1

Preliminary Results25 May 2004

Luc VandeveldeChairman

2

Agenda

Introduction Luc Vandevelde

Financial Review Alison Reed

Operating Review Roger Holmes

Foundations laid to build next stage ofbusiness transformation• New management team• Fundamental shift to overseas sourcing• Exited loss-making operations in Europe• Balance Sheet more efficient aligned with £2

billion return of capital; £400 million injectioninto UK pension scheme

• Renewed all of our stores• Instigated successful Simply Food roll-out• Successful new clothing range launches eg

Blue Harbour, per una• Delivered &more card and first Marks &

Spencer Lifestore

3

Strong recovery in UK Retail sales*

£bn

*03 and 04 re-stated for FRS 5 Application Note G

6

6.5

7

7.5

1998 1999 2000 2001 2002 2003 2004

Recovery in UK Retail operating profit

0100200300400500600700800900

1000

1998 1999 2000 2001 2002 2003 2004

£m

4

* EPS pre-exceptional

Recovery in EPS*

0

5

10

15

20

25

30

1998 1999 2000 2001 2002 2003 2004

pence

Return on Equity* higher than 1998

0

5

10

15

20

25

1998 1999 2000 2001 2002 2003 2004*ROE pre-exceptional and excluding FRS 17 Balance Sheet impact

%

5

Foundations laid on which to build nextstage of business transformation• New management team• Fundamental shift to overseas sourcing• Exited loss making operations in Europe• Balance Sheet more efficient aligned with £2

billion return of capital; £400 million injectioninto UK pension scheme

• Renewed all of our stores• Instigated successful Simply Food roll-out• Successful new clothing range launches eg

Blue Harbour, per una• Delivered &more card and first Marks &

Spencer Lifestore

Alison ReedChief Financial Officer

6

Financial summary – 2003/0453week basis

• Turnover up 1.7%• Operating profit up 6.5%• Group profit before tax of £763m up 0.5%• Adjusted EPS up 0.4%• Strong Balance Sheet

– Retail gearing 44.7% and fixed charge cover 7.3 times• Operating cash flow £1066m before £400m

contribution into pension scheme

52week basis• Group profit before tax of £805m up 6%

P&L impact of accounting changes on2003 comparatives

Sales£m

Profit before tax &exceptionals £m

Last year as reported 8,077.2721.3Adoption of FRS 17 - 41.6

Operating profit £14.6mInterest £27.0m

Adoption of FRS5application note G (58.1) (3.4)

Last year as restated 8,019.1 759.5

7

Profit and loss account

2003*(£m)

%inc/(dec)

Turnover 8,154.8 8,019.1 1.7Operating profit 822.9 773.0 6.5Interest (44.5) (40.5)Finance charges (15.2) 27.0Sub total (59.7) (13.5)Profit before tax 763.2 759.5 0.5

and exceptional items

* restated

2004(£m)

Profit and loss account

2003*(£m)

%inc/(dec)

Turnover 8,154.8 8,019.1 1.7Operating profit 822.9 773.0 6.5Interest/Finance charges (59.7) (13.5)Profit before tax 763.2 759.5 0.5

and exceptional itemsExceptional items

HO relocation (19.6) (7.6) HO restructure (22.5) -Profit on sale of properties 18.7 1.6GM Logistic restructure - (36.3)Loss on sale of operations - (1.5)

(23.4) (43.8)* restated

2004(£m)

8

Profit and loss account

2004(£m)

2003*(£m)

%inc/(dec)

* restated

Turnover 8,154.8 8,019.1 1.7Operating profit 822.9 773.0 6.5Interest/finance charges (59.7) (13.5) Profit before tax 763.2 759.5 0.5

and exceptional itemsExceptional items (23.4) (43.8)Profit: 53rd week 41.8 -Taxation (229.3) (208.8)Profit after tax 552.3 506.9EPS: adjusted 24.7 23.3 6.0Dividend per share 11.5p 10.5p

Turnover and operating profit bydivision

UK Retail 7,159.8 7,027.1 1.9 728.1 643.8 13.1International Retail 665.0 662.1 0.4 44.2 42.8 3.3Financial Services 330.0 329.9 - 50.6 86.4 (41.4)

