B&M European Value Retail plc (BME) Earnings Call Transcript & Summary

Good morning, everybody, here in the room and also for the people who are dialing in on the webcast, and welcome to our -- to my first scheduled announcement today for our H1 results. So my name is Tjeerd, and I'm the CEO of B&M since June, and I'm here with our CFO, Mike Schmidt. And today, we'd like to give you an update on our H1 results, also the actions we're taking and of course, our ambitions for the future. So giving you an outline for today. So a couple of areas. First of all, I'm doing introduction now, obviously, but Mike is then going over the financials, both the headline and also statutory measures. I will give an update on B&M back to B&M Basics that we launched October 7 and delighted to give you also an update on progress we're making there and then the broader plan. And in the end, confirming capital allocation framework and value creation. And of course, at the end, there's a chance for answering questions in the room and online. So reflections on my first half. So clearly, let me be very clear, it fell short of our expectations. And if you look at the half, U.K. like-for-like sales, of course, was soft, was flat. And then combined with a year-on-year gross margin decline, obviously, we didn't have a chance to offset the cost that came through in our business. And unfortunately, that, of course, affected our profitability. I'm not happy with the outcome. And of course, that's why we launched back to B&M Basics because that's ultimately the key driver of bringing our like-for-likes back on track. We are seeing already the first implementations of back to B&M Basics, and I'll give more color on the 4 work streams shortly. general manage your expectations, the full impact of Back to B&M Basics will take about 12 to 18 months to come to fruition. And then the focus is really about getting the U.K. like-for-likes back on track. I think we shouldn't lose sight of the fact that we're still a growing business, and we reported 4% sales growth today, opening stores both in U.K. and France, and I'll give also more color on the U.K. network and our ambitions there. A good quarter for France and a good half of France in a very competitive market and of course, competing very strongly there. The value proposition for B&M is strong and powerful. And I think getting into a more uncertain economic climate, my experience is that discount is a sector to be in, that that's where the growth opportunity is. And finally, we are a cash-generative business. We've always been very disciplined in capital allocation, supporting very strong returns. And of course, that's still core in our model, and we're not walking away from that at all. Focusing on the team now because ultimately, with a new plan and a plan that needs execution, we need best team to support that and lead that. We're making 3 announcements today in terms of people appointments. I think the first one is a very important one for me because it is strengthening the buying and merchandising team. So we've been able to secure and hire Simon Hathway as our Group Trading Director. He shortly also worked for Action, but he started career at Sainsbury's, worked with A.S. Watson and also at Wilko. And I can't wait to see his input and impact in the business, especially on our value for customers and our pricing and our products. We've announced, of course, effectively, Mike announced on the 20th of October, his intention to resign from B&M. And obviously, that leaves us with the vacancy, and we've been able to secure a new CFO starting an interim capacity, Helen Cowing, and she has worked in various industries, consumer services, FMCG, but also retail. She starts next Monday, and then there will be a handoff period with Mike, and then Mike will officially step down on the 1st of December, and Helen will then be appointed to the Board of B&M. And then finally, this is not a new hire. This is a person who's been with us for the last 3 years, Jon Parry, very strong retail background. He currently runs our distribution center, so Director of Supply Chain. But in his career, he probably worked as much in stores as he's worked in running supply chain. And I've decided to bring both supply chain teams and the retail teams under one leader, which is John, which basically creates for me, a very solid compact management team of 4, which will be the driving engine of the business. So CEO, CFO, Training Director and Retail and Supply Chain. And of course, on the back of the announcements, Gareth Bilton, Mike and James are leaving. And of course, we're thanking them for their commitment and wishing them well for their future. So an update then and of course, focusing on the announcement on the 20th October and then after that, of course, I'll hand over to Mike. But first of all, I would like to focus on the forecasting error, the accounting error that we disclosed last month. Just to remind all in the room and also on the webcast, the 20th of October, we made an announcement that we had a systems issue. The flow-on effect was that we incorrectly didn't recognize freight costs in our accounts. And that, of course, had a quite sizable impact on the outlook. And as a consequence, the outlook we initially gave on the 7th of October, we had to restate on the 20th of October, and we provided new guidance for the year. This is, of course, a very disappointing event and clearly not something that's happened at B&M before. We take this very seriously. So we commissioned EY to do a review of this matter. EY has started, it's underway. The outcome is expected and the results will come out in the upcoming weeks. And then we plan to share an update of this at our scheduled Q3 results announcement, which is in January. And then in a way, linked to this, we're still very committed and it's a strong priority for us to migrate from Luxembourg to Jersey. Obviously, it will provide us more flexibility and more options for returning excess capital to shareholders. We though have decided in the light of making sure we follow all the recommendations of the third-party review, but also full oversight of the new CFO that it was more prudent to move the actual redomicile into the new calendar year. We're confident we'll complete the new calendar year and obviously, subject to excess capital being available and subject to shareholder approvals that will enable us to basically commence with share buybacks over time. So with that, I would like now to hand over to Mike, and I will then return shortly with a strategic update. Thank you very much.

