved on 04 Chief Executive’s statement 116 Notes to the financial statements printing and postage 07 Our strategic priorities 172 Company financial statements 08 Market context 174 Notes to the Company will help lower our costs 09 Business model financial statements 10 Food 179 Group financial record Reduces our carbon 12 Clothing & Home 180 Glossary footprint and saves paper 14 International & Services 16 Channels 183 Notice of Annual General Meeting Join our Digital First community 18 People & culture and sign up for online 20 Engagement & decision-making 198 Shareholder information2 communications only, in time for 22 Plan A 200 Index next year’s report. It’s much less 25 Non-financial information statement fuss, much more interactive and 26 Key performance indicators 1. Net promoter score (NPS) equals the percentage of you’ll be helping M&S to reduce 27 Financial review ‘promoters’ minus the percentage of ‘detractors’. its impact on our environment. 33 Risk management 2. Shareholder information forms part of the Directors’ Report. To register, visit shareview.co.uk, 34 Principal risks and uncertainties a secure platform provided by our Registrar, Equiniti. From the Governance ALTERNATIVE APM home page, simply click ‘Portfolio’ PERFORMANCE MEASURES followed by ‘Open Portfolio Account’ and follow the on-screen 44 Chairman’s governance overview The report provides alternative performance instructions. You will need your 46 Our Board 48 Board activities measures (APMs) which are not defined shareholder reference number and or specified under the requirements of activation code to register; these 50 Governance in action: Covid-19 response International Financial Reporting Standards have been posted to you in this as adopted by the EU. We believe these APMs year’s Notice of Availability. 54 Board composition and provide readers with important additional meeting attendance information on our business. We have included Covid-19 response timeframe 55 Leadership and oversight a glossary on pages 180-182 which provides On page 50 we set out the 56 Board review a comprehensive list of the APMs that we use, timeframe for the Company’s 57 Nomination Committee Report including an explanation of how they are response to Covid-19, which 59 Audit Committee Report calculated, why we use them and how they DIRECTORS’ REPORT DIRECTORS’ extends beyond the 52 weeks 66 Remuneration overview can be reconciled to a statutory measure where relevant. to 28 March 2020 covered by this 72 Remuneration in context report. Within the strategic report 74 Remuneration Policy ‘Our Action in Response to 81 Remuneration Report Covid-19’ is not confined to the 93 Other disclosures reporting period but we have 98 Independent auditor’s report indicated where the financial impact of these actions relates to the 2019/20 financial year. Annual Report & Financial Statements 2020 01 © 2019 Friend Studio Ltd File name: Strategic_XIFCXXXXXOurXPeople_v196 Modification Date: 27 May 2020 6:43 pm CHAIRMAN’S LETTER Dear Shareholder, Financial highlights Although much of this report is about All In This Together the results for the financial year 2019/20, We implemented a number of these now seem to relate to a previous Below -70.7% social-distancing measures throughout the age. The Covid-19 pandemic has since shopping journey in our stores to help keep 3.9p swamped our lives and the way we our customers and colleagues well. Total dividend paid for 2019/20 operate the business. At the time of writing we are in the midst of lockdown. Our focus has been first on the safety of our colleagues and customers and on supporting vulnerable people and healthcare workers. Second on securing our business, cash flow and liquidity and planning our way through the clearance and storage of surplus stock. And thirdly on ensuring we learn from the crisis and come out stronger, faster and more competitive when we emerge. Very sadly, we have lost two colleagues to the virus and others are in hospital. “ We have drawn up Our thoughts and prayers have been with them and their families. More broadly, our “Never the Same the M&S family of colleagues has rallied together magnificently in the crisis. Again” programme Our business has been operating continuously since 1884, including to harness our new through two world wars. In the 1939-45 war 100 stores suffered bomb damage and habits and use the 16 were destroyed. With the support of the most passionate and dedicated workforce lessons of this crisis in UK retail, we will trade through the crisis, to make what feels serving our customers throughout. From a financial point of view, the 2020-21 like three years year is likely to be a lost year. Although progress in one.” we have taken drastic measures to secure cash flow and maximise sales, Maintaining our Archie Norman, Chairman it is inevitable we will emerge with more debt than we had planned and make standards for customers losses for a large part of the year. Whilst it We’ve increased hygiene measures is a challenge to forecast the future, our Above across our stores to give our customers scenarios are based on a prolonged period confidence when they shop with us – such as of social distancing, trading limitations cleaning baskets, trollies and self-checkout and depressed demand. We have taken tills every hour. steps to obtain substantial concessions from our banks and secure liquidity for the likely duration of the Covid-19 crisis and to underpin the recovery strategy. There is a saying sometimes attributed to Winston Churchill, “never waste a good crisis”. Our business is now operating in ways we have never operated before. Remote working is only a small part of it. Multi-tasking in stores, delegation of authority, fast decision-making, an action orientation irrespective of hierarchy, and brilliant communication direct to the front line. At the same time, the way our 02 Marks and Spencer Group plc © 2019 Friend Studio Ltd File name: Strategic_XIFCXXXXXOurXPeople_v196 Modification Date: 27 May 2020 6:43 pm customers live and shop has changed beyond recognition and these behaviours will not fully revert any time soon. We are determined to make our ways of working permanent and accelerate the aspects of our transformation necessary to thrive in a new consumer landscape. The manner in which our colleagues have been galvanised to act with pace and agility gives us confidence we can emerge stronger, as a faster, more streamlined business. This is why we have drawn up our “Never the Same Again” programme to harness our new habits and use the lessons of this crisis to make what feels STRATEGIC REPORT like three years progress in one. The acquisition in the year of a 50% share in Ocado Retail, supported by shareholders through a rights issue, gives us access to the UK’s fastest growing food channel and is a strategic driver of growth for our Food business. The crisis has created a step change in demand for online grocery and we will commence supply to Ocado in September, making the M&S food range of over 6,000 products available online for the first time. We are now, after two and a half years of transformation, on the verge of completing a much stronger management team, most notably with the arrival of Eoin Tonge as Chief Financial Officer, Katie Bickerstaffe as Chief Strategy and Transformation Director, and Richard Price as Managing Director, Clothing & Home, together with many others. I wanted to thank all our colleagues for their loyalty in one of the toughest years in our history, the leadership team for working flat out through the crisis, and the Board for being continuously engaged.