8,154.8 8,019.1 1.7 822.9 773.0 6.5

2004 2003*% inc(dec) 2004 2003*

% inc(dec)

sales (£m) operating profit (£m)

* restated

9

Clothing 3,402.4 3,422.1 (0.6)Home 443.7 464.4 (4.5)Food 3,313.7 3,140.6 5.5

7,159.8 7,027.1 1.9

Total UK Retail 728.1 643.8 13.1% to sales 10.2 9.2

UK Retail 2003 % incSales ex VAT (£m) 2004

Operating profit

UK Retail performance on year

WomensMensLingerieChildrensTotal ClothingHomeFoodUK Retail

Sales Gross Margin Operating Profit

10

UK Retail sales inc VAT % on year

-15

-10

-5

0

5

10

Q1 Q2 Q3 Q4

UK Retail

Clothing

Food

Home

Sales density GM £430: Food £930(sales ex vat)

%inc/dec

Market share52 weeks to 4 April 2004

Total Clothing 11.0 (0.2) 1.8Womenswear 11.0 (0.4) 2.2Menswear 10.2 0.2 1.1Lingerie 26.5 0.2 1.4Childrenswear 4.8 (0.7) 1.0

M&S% share

M&Sshare %

pointchange

Market %movement

M&S 12 weektrend to 4th

April

Source: Fashiontrak

11

Impact of key Womenswear areas onClothing performance

FormalKnit

FootwearCasual

per una

Formal

Knit

Footwear Casualper una

Rest ofClothing First half Clothing +2.5%

Rest ofClothing

Second half Clothing -3.0%

footfall +1.1%

footfall -2.3%

0%

+2.5%

-3.0%

0%

Analysis of volume and value ofClothing sales

Total Market Size £29.5bn

Source: Fashiontrak

Okay Better BestGood

Mkt Size 2004

Mar

ket S

ize £

bn

% of total clothing market

17% 16% 24% 16% 27%

£5bn £4.8bn

£6.9bn

£4.7bn

£8bn

0

4

8

12

14

16

20

24

Mar

ket S

hare

%

Mkt Share 2000 Mkt Share 2003 Mkt Share 2004

Price segments (PTAG)1 2 3 4 5 6 7 8 9 10

12

Home

• Sales declined by 4.6% with final quarter -13.7%

• Strong progress in stationery. All other areas downon last year

• Marks & Spencer Lifestore launch Feb 2004– Early valuable lessons learnt – environment,

product, price– Positive NPV at current sales levels

Food total and LFL performance

Q1 Q2 Q3 Q4

%

LFL

Total

-2

0

2

4

6

8

10

13

Analysis of Food sales% inc/dec

-6

-4

-2

0

2

4

6

8Ap

r-03

May

-03

Jun-

03

Jul-0

3

Aug-

03

Sep-

03

Oct

-03

Nov-

03

Dec-

03

Jan-

04

Feb-

04

Mar

-04

Total transaction growth

LFL transaction growth

LFL basket size

Simply Food

• Overall sales and profit targets achieved in SimplyFood and larger Food stores

• Locational/operational lessons learned• Sales deflection c.10%• Stronger return on investment in larger stores

(>5,000sq ft)• Overall profitability at maturity in line with core

business• Strong year 2/3 sales growth

14

Operating profit 728.1 643.8% to sales 10.2 9.2Margin movement as a result of:

improvements in gross margin 0.8%reduced staffing costs 0.4%reduced occupancy costs 0.3%increased other costs (0.5)%

1.0%

UK Retail £m

2003Sales ex VAT (£m) 2004

UK Retail gross profit improvement

• Clothing +1.5%

• Food +0.5%

• Home (0.2%)

• Total UK Retail +0.8%

15

Clothing bought-in margin

Impact

Dollar

Euro

• 150 bp improvement in Clothing bought-in margin

• On track for 300 bp increase from 03/04 to 05/06

Clothing cost of markdowns as a % tosales

0

2

4

6

8

10

12

14

16

1997 1998 1999 2000 2001 2002 2003 2004

Childrenswearmarkdowns

Womenswearmarkdowns

% to

sal

es

⊕⊕Total Clothingmarkdowns

WC

W

C

WC

16

UK Retail operating costs for 03/04held to +1.2%

Other operating costs

Occupancy, repairs andrenewals

Depreciation

Staff costs£913m

£324m

£227m

£371m

£m

Logistics£310m

(1.3)