Thank you, Tjeerd, and good morning, everyone. So let me take you through the financial performance for the first half. Group revenue rose by 4% to GBP 2.75 billion, driven by new store openings and good like-for-like trading in France. However, our profit performance did see adjusted EBITDA declined significantly to GBP 191 million for the half from GBP 274 million in the prior year. This was due to the limited like-for-like sales growth in the U.K., gross margin pressures, but also the cost inflation that was very much as we expected entering the year, which arose principally from increased government taxation and minimum wage increases. Our cash conversion in the half has been strong, and our leverage ratio ended at 1.6x pre-IFRS 16 EBITDA, which is slightly above our target range of 1 to 1.5x due to the lower profits, but it is within seasonal tolerances, particularly as we stock up during the first half on our ranges for the important golden quarter trading period. So looking at group revenue progression in more detail. As mentioned, the main contributors here were the continued expansion of our store estate and also a strong performance from B&M France. We opened 31 new stores across the group during the half on a gross basis, which is 15 net new stores. As you can see on the bottom right-hand chart, for B&M U.K., we opened 23 gross new stores and 9 net after relocations and closures. So that puts us on track in the U.K. in B&M U.K. to open between 40 to 45 new U.K. stores on a gross basis in the 2026 financial year, more on which Tjeerd will come on to later. In the U.K., our like-for-like sales were broadly flat, up 10 bps or so year-on-year with a positive performance in general merchandise that was offset by a decline in FMCG. Within the half, the timing of Easter and early good weather boosted our outdoor ranges in April. We then saw weaker sales in May as that trend reversed, following which we saw a progressive moderation in our like-for-like sales declines in June and each period following during the second quarter. That was helped by a return towards higher average value products in general merchandise and some out bridge selling price inflation in FMCG. B&M France delivered double-digit revenue growth from new stores and good like-for-like sales growth in a competitive and challenging marketplace. We did see a noticeable step-up from the first quarter into the second quarter, and I think that particularly reflected good underlying trading, but also a base effect of Q2 last year, where we did see some limited disruption while we implemented our new warehouse management system. Turning to gross profit and margin of B&M U.K., which is important to note as part of our overall profit drivers. Gross profit of GBP 794 million of B&M U.K. is down slightly from the prior year, which reflects the limited revenue growth rate we saw and also the 3 negative factors affecting the U.K. trading gross margin percentages shown on the slide. So firstly, in terms of the impacts we saw, we saw lower bought-in margins in general merchandise, discussed this previously as we implemented lower price points. Secondly, we did see the price investment that we made in the latter part of the first half in our key FMCG lines taking effect. And finally, to a more limited extent, there was an increase in markdowns late in the first half as we started to reduce range counts as part of our back to B&M Basics platform. We did benefit overall from a positive mix effect towards our higher-margin general merchandise categories, but this tailwind was actually less prominent than we saw exiting the second half last year. So net new stores and the small contribution from B&M like-for-like growth roughly offset the gross profit impact of that overall margin decline. Taking a closer look at costs of B&M U.K. during the half. Firstly, of course, there are the costs and preopening costs of new stores. These are as we expected. I should note head on that it isn't correct to simply compare the gross profit of the new stores that have opened to the new store operating and preopening costs, very much as usual, there are moving parts from year-on-year phasing in different store types and sizes. And as Tjeerd will come on to say, the new stores that we have opened continue to perform as very much as we would expect and are delivering payback on average in about a year. As we previously communicated with our full year results back in June, we do face higher staff costs this financial year as a result of the statutory rise in national minimum wage and higher national insurance charges. So together, these incremental costs amounted to GBP 30 million for the group as a whole, including Heron. And within B&M U.K., the total staff cost increases, including those statutory pressures were held down to GBP 24 million, which reflects ongoing mitigating actions being taken to offset the statutory pressures and also our routine annual pay increases. The new extended producer responsibility tax added a further GBP 14 million of costs in the half. And it's important to recognize that GBP 14 million reflects the full annual cost, and that needs to be expensed in the first half due to the accounting standards approach. Other costs here include investment in our distribution center infrastructure, IT, new store openings and general cost inflation across our operations, net of mitigations. Actually, when you look at the other bar relative to the size of our infrastructure, you can see that in our business overall, other than through taxation of employment packaging and minimum wages, there's very minimal levels of inflation feeding through. So bringing all of these elements together, the profit outturn for B&M U.K. reflects the impact of the revenue growth from new stores and like-for-like sales, providing an offset for lower gross margin rates, but not for the higher statutory staff and other costs despite the work on mitigations. This is reflected in the adjusted EBITDA margin outturn for the half of B&M U.K. of 7.7% versus 11.3% in the first half last year. I flag here that the EPR charge of GBP 14 million will not repeat in the second half, as I said before. So looking ahead, I'd emphasize that we continue to see like-for-like sales as the primary determinant of margin outcome. Important to recognize that point. The margin is the outcome. It's not the threshold that we work to as a business. That being said, the actions that we're taking under our back to B&M basics plan are focused on restoring sustainable U.K. like-for-like growth, and we expect those actions will enable our U.K. EBITDA margin to recover and stabilize at low double-digit levels in the medium term. So looking at the group overall, the decline in group adjusted EBITDA, as we've discussed, is largely as a result of the disappointing performance in B&M U.K. France's operational performance was pleasing, growing both from new stores and like-for-likes with a small decline in margin rate overall relative to prior years, reflecting the larger infrastructure in place for its future growth. Heron shows a similar trend to B&M U.K. with the operating leverage effect of like-for-like performance and cost inflation pressuring its margin. Despite the pressure on profits, we did generate healthy free cash flow of GBP 51 million during the period. This was achieved through disciplined working capital management as always, and is despite having invested GBP 74 million in CapEx in the half, including investing for growth with GBP 32 million spent on new store openings and GBP 13 million on infrastructure, having, in addition, also incurred GBP 7 million on one-off bid out for Ulsan Airport. We also did spend GBP 22 million within that number on maintenance, which is very much in line with the prior year. So let me sum up before handing back to Tjeerd. Overall, we've seen a challenging half with low like-for-like growth in B&M U.K. and the decline in the gross margin rates and also managing the sizable cost inflation from statutory changes to minimum wage, national insurance and EPR taxation. However, France and new U.K. stores continue to perform well, and our cash conversion remains a core strength of our business. The back to B&M basics plan is underway, and we remain focused on restoring sustainable like-for-like growth in B&M U.K. We have prudent leverage and a strong liquidity position and long-dated maturities across our credit instruments, the first refinancing of which does not fall due until the end of 2028. And so we entered the second half with our gross margin trajectory showing some signs of improvement. Trading in the early third quarter has been at the lower end of our like-for-like sales guidance range of low single-digit negative to low single-digit positive percentage for the second half. And with the majority of our critical golden quarter still ahead of us, we are reiterating our adjusted EBITDA guidance of between GBP 470 million to GBP 520 million for the financial year. So with that, let me hand back to Tjeerd.

