Marks and Spencers - a Platform of Growth

A Platform of Growth

This year M&S returned to growth, demonstrating the resilience of the brand through difficult times. 2009/10 has been about leading the business through the recession without losing sight of our long-term plan or our core values.

We remain committed to building a world-class retailer through increasing the pace of change and driving operational excellence in the business; building our multi-channel capability; growing our international portfolio; and, as the economy returns to a stronger footing, reinvigorating our brand communications.

Our progress was interrupted - but not altered - by the recession. Last year, we continued to implement short-term objectives to guide M&S through the economic downturn. As a result of this decisive action our long-term strategy remains in place. We have built a strong platform for growth and have improved or maintained market share in all our core areas.

We grew because we managed our costs prudently, listened and responded to our customers' changing needs and stayed true to our core values of Quality, Value, Service, Innovation and Trust, reminding our customers of what makes M&S different. This year we have worked hard to further improve our quality and our customers have told us they have noticed this improvement.

A year ago, I told you the Board had cut the dividend by 20.9%. This was not an easy decision but it gave us the flexibility to continue to invest in the business despite the downturn. Although we scaled back investment in new stores, we continued to invest in our infrastructure, particularly our supply chain and IT systems.

We also invested in our margins, to give customers the extra value they were looking for without compromising quality. Whilst some retailers attempted to meet this need by repositioning themselves as 'low cost', M&S continued to stand for value and not just price &ndash an approach that is serving us well as consumer confidence returns.

Despite the economic challenges, we have also renewed our commitment to Plan A, our eco and ethical plan. We know environmental issues matter to our customers and that the recession has not altered their level of concern. They continue to look to M&S to lead the way, so this year we set out our vision to become the world's most sustainable major retailer by 2015.

Since its launch in 2007, we have moved from the implementation of Plan A to making it the key driver of how we do business. In doing so, we have become more efficient and in 2009/10 alone Plan A generated £50m additional profit, which has been invested back into the business.

This year I worked with the Board to identify Marc Bolland as my successor as Chief Executive. Though we remain cautious about the year ahead, the worst effects of the recession are behind us. Furthermore, M&S is in a stronger position and I am convinced that Marc is the right man to lead the business forward, as he brings a wealth of experience to the role. As Chairman, I will continue to work with the Board and with the management team to ensure a smooth transition until I leave the business.

Our performance this year*

Marks & Spencer has had a good year, with our adjusted profits up 4.6% on last year to £632.5m. Before the £80.9m bonus we paid to our colleagues to thank them for their extraordinarily hard work, profits were at £713.4m, a 17.5% increase on 2008/09.

You will see from Ian Dyson's performance overview that Group sales increased by 3.2%. Positive UK like-for-like sales have returned, up 0.9% and we have seen growth across all parts of the business, as the external market conditions improved and our customers became more confident.

Food has now delivered a sixth consecutive quarter of growth. As outlined in John Dixon's review this has been achieved by better value, availability and product innovation, whilst continuing to deliver outstanding quality. The pace of development in Food will not slow and this year we committed to renewing 25% of our food range every year.

Our clothing market share continues to grow, up 0.3% to 11%, as our customers have started to invest in their wardrobes again. Feedback from them tells us we have got the products right and are in touch with the latest trends. As set out in Kate Bostock's clothing review we've responded to customer requests for an easy to wear, casual range, with the launch of Indigo Collection. We have also used our 'good', 'better' and 'best' pricing structure to ensure we continue to offer something for everyone, making it easy for our customers to trade up and down within M&S to suit their priorities and budgets.

We remain focused on helping our customers shop with us whichever way they want, bringing together our various shopping channels to provide greater convenience and flexibility. As explained here, this year we launched 'Shop Your Way', a new ordering service that has been rolled-out to over 300 stores, allowing customers to place orders either in stores, online or over the phone, for delivery to either a nominated address or free of charge to their nearest store.

Our International sales were up 5.7%, despite difficult trading conditions in the Republic of Ireland and Greece. We remain confident in our International growth plans and this year we have focused on building sustainable businesses in emerging economies such as India and China.

Improvements across M&S are a result of our consistent delivery of quality and value to our customers. Through good times and through adversity we have remained true to our core values. It is these values that continue to set M&S apart from the competition and I believe they are more relevant than ever before in our 125 year history.

Trust

Our customers know they can trust us to do the right thing and nowhere is this better demonstrated than through Plan A. This year we raised the bar - setting ourselves the ambitious goal of becoming the world's most sustainable major retailer by 2015.

Our extended Plan A will reach further and move us faster - covering every part of our business and reaching out to our 2,000 suppliers in the UK and overseas and into the homes of our 21 million customers.

We are also encouraging our 76,000 employees to live 'greener lifestyles' and this is explained in more detail in our people section. As part of this all M&S employees are now entitled to a paid volunteer day - so that we can give something back to the communities we serve.

By 2020 we aim to convert the 2.7 billion individual M&S food, clothing and home products sold each year, to 'Plan A products', so that