(3.4)

4.4

10.7

level

% inc/(dec)

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

Turnover:M&S branded businesses 426.2 390.5 9.1Kings Super Markets 238.8 271.6 (12.1)

665.0 662.1 0.4Operating profit:M&S branded businesses 41.8 34.9 19.8Kings Super Markets 2.4 7.9 (69.6)

44.2 42.8 3.3

Profit from International businesses up3.3% (at actual exchange rates)

2004(£m)

2003(£m)

% inc/(dec)

17

Underlying operating profit 89.5 97.5 (8.2)Credit card launch impact (58.6) (25.0) 134.4M&S Money 30.9 72.5 (57.4)M&S Insurance 19.7 13.9 41.7Total Financial Services 50.6 86.4 (41.4)

Financial Services profits were impacted bythe launch of the &more card

2004(£m)

2003(£m)

%inc/(dec)on year

M&S Money – &more key measuresHow are we performing?

Sept 2003Guidance

March2004

Total accounts (m) 2.1 2.6Average outstanding balances (£) 448 > 374Interest bearing balances (%) 77 >70Average spend(x average balance) 3x c.2.5-3xBad debt charge 2.4% c.3.5%

* Target before agreement with OFT re non-activated cards

*

*

18

Capital expenditure

New stores and extensions 118 81Head Office relocation 40 -Renewal/refurbishment 44 96Refrigeration equipment 39 45IT equipment 40 25Logistics 95 17Other 32 39Total UK Retail 408 303International/Financial Services 26 8Total 434 311

2004(£m)

2003(£m)

New stores and extensions• +0.8% GM weighted increase (200k sq ft )• +4.2% Food weighted increase (230k sq ft)• Representing

– Castlepoint 91– Marks & Spencer Lifestore 77– 30 Simply Food* 120– 9 Food stores 85– Speke 15– Outlet stores 19– Store extensions/relocations 73– Footage downsize/closures (47)

* excludes 10 Compass stores

k sq ft

19

Capital expenditure

New stores and extensions 118 81Head Office relocation 40 -Renewal/refurbishment 44 96Refrigeration equipment 39 45IT equipment 40 25Logistics 95 17Other 32 39Total UK Retail 408 303International/Financial Services 26 8Total 434 311

2004(£m)

2003(£m)

Balance Sheet

Fixed Assets 3,493.4 14.2 3,453.7 11.1Stock 398.0 - 361.8 -Loans & advancesto customers - 2,452.4 - 2,015.9Other debtors 202.9 95.6 320.4 76.3Creditors/Provisions (945.0) (793.3) (1055.3) (348.4)Net debt (823.7) (1,171.0) (701.5) (1,129.9)Net assets 2,325.6 597.9 2,379.1 625.0pre pension deficit

2004(£m)

2003(£m)

FinancialServicesRetail

FinancialServicesRetail

20

Group cash in-flow from operatingactivities £1066m before £400mcontribution into pension scheme

Redemptionof B sharesand sharebuy-backs

Net capitalexpenditure

Tax,interest

& dividends

Closure ofoperations

Other inc.exchange

Increasein net debt

(303)

51

(67)

7

(163)

(517)

602

64

Retailcashflow Financial

Servicescash flow

Operating cash flow666

Retail gearing 44.7%Fixed charge cover 7.3 times

Financial summary – 2003/0452week basis

• Group profit before tax of £763m up 0.5%

• Turnover up 1.7%

• Operating profit up 6.5%

• Adjusted EPS up 0.4%

21

Roger HolmesChief Executive

Where are we today?