Thanks, Mike. So let's move to the strategic priorities and the progress we're making and mainly focusing on the execution. So let's go back to October, I think October 7, we shared this. And my first task after becoming CEO in June was focusing on diagnostic of the business. So where was execution good and where was execution not in a great place. And we basically focused on 4 areas. So sharpening prices, promotions, ranges and improving on-shelf availability. And if you would bring that actually back into a framework, we call this back to B&M Basics. And it's very much focusing on getting back to the original value proposition of B&M that made us successful in the past and making sure we were able to grow. It is action focused and actually, some of it is already underway, and I'll give some more color later. It's not just about doing the basics better. It's also going back to growth in the longer term. There's a second and a third phase that basically is about deepening our foundations, more data, more customer insights and then also looking at a faster growth path once we have restored like-for-likes in the U.K. But the U.K. and its value proposition and its like-for-likes is now our focus, next 12 to 18 months. And again, as Michael alluded to, with returning positive like-for-likes in the U.K., we also believe that the U.K. EBITDA margin as an outcome should go back to low double-digit levels in the medium term. So just to put things in perspective in our earnings flywheel. We also I think we shared this on the 7th of October, just to give some more, let's say, background to this. Fundamentally, I think it's a really strong business. And the teams that we have and also the strengthening of that the announcement today in our -- in combination with a compelling brand, a local store model really allows for great outcomes. And again, serving 5 million -- more than 5 million customers visits a week, I think, is testament to this. Our direct sourcing setup with Multi-Lines in the Far East and very cost-efficient operations allows us to really offer great value every day for customers. And in principle, the targeted FMCG offer that needs a bit of sharpening and the broad GM range really helps us to deliver great value for customers. The skilled footprint, of course, rationalizing costs and growing in the U.K. and France. But also, I think today, you'll hear that we are confirming again the growth potential we see in the U.K. We strongly believe we can continue to recover and grow. And then there's an underpin of a very financial disciplined approach to space. And I think today also given you some insight in the quality of the estate with not only fast paybacks, but also a very healthy estate across the board. This hasn't changed fundamentally in terms of its structure. What has changed though is the execution where we've drifted, and that's exactly what we're addressing with the back to B&M Basics. So -- and that ultimately is what I like to share with you after this. So back to B&M Basics is the first phase, 12 to 18 months, price, product range availability. Second phase is deepening our foundations is using customer insights at B&M U.K., we kept things really simple and lean, but I think there's also a chance for us to use analytics a bit more than we could. And that's what we're doing. And I'll give you a bit of a flavor of how we're using insights to improve our store locations and the offer to our customers. And then finally, we will also address and come to, let's say, a decision on e-commerce, loyalty and private label. And that, of course, is the next phase of our plan. But let's bring it back to the basics, back to B&M Basics. Just want to refresh your memory. So on price, we've always communicated 15% cheaper, 15% better value than main supermarkets on a total basket level. What has changed since August, September time is that we basically are now reviewing not just on a total basket, but also on a line-by-line basis. Pricing is an ever-going and always ongoing and always-on process. But I can tell you, since we've started 35% of the key items that matter most to customers, we've changed and reduced prices. We have a ratio that we're looking very carefully, hell ratio higher, equal lower versus our main competitors, and we use a lot of internal KPIs to monitor this. We are going to also look carefully at other peers. So currently, we're focusing on the big supermarkets and the operator closest to us in this market, but we're also looking at the discount supermarkets and other discount operators just to make sure we are -- we've got the best pricing in the market for our customers. And over time, we'll also add general merchandise ranges to our FMCG. So really making sure we provide great value all across the store. In terms of promo, so we had always manager specials. The inception of manager specials from the Black full days was a great item, which was bought for a short period was decided by the manager to put on display. That became a bit static, and we're bringing back the more dynamic customer relevant merchandising of promos. We've already started addressing this from October. So -- and actually already during the summer, we brought back-to-school to the front, Halloween and now Christmas. We are going to also use analytics and promotional review tools to really find out what promotions and which items really grow the category and really impact and increase basket penetration. So to really basically have an ongoing improvement in our promotions, but that's already starting and on the way. Moving on to range. I think we shared that we had quite a significant increase in our range. And if you think about discount, it's all about discount in price, time and complexity, and we haven't really made shopping easy at B&M. But the flip side of having a larger range is that it's more costful and more difficult to operate in terms of stores and DCs. And ultimately, with a larger range, you can't really get your economies of buying, economies of sourcing, so you lose out on value. So we have started now with testing an added range in 3 categories. So we have 3 categories live in 22 stores where we've reduced the range about 35% in wine, in snacks and crisps and in rice and pasta. We're testing the method that we have used to apply the range reductions. We're testing the method for stores to remove those lines, and then we're now assessing how they're performing. And we will use those insights to inform us how to then proceed for the next phase. And mind you, just in FMCG, there are 200 subcategories. So 3 is just a start. Then moving on availability. So we've never really had a clear read of availability because we don't have an online channel. If you're an online retailer and you do store-based picking, you've got a very clear customer availability measure. We don't do gap scans. So we didn't really have a good insight. We actually, through analyzing items in stock, but no sales, we came to an 86% availability for B&M, which is far below best practice on those lines. We put in place now in 11 stores a trial to merchandise the best-selling FMCG items, about 240 lines in a different way with the aim to actually roll this out to all stores and then over time, with the aim to roll it out to all ranges in FMCG. And we're also trying to see if we can actually skip a number of generations of gap management or availability management. So we're not going to do the classical gap scanning that every retailer in this country is doing. We're moving straight to an AI tool, which alerts the store manager where in the store of the thousands of lines we sell, there will be a gap which he needs to correct the stock record. So availability can straightaway improve without having to spend a lot of time in non-value-add work. So moving on to the next slide. We're also deepening our foundations, and that's the next phase. And that's ultimately using customer insights for making better and informed decisions. And this is Phase 2. And in Phase 2, it's all about insights. It's looking at formats. So basically the stores. It's looking at locations. It's looking at simplifying ways of working for stores. And then finally, over time, we also would like to update our store concept and reflecting an improved and a better B&M store for customers. And we've already started, let's say, laying the foundation for Phase 2. So what we've done, we've analyzed transaction data from every single store in the U.K. We've taken external data like local competition, demographic income levels. And then we came actually to the conclusion that there are 6 groups of stores with very similar patterns that actually you could cluster in 6 different ways. And -- the upside here is you could actually then start ranging those stores in a different way. You could have different marketing programs for those stores. And actually also for your location strategy, you could straight away bring the best possible range to that local location. Historically, we've not really tailored. Historically, we've always kept range based on size and space and never tailored to the local customer. But if you look at the data, customers shop very, very different across the 6 clusters. This is the next phase. So we will use the insights to start piloting adapted ranges, different layouts, different FMCG, GM space allocation, different range of locations across the 6 clusters. My experience in other retailers is that normally gives you a good sales uplift, which then gives a nice perspective for over time, updating the estate and becoming more tailored and relevant for local customers. Talking about the estate, a very strong U.K. brand presence. So we closed the H1 with 786 sites across the U.K. We're also now providing some insight and actually how those stores are performing. I must say the screen, I'm not sure if you can see the Axis, but the 4 dots on the bottom basically have a negative contribution and every other dot above is positive, which means 99.5% of all stores in B&M U.K. have a positive contribution. I can tell you, I've not worked for any retailer with that health of an estate, which I think is reflecting, I think, the great work which has been done in the past on being really, really strict with capital allocation and really only opening stores where you can. If you would now look at the opportunity going forward and if you would look at some more insights, in our state, we actually are confirming today because we have -- I've had a question quite a few times since I started, confirming the 1,200 opportunity across the U.K. So we use a third-party location analytics company, and we've asked them to do a complete review of our estate. They've also now been able to actually add credit card and debit card data to their analytics, which means we can actually see where customers live in certain catchments. We've updated the model with the stores we've opened in the last 2 years, and we actually came with an opportunity for about 1,200 stores again over time. We're also going to use the updated model with better insights to even make better decisions going forward. But that said, if you look at the latest openings, payback is still on average 12 months, which I think is very, very solid. And new stores are opened with accretive contribution margins, and they are accretive to company margins. So opening stores in the U.K., there's still a very good growth pipeline. And also, we see good, let's say, accretion of company margins with that. We're also breaking down the actual number because we have had 45 store openings last year, more or less. We're guiding to 40 to 45 store openings this year, and we're on track to deliver between 40 and 45. But I think it's important to note that underlying this number basically consists of an organic site acquisition pipeline of about 25 to 35 stores, so basically being a very considered approach with landlords, with shopping center owners, with developers to build a pipeline of stores, which normally takes multiple years to open. But then every single year, we've also seen or at least in recent years, we've seen distressed opportunities being offered to us, which, of course, we have seized when they made sense economically and financially. And the combination of the 2 is the 40 to 45 stores, but underlying is 25 to 35 organic and then 10 to 15 opportunities. And clearly, you can't plan for opportunistic sites being offered to us. But clearly, that's been part of the pipeline. Then moving on to value creation. How can we actually create shareholder value. Ultimately, our value creation is designed to support shareholder returns. And clearly, standing here, I can honestly say that, of course, performance hasn't been where we want to be and the actual result of this is not where it needs to be. But if you would stand back, I think we still have significant opportunity to grow in both the U.K. and France with healthy margins. We believe that with returning of like-for-like -- sustainable like-for-likes back to the U.K., we can bring our EBITDA margin in the U.K. back to low double-digit margins as an outcome. And if you could combine that with the compelling space growth and the very efficient way of using capital, so the very solid return on capital employed, we believe over time, we were able to return excess cash back to shareholders. There's a sequence here, which is basically our capital allocation principle, which I would like to provide more color on the next slide. So we are basically confirming our capital allocation framework going forward. I think the starting point is our leverage. So I think that's important to note. So we really believe the fundamental of this business is a pre-IFRS 16 lease leverage of 1 to 1.5 which we believe is a prudent number to have. There's also, of course, seasonal swings. Currently, in the half, we finished at 1.6, but that's well within the tolerance of a seasonal swing, but the focus is 1 to 1.5. And then if you would prioritize and rank the 4 drivers of capital allocation, I think the first one and will always remain is investing in our business. So making sure we have a good pipeline of stores coming through and maintaining those stores in good shape. Second one is the dividend payout between 40% and 50%. And that's also what we have confirmed with the interim dividend payout. Obviously, M&A is on this chart, but to be very clear that it's not actively -- we're not actively looking at M&A opportunities. But clearly, when something would arise, we would, of course, seriously look at it. But right now, this is not our focus. And then, of course, when we have excess capital, we can return this to shareholders. In the past, we had only one tool, as you know very well, so special dividends. And we aim to conclude our redomicile to Jersey, which will give us the chance subject to shareholder approval to start buybacks. And the Board has decided that actually the current preferred option in the event there's excess capital available and the shareholder approval is basically going to the share buybacks. So then concluding and summarizing, I think we're responding to a half that was falling short of our expectations. We have launched back to B&M Basics. Some of it is already underway and new pricing promo. Some of it is now being tested, which means in products and availability. To lead the plan, the execution of the plan, we're strengthening the team. So 3 strong announcements today in terms of appointments, 2 external hires and 1 promotion from within. We're already starting to work on Phase 2, mainly on the 4 month piece. We're using customer insights to improve our offer to local customers. And I'm confident that will give us even better customer response to our offer in the local markets. And I think we could be -- even though the results are falling short of our expectations, I think the perspective is still one of optimism. We have a very healthy estate, and we have a significant white space opportunity. We're confirming here today. So we can still grow the store count with about 50% in the U.K. through 1,200 stores. And also, we see in a market that is also highly competitive, our French business doing well with also plenty of opportunities to grow in that market. So with that, I would like to conclude and hand over the floor here to questions, but also mindful of people on the webcast. And I think, Andrew, James, you're also making sure that people who are not in the room, but still have listened are able to ask their questions. So happy to move over to Q&A. Thank you very much.

