The financial year 2016/17 was a 52 week year whereas 2015/16 was a 53 week year.
Unless otherwise stated, in order to provide a year on year comparison, variances relating to revenue, profit and earnings per share are on a 52 week comparative to 26 March 2016.
• Adjusted profit before tax down 10.3% due to the expected decrease in Clothing & Home sales and increased costs of new space.
• Significant adjusted items of £437.4m resulted in profit before tax down 63.5% as we establish a base from which to grow.
• Clothing & Home gross margin up 105 basis points with full price sales growth of 2.7%. As expected, revenue down 2.8% due to planned reduction in promotions and clearance sales.
• Food revenue growth of 4.2% driven by new stores. Gross margin down 25bps due to input cost inflation and higher than anticipated waste.
• UK costs up 3.8% due to costs of new space, IT investment and inflation, offset by efficiencies.
• International profit before adjusted items up 15.4% to £64.4m, as a result of the decision to exit owned stores in 10 loss-making markets.
• Strong cash generation reduced net debt by £204m. Full year dividend unchanged at 18.7p.
Steve Rowe, Marks & Spencer CEO said:
"Last year we outlined a comprehensive plan to build strong foundations for the future. We said we would recover and grow clothing and home, continue with our plans for Food growth, remove costs and simplify the business. We achieved a huge amount in the year and whilst there is still much to do, I am pleased with our progress and we remain on track.
"As we have made improvements to our Clothing & Home product and proposition, our customers have noticed; we are starting to stabilise market share and importantly have seen full price market share growth, as we removed excessive discounting. In addition, our new Food stores continue to exceed our expectations.
"As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits, but the business is still strongly cash generative and we reduced our net debt.
"Looking ahead, we will continue our programme of self-help in a tough trading environment. We remain committed to delivering for our customers and shareholders as we build sustainable foundations for the future."
Robert Swannell, Marks & Spencer Chairman said:
"This has been a year of accelerated change at M&S, as Steve set out his plan for a simpler business, focused on customers. We believe these actions will make M&S a stronger, sustainable business. We are maintaining a total dividend per share at 18.7p, the same level as last year, taking into account the strong cash generation of the business."
Progress against our strategic priorities
A year ago, we announced the results of the strategic review that will form the platform from which we will recover and then grow the business. Since then we have delivered:
• A clear view of what our customers expect from M&S and what we stand for, supported by our unified brand message, 'Spend It Well'.
• A reshaped Clothing & Home proposition. This includes a more consistent colour palette, improved fit, 18% price reductions on a number of like-for-like lines, reduced promotional activity and 10% fewer lines.
• Continued growth in our Food business with 68 new stores and 1,600 new innovative lines, c.25% of our offer.
• Improvements to customer service in existing stores, where we have invested in over 3,000 new store colleagues, paid for through business efficiencies.
• Plans to reshape and improve our UK store estate for a multi-channel world. This will result in a refresh of c.25% of our Clothing & Home space over the next five years and further growth of Simply Food with c.250 new stores by the end of 2019/20.
• Completed consultation on store closures in 10 loss-making international markets. Renewed focus on growth with our franchise and joint venture partners.
• A fairer approach to pay and pensions which has resulted in a significant increase to our qualified UK customer service assistants' hourly base rate to £8.50 (outside London) and the closure of our defined benefit pension scheme to future accrual.
• A simpler, more effective leadership structure and operating model at our Head Office, with a reduction of c.590 roles.
We believe that our plan and the actions we are taking are the right ones to build a more sustainable, profitable M&S for our employees, customers, communities and our shareholders.
Full year guidance 2017/18;
• In Clothing & Home we expect a space decline of 1-2%, weighted towards the end of the year. We anticipate gross margin to be +25 to -25 basis points as we seek to mitigate currency headwinds with better buying and a further reduction in discounting.
• In Food, we expect space growth of c.7%, weighted towards the end of the year as we open c.90 new Simply Food stores. We anticipate input cost inflation will slightly outweigh operational efficiencies with a resulting decrease in gross margin of between 0 and -50 basis points largely weighted towards the first half.
• We expect UK cost growth of c.2.5 to 3.5% as a result of new space, cost inflation and the annualisation of investment in customer service, partly offset by Head Office restructuring efficiencies. Cost growth will be weighted towards the first half of the year.
• The 2017/18 effective tax rate on adjusted profit before tax is expected to be around 21% as a result of the Scottish Limited Partnership structure.
• Capital expenditure is expected to be c.£400m as we increase the rate of Simply Food store openings.
Group revenue: constant currency
Q4 group revenue declined by 0.6% at constant currency. Revenues were adversely impacted by the timing of the December sale, which was included in Q3, and Easter which fell outside the quarter. We estimate these factors had a combined effect of c.-3.8% on Clothing & Home revenues and c.-1.9% on Food revenues in Q4.