• Recovery was secured but now need to move tonext phase

• Last 3 years have seen a lot of change andrestored both customer perception and financialperformance

• Significant change is required to secure growth

22

Quality

30

35

40

45

50

55

60

65

70

75

Jun-0

1 ' ' ' '

Ap

r-0

2 ' ' ' ' '

Ap

r-0

3 ' ' ' ' '

M&S best competitor worst competitor

Building on a different place to 3 yearsago

Source: Millward Brown

Service

2025303540455055606570

Ju

n-0

1 ' ' ' '

Ap

r-0

2 ' ' ' ' '

Ap

r-0

3 ' ' ' ' '

M&S best competitor worst competitor

Source: Millward Brown

Building on a different place to 3 yearsago

23

Critical steps to business transformation

Product

Supply Chain

People

Stores

Key appointments in Clothing• Vittorio Radice - Executive Director General Merchandise• Clothing management team announced

– including Kate Bostock Director Womenswear• Womenswear

– Previously 2 Heads of Merchandising and 3 Heads of Buying for allWomenswear

– Now dedicated Head of Buying and Head of Merchandising for each keyarea:

Head of Buying Head of Merchandisingformalwear external internalcasualwear internal externalknitwear internal internalfootwear / accessories external internal

24

• Back key trends with authority and confidence

• Provide real choice down the chain through narrow anddeep buying

• Contest middle market price position

• Clearer layout of Clothing sales floor

Action to drive sales growth in Clothing

Backing key trends - eg Tweed

Tweed coat - 200 storesTweed skirt - 150 stores

Corsage jacket & skirt150 stores

Total buy is double the similar key trend last year - cord

ProductSupplyChain

People

Stores

25

• Uplift in ‘Banbury’ stores +10%

• Rollout to 90 stores, complete Autumn 04

• 35% more choice

• Same stock levels

• Target 10% sales uplift, c£60m annualised salesopportunity

Increased choice down the chainProduct

SupplyChain

People

Stores

Pricing

For 2004/05 Clothing average selling price deflation c3%

• Strong entry price points -contest middle market

• Lower prices on sameproduct

• Clear Good, Better, Bestpricing architecture

£19.50 jeans, LY £25£19.50 formal trousers, LY £25

£75 from £99 Cashmere£25 from £28 Lambswool

Fewer price pointsIncreased volumes at key pricepoints

ProductSupplyChain

People

Stores

26

Entrance

per unaper una

dueT-shirt Shop

Jean Shop Coats

Shoes

Knitwear

Formal Tops

Formal Trousers

Suits

CoordinatedCasualwear

Your Signature

Limited Collection Collections

ClassicCollection

Coordinated Areas

Shop fittedbrand

Productled area

Clearer layoutProduct

SupplyChain

People

Stores

New approach to smartwear - LimitedCollection

• September 04 launch• 66 stores• ‘effortless style’• Regular newness 65%

every 8 weeks• Trend for less formal

more versatile wardrobe• Bespoke shop

environment• Target annual sales

£100m+

ProductSupplyChain

People

Stores

27

• New team

• Increased newness

• Back key trends

• Increased choice

• Strong pricing

buy per way increased by40%

75% range new Autumn 04

6% deflation for Autumn 04

75% more choice in smallstores

Womens knitwearProduct

SupplyChain

People

Stores

Significant move offshoreachieved in last 5 years but withlargely the same suppliers

6%

94%

56%

15%

1997/98 2004/05

Top 15suppliers

OtherOther

11of pasttop 15suppliers

UK 80%

Overseas

UK

2004/05 1997/98

94%

10%

20%

80%

29%90%

4 sub top 15existingSuppliers

ProductSupplyChain

People

Stores

28

c90 supplier UK distributioncentres

c600 factories

10 M&Sdistribution centres

300 M&Sclothing stores

Current no. weeks

2

6

181

1-3

6

Target no. weeks

4

Need to reconfigure & tacklelegacy of long lead times &complexity

Total made up stockTotal stock incl contracted unmade

Unmade Contracted 121

1-3In transit

1836

4

1224

ProductSupplyChain

People

Stores

Re-assign £150m of production& confirm new models for fullservice and direct• Re-assign £150m of production

– £100m direct, £50m to other FS suppliers• Direct

– Strong handwriting, less complex product eg casualwear– 2004/05 - confirm capabilities– 2005/06 - 20% production