Fintan Ryan here from Goodbody. Two questions from me, please. Firstly, on the longer term, you reiterated the 1,200 store count for the U.K. Is it fair to say that maybe the pace of achieving that target is going to be slightly slower in the next sort of 2, 3 years while you're implementing back to B&M Basics plan? And related to that, is there -- is it fair to say as well as you sort of invest behind greater data analytics capabilities and maybe you need to refresh the stores, actually CapEx might pick up from current levels? And like what do you see as sort of the medium-term CapEx for the business? And then just finally, I know it's very short term, but could you give a sense of color of what are the moving parts around the sort of Q3 trading to date, GM versus FMCG and just sort of what your hopes for Christmas execution?

Yes. So first question. So clearly, we normally don't guide multiyear store expansion targets. I think we historically guided within a year. And I think the exceptional guidance we gave 2 years ago on the 40 to 45 is on the back of significant amount of stores we were able to take over from a Wilco, state. So I think we've been very transparent today of confirming 40 to 45. I think we've also been very transparent to show the breakdown of our store expansion. Clearly, I can't predict distressed opportunities. But I think the breakdown is what we show today is what you should expect from us. We will seize every single opportunity that's offered to us, and we'll keep working on a good organic pipeline. I think in terms of capital expenditure on refreshing the estate, clearly, our growth of D&M has been done predominantly in the last 10 years. So many of our stores are in good shape and actual cost of fit-out is pretty low. So if you would be sitting here -- if I would be sitting here in the Chair of Supermarket, Chief Exec, refreshing supermarkets is very expensive. Our stores have very low fit-out cost. Clearly, if you would update stores with an improved roof, so you can spray paint it. If you would remove some of the tiles of our vinyl floors. If you would improve the speaker system, you bring some more technology to our checkouts. In some stores where it's really warm, you put air conditioning in, you still talk about a relatively low expense for a store, but a great improvement for customers. I think every single pound we invest in our business goes through a rigorous investment proposal. If these trials will turn out to be very helpful and the returns are there, clearly, we'll then, of course, not hesitate to invest. But for now, we're just trialing and learning. In terms of Golden quarter trading, we still have the vast majority of the quarter ahead of us. I think we just thought it was helpful to be transparent. We've guided to a low single digit at the bottom of the range and high single digit -- sorry, positive low single digit, the high end of the range and negative low single digit low end of the range. And we're just sharing today that we started at the low end of guidance in terms of like-for-like. The only thing we can say, and I think we're not the only one saying this, uncertainty doesn't really help in terms of consumer confidence and more certainty would be helpful. That said, we need to fix our own opportunities and trade harder. But again, we started -- we only have had a very small portion of the golden quarter. That trading was at the lower end of our expectations. There's still a significant time ahead of us. I think our Cram Christmas ranges are good. I wasn't here last year, but I've asked many, many of our store colleagues how they look at our Christmas ranges. And I get consistent feedback that the Christmas ranges this year are really strong. And early trading of Christmas ranges, I'm talking Christmas category has been very solid. So it's a good perspective. That said, we started [indiscernible] quarter slow.

Ben Hunt from Panmure Liberum. Just on the range rationalization, it seems to me to be a sort of bit of a juggling act. And just sort of wondering what sort of drag should we expect from the potential for smaller baskets? And obviously, as you clear out those ranges, there's going to be an element of dilution -- how old is your stock now? How confident you are and how clean is really?

Yes. So I'll talk about the commercial implication. -- you might talk about the age of stock. So the reason we're doing the 3 trials is actually making sure that when we remove products, it doesn't lead to lower sales. Actually, the aim is to increase sales. And that's what I've seen consistently with other retailers where I work. The moment you bring clarity on shelf, you make it easier to shop and you actually bring out the best-selling lines and you give them the right space, you restore value credentials, you restore value perception, but also practically, you give more space to the best sellers. So let me give you an example. Our coffee range, I think we have got more coffee SKUs than Tesco has at the moment, which is interesting. But our best-selling range selling in the store, I was in 38 items per week store had only 2 facings -- so we can't even cover the best-selling lines. So the target of those trials is actually doing more sales, otherwise, we wouldn't do it. And then having the flow-on effect of much simpler execution and the DCs, much simpler execution in our stores. And the other benefit that comes with a tighter range is that you actually have the flexibility then to go for shortcut of products, parallel products, traded products. So when it's gone, it's gone because you've got the capacity to do those things. There was, I think, a stronghold of B&M, and we can bring that back. So in terms of age of stock.

Yes. Look, I think if you look at the stock picture overall, you can see it's very consistent relative to sales year-on-year. We provide for stock where it's not moving or it's being sold at lower prices and that provisioning policy has remained wholly consistent. Ultimately, the point about our stock model is that it's all designed around rapid turn of stock, and that's consistently what we see. I think what we're talking about here is a reduction in the number of ranges that we have. I think to the extent that we pursue that, we choose to do that, we're talking about that, that's because there's a perceived financial benefit of doing that overall. And I think that will be just part of the consideration as part of the picture as the full year develops.

Yes. And it's ultimately restoring the discipline we used to have is one in, one out. So I think we're going there.

Okay. And just maybe one more, if I can. You talked about maybe flexing format stores and space allocation. How should we think about the continued rollout in the U.K.? Will there be changes in the size of the stores going forward or in the locations or...

I think it's fair to say that our bread and butter is a 25,000 square feet retail park out of town store with a 6,000 to 8,000 square feet garden center. I think then we are at our best. And we are at our best because we can offer the breadth of GM, we can offer the breadth of FMCG and we cater to a quite homogeneous customer mission. I think where there's opportunities in town center stores. Our format is not really yet optimized for that because the customer mission is very different. So I think what I'm trying to share on the format work we're now doing, the emerging insights are that we should really have a bit of a different offering in town center stores. It actually doesn't change our expansion target, doesn't change our expansion, let's say, goals because ultimately, we've seen both town center stores and out of town stores performing well with very good margins. It just means that we will be operating those stores, I think, with better results if we are tailoring more to the customer.

Andy Wade at Jefferies. First one, you obviously disclosed them current trading around running towards the lower end of your range and FMCG underperforming that. Just interested as to what impact do you think the pricing changes that you've had so far are having? Is it having the impact you hoped it would have? Is it going to take longer to come through because it needs repeat shops? First a bit of color on that.

Yes. It's very difficult to actually share it. I see that my experience normally takes about 6 months for customers to really notice a change in price. We have mainly addressed not so much a total basket because the total basket, we were about 15% cheaper than the 4 main grocers. We've mainly addressed anomalies, so where lines were completely not in line with our policy on a line-by-line basis. I think we've shared in the last update that the actual financial impact for the investment we had to make was actually not very significant, but it's mainly making sure we're really competitive on those lines. My experience again is price perception, value perception builds over time. And to the extent that we have changed our prices, I wouldn't expect that actually that has now, say, a deflationary impact in our overall sales.

You mentioned price perception, it takes a while to improve/recover. Why then -- certainly, the team, Mike and the rest of the team have talked to over an extended period, price perception not having really declined. Why how do we square the circle there? If it hasn't declined and like-for-likes have been negative, why is...

I think it's fair to say that I think we haven't really applied as a company, customer insights to the best possible way. I think there's various pieces of research that indicate that our overall value perception is still solid. But if you would zoom into FMCG, I think that's where we have slipped. And actually, you don't need a lot of research. I think our store teams recognize that we were not sharp enough on certain items. So I think it is very obvious to me that if you are -- when your closest competitor and your target is to be the same price and in food, your 65% of the lines are more expensive, even if it's only 2 or 5p, that builds up over time in terms of negative customer perception. And that's what we have addressed.

Okay. And then finally, just looking at the 4 elements you sort of talked about price, as you just said, it is pennies in some cases, you're investing range where you're slimming it. I appreciate your examples there where it can increase sales, but as often range increases as a driver of -- can be a driver of revenue.

Not In a discount environment.

Yes. And then availability, which had increased at times. I'm sort of interested as to what drives your confidence that those measures are going to get you from a sort of minus 3% run rate to a plus 3 run rate. It seems like an awful big swing.

I think the run rate in the half was flat. Clearly, softer trading...

Sure. Longer term and current.

No, it's a good point. I think retail is about the total proposition. And there is not really one silver bullet because if it was one silver bullet, it would be very easy to run shops. I think it's investing in price. And again, as I said before, price is ongoing. So every single week, every single day, we check our prices and we correct and we adjust. On range, that's the biggest, let's say, that will have the biggest impact over time because I can tell you, if you've got a really sharp range, it's really clear to shop, value is really clear. We're able to merchandise your best lines in a confident way. You don't need one item extra from the basket to have a significant increase of sales. I think our promotions were enormously static and actually the first 6 days of all our stores didn't really drive incremental traffic. So we're addressing that and getting better at it. And availability, if on your best-selling fast-moving consumer goods lines, the lines that actually customers buy most, you have such an enormous gap in products available. The combination of the 4 is my strong conviction we will bring them like positive like-for-likes back. And you only need to say if every single customer pick up extra line, you already smashed that target massively. Clearly, it's very easy to say. But it's a combination of the 4. If you would stand back, if we would be looking -- if I would be looking at a business that had a massive transaction decline, we would have a very different problem. It is a basket decline. So our transactions have more or less held up. It's the basket where we've lost it, which means customers are still shopping with us. Customers are still coming back to B&M. They're just not buying the same level they did in the past.