• Full service– World class supply base providing design, sourcing, technology

expertise• Rationalisation of global logistics

– 2004/05 - pilot rationalisation of suppliers distribution centres

ProductSupplyChain

People

Stores

29

• Strengthened team

• Back key trends with authority and confidence

• Provide real choice down the chain throughnarrow and deep buying

• Contest middle market price position

• Clearer layout of Clothing sales floor

Clothing summary

Sell food which is a real treat Offer better quality food thanother retailers

M&S - Food Love

100

20

40

60

80

2002 2003 2004

M&S

nearest competitor

20

40

60

80

100

2002 2003 2004

M&S

nearest competitor

Source: Millward Brown

30

Queues are kept to a minimum

M&S - Execution

0

5

10

15

20

25

2001/02 2002/03 2003/04

disagree

Source: Research craft

Dynamics of food market

• Increasing spend per visit but frequency of visitsdeclining

• Supermarkets introducing new and improvedtop end ranges

• Increased competition and standards in top-upshop market

31

Making our Food moreconvenient

• On target to extend our reach by 2005/06– 300 to 400+ outlets– 500k square foot– 55% of population within 10 minute drive of M&S

Food offer

• Commitment to next phase of growth– plans communicated 2004/05

ProductSupplyChain

People

Stores

Fantastic product…. marketedwith authority

CelebrationChristmas, Easter, Mother’s Day etc. destinationoffer for regular and occasional customer

Gastronomic adventureInvented the ready meals market, heritage ofinnovation and quality

Fresh & healthyMarket trend aligned to Marks & Spencer brand

ProductSupplyChain

People

Stores

32

Reposition Home offer anddevelop Marks & SpencerLifestore

• Build sales of newranges at full price

• Open Kingston(35,000 sq ft)

• Open Thurrock(70,000 sq ft)

• Demonstrate case forrollout

Existingstores

Marks &SpencerLifestore

2004/05 2005/06

• Rollout ‘Kingston’ toexisting stores

People

Product

Stores SupplyChain

• Build balances on card

• Develop loyalty

• Pilot new products andgreater in-store presence

• Strong profit growth

• Rollout new products

• Move into profit on card

Securing our opportunityin Money

2004/05 2005/06

ProductSupplyChain

People

Stores

33

Tackling unsustainable cost peremployee

Total costsper FTE (£k)

1 62 2

M&S typical competitor

+38%

Advisor costs perFTE index

10093

2003/04 2006/7

Product

People

Stores SupplyChain

Changing the way we workin stores

align working hoursScheduling

Efficiencies establish practice for keyprocesses

system dependentimprovements

Right people use concept stores todevelop model for staffing

rollout to all stores

2004/05 2005/06

Product

People

Stores SupplyChain

34

maintain numbers,drive best practice

expect loss of 500jobs

Design,buying &merchandising

Other streamline – expectloss of 500 jobs

longer lead-time actions

Money

Michael Houseready forredevelopment

900

2,6001,500

5,000

FTE

Streamlining Head Office

2005/062004/05

Total

Product

People

Stores SupplyChain

Heartland Flagship

Simply Food Marks & Spencer Lifestore

We will develop four compellingstore formats

ProductSupplyChain

People

Stores

35

Holistic approach – eg Speke

• Fresh modernenvironment

• New equipment forimproved display

• Sense of fun

• In-store eating& internet ordering

• Proactive friendlyservice

• New branding

ProductSupplyChain

People

Stores

Key priorities

Product

better productsharper prices

real choice

Supply Chain

shorten lead timeseliminate complexity

People

store staff - schedulingHead Office - streamlined

Stores

develop formats

36

Growing with the aspirations of ourcustomers

Inspire

Style Pleasure inLife

Trust

Preliminary Results25 May 2004

37

Entrance

per unaper una

dueT-shirt Shop

Jean Shop Coats

Shoes

Knitwear

Formal Tops

Formal Trousers

Suits

CoordinatedCasualwear

Your Signature

Limited Collection Collections

ClassicCollection

Coordinated Areas

Shop fittedbrand

Productled area

Clearer layoutProduct

SupplyChain

People

Stores

Preliminary Results25 May 2004

38

Preliminary Results25 May 2004

Preliminary Results25 May 2004