Jonathan Pritchard, Peel Hunt. Just labor the point on reduction. I mean, to be honest, I was stuck myself when I saw that 13,000 was the starting point to get to 16,500 was way above what I thought it was. But have you got a number in mind for the ideal number of ranges in there? I know you're doing a lot of data analytics at the moment. And then just on the point on perception, I mean how do you speed that up? How are you intending to communicate what you're doing? And I mean that in store, but also out of store and marketing, et cetera?

Yes. So in terms of range count, I think I quoted a number of 35% reduction in the 3 pilots. I think that's a good starting point. which basically will bring us back to the level where we were about 2, 2.5 years ago. I think it actually goes hand in not just with active line reduction, but it's also a more disciplined end-of-season clearance, which we're strengthening as we speak that will ultimately help reducing range also on our shop floor, which I think is the right thing to do. In terms of your other question, so on...

Communication that...

So in terms of communication, so there's obvious ways how to communicate value to customers. And I think we have a chance to actually do one very simple thing in a much better way. If you would walk into a B&M and if you would look at a shelf edge label, which is a bit larger, so we call it a price marker, we would never ever communicate the recommended retail price from manufacturer, we never communicate value. That's a fundamental way to communicate value to customers. Nobody knows if Kellogg's 219 with us or somewhere else. That is something we're going to implement, obviously as well. We have always run a very lean model in terms of marketing and advertising, which I think is really solid. We have a very large social media fan base, which we're leveraging. I think the moment we have our range reduced, we will then strengthen our communication on the lines that matter most. We'll communicate much more the actual value, the saving that customers are making. That's really the way to drive value perception. I think we've been very restrained in doing so.

It's Richard Chamberlain, RBC. Just a question on, I guess, on-shelf availability and labor hours. because my impression was under the -- in recent years that there seems to have been a big drive to optimize on-shelf availability. So I'm surprised it's so low on your analysis. But I wondered if there's an opportunity actually to reduce labor hours because it feels like maybe availability in stock would still be pretty good, but maybe the shelves don't need to be 100% stocked all the time. So I'm just wondering what your thoughts are on that or actually whether they need to go up to get that availability metric better.

There's a couple of elements in there, which I think is good to reflect on. So I think we've always had good stock levels. So if you look at our stock levels in terms of days stock on hand and working capital, I think we have significant stock in our business. But as always, with retail, you probably don't have the right stock in your stores. And I think the process that was executed until, let's say, summer this year is a very, very strong focus on making sure that every single shelf is properly phased up which means no gaps. So it looks pretty. But if I now go one level deeper, what actually happens is an item runs out, there's no stock in the backroom. There's a shelf-edge label with price on it. Then you phase over the adjacent item. But clearly, shellfish label and item don't match. So people move to shelf label and throw it in the bin. And then there's a stock record issue with that item, so the item actually is 0 stock or there's in a system stock, but actually there's no stock in the store, it will not trigger a delivery from a DC. So the item will be lost and will not come back in our range. That's a consequence of phasing out and making shelves look pretty. And that's the reason why availability of the right lines is relatively low at B&M. So the way to do this, of course, is, a, make sure your stock records are accurate; b, when there's a gap, leave the gap, it is what it is, and then make sure that the product comes back. In terms of hours in stores, if you would look at the complexity that comes with increasing stock count, SKU count from 13,000 to 16,500 and if you would multiply that with the amount of products that you need to order that you have to get in your warehouse that you have to replenish on shelf, the amount of pick locations you have in the DC, I think there will be a flow-through effect from simplifying range into also simplifying store operations. And that's why in the second phase of our plan, simplifying store operations is very much in scope with the aim indeed to reduce hours of non-value-add work but to reinvest them in areas which matter most, which is customer service, which is checkouts to make sure customers could go through the deal as soon as they can, making sure our prices are correct, there's price integrity. So I think there's areas in B&M we can reinvest those hours.

Okay. Great. And then on the, I suppose, point about sort of making the stores more appealing to customers to come in and maybe improve their basket sizes again. What are going to be the key drivers of that? I mean you talked about price cuts. I think we were talking about just under 2% before. But presumably, that's an average. I'm presuming that's going to be much more in certain areas to have that impact on customer perception. It's going to be that along with promo signage, all of that stuff -- it's actually going to make people feel there is slightly more appealing want to spend more.

Yes. So I think there's -- my experience is that there's always 3 areas if you want to improve the performance in the store and if you invest money in it. So you refresh the store, so you invest in fixturing and you make sure that the walls are painted and the ceiling is great and the floor is great and you got a system that works and checkouts work. But then you need to offer range because just updating a store and you don't change the range, you don't get a better outcome. That's why in tandem, we're actually doing the work on clustering because that means you bring new categories to the store that customers haven't seen before, and that drives incremental sales. And the third one is then you also invest in training for your store. So you give them tools and technology to make their work do better. And if you do all 3, you get the best possible outcome of a refresh. And that's why we're building the plan as we're building it. So it's you have to improve ranges or change ranges. You have to invest in store, let's say, hardware and then you have to make sure your team is better equipped.

Kate Calvert from Investec. Just 2 questions from me. As you start to tailor your formats more to the sort of 6 clusters, how do you see the space allocation changing between GM and FMCG?

Yes. We're very early days with that piece of work. But what you see is the 2 of the 6 are town center clusters. And there, we see a significant share of FMCG, which is not really reflected in our layouts. But also in some of the other clusters, we see certain customer groups not being served properly. So there's by cluster, very different space layout and range layouts. And that's what we're going to test in the new year.

Okay. And my second question is just obviously, in your short-term strategy, it's very focused on what the customer sees. And you have mentioned there's an opportunity in the operations. Are you happy with the way the supply chain works. So therefore, the operational bit is really about the full labor hours?

It's a good question. So I think if you look at the way B&M supply chain is designed, it's very cost efficient. So we're picking in a very optimal way for the DC, and we're having a very high fill of our trucks. If you look at the amount of deliveries per week, I think it's super efficient. So I think we've really optimized our current supply chain. We're now commissioning Ellesmere Port, which basically centralizes the inflow of all of the Far East general merchandise containers to centralize in one way because depeelletizing a container with Far East products is a very different skill set from changing, I say, unloading a pellet of FMCG product from British supplier. So we are concentrating that will actually give us more flexibility to better allocate stock, but also lower cost of the pelletizing that general merchandise product. The reason John Perry takes over both is I think there's a chance to actually improve the focus on helping stores better in our logistics. So to give you an example, currently, we pick in the best possible way for the DC and our pellets come mixed. But that means at the store, it could be that in a pellet, there's items on the beginning of the store in the back end of the store. And then at store level, you need to start dividing the pellets and need to regroup them. Most retailers would have already picked the pellet in line with the layout of the store. I think that's an opportunity for B&M to do so that you're helping the stores in a better way. But if you look at stand-alone, I think our supply chain network is very efficient and very cost effective.

A number of questions online, and thank you for those. Two first from Wayne Brown at Liberum, both on Phase II objectives, one on private label, one on loyalty. For Tjeerd, in terms of private label, what's your thinking there in terms of the value proposition? And why is that a Phase II consideration not earlier given the current focus on the value proposition? Secondly, on loyalty, any early thoughts in terms of what B&M may be trying to achieve there in the context of thinking around customer segmentation and gathering data?

Yes. I think private label is basically a catchall for an entry price point for customers to find great value. If you would go back to the beginning of B&M, the origin of B&M, it was big brands, big savings, but there was no Aldi, there was no little. So ultimately, people are used to buying the big brands, and there were some private label opportunities. I think the 2 German discounters have completely reset value expectations in certain categories and certain categories are just dominated by their price points. Take an example of Kellogg's Corn Flakes, where the 450,000 Kellogg's packet is 219 at us, B&M and then everybody sells an 85 to 89p Aldi fighter in their stores. So even if we would reduce the cornflakes product to 175, we would still be double the price of the Aldi product. So I think over time, I think there's an opportunity for us to look also at entry price. It doesn't necessarily need to be private label. It could also be a secondary or tertiary brand. It's more about the architecture of our range that we are basically providing choice for customers. That's what we're looking into. In terms of loyalty, most retailers, I think every single retailer I worked before B&M had a loyalty offering, either a classic point system or a more gamified system with vouchers and spend stretches. I think ultimately, it's what you do with the data and what you do with optimizing that relationship with your customer. I think there's become an expectation, I think, with most customers now that there's an offering, and that's why we're seriously looking into it. But you can do it in much smarter ways much more cost-efficient ways than the old days of GBP 1, 1 point with points on the balance sheet and all that nice complexity that we used to have that's no longer needed. So you can actually do it in a much smarter way where you help suppliers and help their sales marketing funds to reach our consumers and actually combine their investment in brands with our reach out to customers in, let's say, a more exciting way and then a loyalty scheme would make sense. But again, we're looking into it. It's no decision, but I think customers would expect probably over time, B&M also to have such an offering. So that's why it's on our road map to make a decision on that.

Just one other question online around cost and number, but let me summarize 2 for Mike. Firstly, how is the company mitigating those increases in statutory costs and other costs that you've indicated today? And secondly, other retailers are facing the same and taking decision to pass those costs on. What's your approach?

Yes. So I think the culture of B&M is about cost efficiency and about seeking to mitigate where possible. And ultimately, it's about finding ways in stores to reduce the number of hours being spent to carry out each of the tasks. I think Tjeerd has talked about some of the things we can explore in looking at the supply chain and retail operations integration. But actually, the actions that we're seeing come through in the first half are the ones that we planned in probably sort of 6, 12 months ago as well in anticipation of these costs coming through. So they would be things like improving the design of shelf-ready packaging, thinking about the ranges that we have and how we display the ranges in stores, thinking about the commercial churn and the in-store activities and making sure that's all as efficient as possible. And I think all of those changes do add up to a large amount. And I think touched on the fact that there'll be more opportunities in mind as we look about integration between retail and supply chain. In terms of passing cost increases on to customers, ultimately, I think the message that I think we've been delivering as a business is that we recognize price is absolutely paramount for customers, and we're going to make sure that our price position is at the right point for customers, and that's what we've been doing over the first 6 months of the year. And clearly, we do watch and we do track with data with insight as to where those price points are at any moment in time, and it's a daily, weekly, monthly process.

David Hughes from Shore Capital. A couple from me. Firstly, on the store rollout plan, obviously, the net new stores was kind of a fair bit lower than the gross stores. How would you expect that to play out in the second half? And what's driving that? Is it store closures? Or is it the case that it's relocations with the new stores? And then secondly, on Heron Foods, I was wondering if you could give a bit more color on the strategy there because obviously, it's slightly different from the rest of the business.

Yes. So -- as you look at the first half, I think what we saw in B&M U.K. was 14 reductions, which when you've broken down the 7 closures, 7 relocations. So the 7 relocations we sort of touched on before is a new store, potentially sort of better location, larger store, better customer proposition coming through that we think looks attractive financially. And so that was driving part of that net number. And sort of 7 closures, which is all about the discipline about where we've got our capital employed in the business. I think the -- as we look at the second half, we anticipate that there will be fewer relocations and closures based on what we can see today. And I think that does factor into our thinking. Fundamentally, we're not seeing any changes in the underlying trends, but these short-term periods can always be, to a degree, lumpy as you see batches of trends coming through. And I think the key point that we talk about is look at the health of the existing estate, 99% of stores plus delivering positive contribution margins. And it is by having that discipline about the relocation program and about the closure program means that we've got both that health of the estate, but also that very attractive runway to get up to 1,200 stores in the U.K.

And then on Heron, so clearly, the performance wasn't where it needs to be. They've actually launched a very similar plan to B&M U.K. They probably were a bit ahead of B&M U.K. So they actually have started to review their categories as well. So they've done -- they're applying a very rigorous process of reviewing category, looking where the range gaps are and then basically updating the range, and they've done this now for a number of core categories. chilled, sweets, health and beauty, soft drinks. And actually, we've seen every category they've touched, we saw the core performance improve. They have also started to apply the same pricing insight has been in the U.K. with the line pricing, and they have launched an updated pricing for their business. The reason I'm saying they're a bit ahead of us because that business is a bit smaller and they could easier, I think, get to a state where they actually feel that they've got sufficient ranges improved and also their prices adapted. So they've combined it with an in-store campaign on communicating better value. And the other element that Heron used to be very strong at was the -- when it's gone, it's gone. So it's basically mainly in fresh fruit and frozen. They've lost a bit that strength and they're now bringing it back. They're dedicated to buyers and the team who are full time working on getting the best deals for Heron -- that's working well. So I would say it's early days, but I think the Heron team are doing all the right things, and we see some initial green shoots, but it's still early days.

Warwick Okines from BNP Paribas. Two questions, please. The first is that you talked to the point that the transactions are not a problem. It's the average basket size and that people are putting fewer items in the basket. Is that much more skewed towards FMCG? Or have you also lost items per basket in Gen merch?

It's mainly an ASP actually. So it's predominantly an ASP underperformance in GM, where basically still from a volume perspective, it's okay. But from an ASP perspective, you would like to see it in a different way. And it's a slight indeed volume development in FMCG. So it's a combination of the two.

Got it. And secondly, on gross margins, the first half trading gross margin was down quite sharply. Can you talk about the puts and takes for the second half and where that should be landing for H2?

Yes. I mean I think the -- you need to look across both sides of the business in B&M U.K. So if we look at general merchandise, I think firstly, we've seen the general -- we've seen the gross margins lower for a period of time. And clearly, we're starting to comp against those as we go through the second half of this year. And we've also taken actions to make sure we've got our margins in the right place. On the FMCG side, we talked about the fact that in the latter part of the first half, we took price action on the KBI lines. And so of course, that is going to feed through into the second half of the year. Ultimately, what also affects the overall picture is the mix between the 2 sides of the business as well. And so I think it will be important to see and understand how that trend develops across the balance of the year before we sort of guide on margins. And as you know, Warwick, we don't typically guide on overall margins, but I think the final thing I'd say, in terms of the overall trends, I think we do see some tailwinds from favorable FX rates. I think if anything, freight rates are moving slightly in the business' favor. It's small, but it's all beneficial. And FX in the first half of the year, as we touched on before, was a drag that we know mathematically will reverse in the early part of the second half as well. So I think there's a few tailwinds coming through. But again, there is that annualization on FMCG that does provide a degree of the balance to that picture.

If I may add some color. So if you would look at margins, the way we report margin, of course, is one number. Actually, there's 3 elements underlying, and I think all 3 are important to call out because that's really our focus. One is the bot in margin or full price margin which basically is the number that our buyers negotiate with our suppliers and that actually is a starting point of our way of working. Then there's 2 discretionary elements, which are promotions where you basically offer more value for customers, a 2, 4, 3, 4. Clearly, you've got discretion to amplify that or to reduce that. And the third element is in clearance. So how much -- how effective were you in buying -- setting your range plan, committing to volumes, what was your sell-through? And clearly, if you do a good job, the clearance element is a small number. And if you've done a good job, it's a bigger number. And it's -- I believe we can actually improve in all 3 elements because I think there's opportunities to be more efficient in all 3. So I think it's -- margin management is probably a bit more comprehensive than going forward than the way it was managed in the past.

It's Vandita Sood from Citi. I had one more question on the SKU range. So if I remember correctly, before you said like some time ago, you said that because people have been buying sort of the cheaper product, you wanted to introduce a sort of good, better, best optionality in the range. Is that what led to the inflation in SKUs? Or is it something completely different?

I think what you're referring to, but I wasn't there, but I think that was the general merchandise home ranges mainly where we introduced the Simply range, which was the lower price point, but it's mainly in general merchandise. That was indeed in addition to the existing range. If you look at the performance of general merchandise, actually, that's still performing solidly. The range proliferation and the undermining of our value is mainly in FMCG, where the issue is. I think that said, I think if you look at our general merchandise ranges, I think there's an opportunity to really implement good, better, best across the estate. I think we're quite good and good, quite good and better. But I think if you look at the tiering, I think there's chances to do also in GM, a more solid job there. That's why we have actually said that the implementation of the range improvements is not just 12 months, it's 18 months because it takes about 18 months to do all the buying cycles in general merchandise, including all the seasonal ones. But that's also in scope.

And just one more. So when you talk about customer insights, -- what kind of insights do you have at the moment? Because presumably, it will take some time to build up the database. Do you know how far people are traveling in from, what ages they are, et cetera?

Yes. So we are using -- and please feel free to add to Mike. We're using a third-party data provider who specialized in real estate and location strategies. They have a large database of customer demographics in terms of age, background, type of role, income. And clearly, we also have all the information on the local competition that basically is informing us to where opportunities are. I think what we've added now with the latest update of our third-party data is the banking data of those customers because you would normally traditionally, if you would plan a store, you would more or less have just a simple mathematical range in terms of driving time from stores. But actually, when there's a motorway or a channel or a railroad track, the actual catchment is very different. And with those credit card data with hotspots, you can actually zone in on where the true catchment is. And it actually informs you that there might be a store location available, which on the net appears to be quite close to the other store, but effectively, there's a completely separate catchment. And I think that's what we actually shared today. That extra level of insight, we're now applying to new store locations.

I think what I'd just build on what's point, I mean I think it's not just about the data that you have within the business. It's also about what you're doing to tailor your response to the data that you have ultimately. And so if you looked at the way that we would normally operate, it's sort of be a single format across the estate. We'd be looking at a sort of a buyer-led range proposition based on what they saw selling rather than tailoring it to customer groups and so on. And I think really what we're talking about here today is the Back to Basics plan having a degree more tailoring for customer groups based on the insight being provided. And there is good data out there already within the business, as Tjeerd said, on the real estate side. Also, we do have credit card data. We do have detailed transaction data within our own systems that we keep. And ultimately, you are able to sort of see quite detailed insight based on the questions you want to ask and the decisions you want to make based on that data. So there is plenty to be done.

It's a good point, actually. So if you do a range rationalization program like we are doing, one of the key risks that you face is you take out a wrong item where customers are quite loyal to. If you don't have a loyalty card, you actually can't see how customers actually shop. Ultimately, what you're able to do is you don't know who the customer is, but you could link the credit or debit cards to the basket. And if you assume people are using that card consistently, which most people do, you still see a pattern. And then you can see in the basket over time, if they've actually shopped multiple brands of the same category. So you can actually see there's a high level of substitution available. And that insight we're now using to design the best range. So even in the absence of a loyalty scheme, you can actually get good meaningful customer insights, and we're now actually applying it for selecting the items that will actually leave our range. I think we've already spent quite a while together, and I think we're very, very light amount of questions. So looking at the hours, I would like to propose to conclude. Again, this was my first scheduled announcement at B&M, and I do hope that it mainly remains a scheduled announcement. But clearly, I have a crystal ball. We are getting back on track at B&M. Golden quarter is still there out for us. And I would like to ask all of you as clearly followers of B&M, please also visit our stores and look at our beautiful Christmas ranges. And if you still have some money left after the budget announcement, please spend some at B&M.

Thank you very much.