B&M European Value Retail S.A. (BME.L) Q3 FY2026 Earnings Call Transcript & Summary

Good morning, and welcome to B&M European Retail's (sic) [ B&M European Value Retail's ] Q3 2026 Trading Update Call. [Operator Instructions] I will now hand over to management to introduce the call. Please go ahead.

Good morning, everyone, and thanks very much for joining this call to discuss our third quarter FY '26 trading statement, which we released earlier this morning. My name is Tjeerd Jegen, CEO, and I'm in a room here with Helen Cowing, our Interim CFO; and Andrew Orchard, our Head of Investor Relations. And on the back of this trading update and the guidance change that we communicated today, we wanted to hold this call to give you some context and also offer opportunity for questions. So before we go into questions, I would like to start with some prepared remarks and I would like to start with some background. On the date of the announcement, so we would normally announce our Q3 numbers a bit earlier. This time was a bit later because we want to take sufficient time to both prepare our trading results properly and diligently, but also spend sufficient time to undertake a thorough evaluation of the outlook for our business. I would like to cover four elements today. First of all, I would like to give some color to our third quarter results. I would like to take you through our thinking of guidance for FY '26, and progress made, which I think is the most important part of today with the Back to B&M Basics and then updates on the review of the freight issue and the review that was done by EY, which has reported -- has been finalized, and we're getting on with the implementations of their recommendations. So starting with the third quarter results. I think we indicated that in our release in November, but we had a slow start in the beginning of the Golden Quarter, negative low single-digit like-for-like numbers. And I think that was linked to quite high levels of uncertainty with customers. December was a turning point, and we saw a particularly good sell-through of seasonal. Not only seasonal sold well, but overall like-for-likes amounted for the month of December to 3% for B&M UK. And interesting also, I think, positive for us was the performance between general merchandise and FMCG was more or less equal. And the positive like-for-like sales momentum has continued into this month of January. Elsewhere in the group, France delivered positive like-for-like growth, be it a bit lower than before. In a competitive market, they had to comp strong like-for-like year prior. But with new store openings, they still delivered, in my view, a solid year-on-year growth of 8.5%. Heron's performance was below expectations and also the underlying profitability was not where it needed to be. Let's move to our guidance for FY '26. If you would combine the actual results for Q3 year-to-date, combined with the outlook for Q4, then we had made a decision to adjust and tighten our guidance range for FY '26 adjusted EBITDA. We've adjusted and tightened it downwards from the previously announced GBP 470 million to GBP 520 million to the new range of GBP 440 million to GBP 475 million. So that's basically our new guidance range for the remainder of this financial year. There are three key drivers for the downgrade, and I would like to give also some color to why we believe we needed to do this. First of all, we have continued the investment in our FMCG pricing. I think we were very clear that as of August, we've made changes to the way we implement our pricing policies and strategies. And we've made already in August adjustments to a number of key KPIs, or key value items. And since then, we have continued to invest in price. And clearly, we want to make sure that we are there for our customers, that our customers will always find prices in line with our price policy, i.e. being significantly cheaper than the big grocers and we continue to do so also, of course, in the Growing Quarter. And second one is part of basically back to basics. And it's an investment in strategic clearance and cleaning and adjusting our stocks. I think you all know that we spoke about our range rationalization program. We really would like to focus our ranges. But to do so, clearly, we need to part ways with quite a bit of range. So we are preparing our stores for the rollout of this range rationalization. And on the back of this, we're increasing our clearance efforts significantly in the second half of this financial year, and especially in Q4. We've got a very strong focus now at the moment if you go into our stores on clearing seasonal and discontinued lines. Obviously, January is a really good month for this. And in addition to this, on the back of the availability trials we're currently running, we're also finding opportunities to adjust and clean our stock to make sure that we achieve the correct base in the right lines to drive the availability improvements we want to bring about. So that's the second driver of the downgrade. And the third one is the underperformance at Heron Foods. And just to be -- to frame your mind, so the business of Heron Foods was built on a clearance model, combined with a convenience offer. And at the moment, this is a challenged business model, and in this financial year, has resulted in relatively for that business, a significant EBITDA underperformance versus our expectations in the October outlook. We're conducting a review of the customer proposition, and we'll continue to assess this business going forward. I think it's important to point out that two of the three drivers I've outlined are linked to back to basics and that they are investment decisions we have taken based on the insights and the long-term health of the company. And we could have chosen also not to make those investments now, but I firmly believe that this is the right approach as we prepare the foundations for a return to sustainable like-for-like growth of B&M UK and return to sustainable like-for-like growth is our #1 priority. I also would like to emphasize that the lower profit guidance for this year doesn't change our view that with sustainable like-for-like growth returning to B&M UK, we continue to believe B&M UK can return in the medium term through a low double-digit EBITDA margin business once we have reestablished sustainable like-for-like growth. But we've always said, restoring like-for-like outcome would likely take between 12 to 18 months, and there's no change to our view. And also, I think it's important to note, margin is an outcome, not a financial input in how we manage the business. So let's move on. I would like to give you an update on Back to B&M Basics because that ultimately is the key to unlocking the recovery of U.K. like-for-like growth. We're now moving from trial phase to rollout phase in both the range or that we call this SKU rationalization and availability work streams we outlined back in October. On availability, we scaled up now to over 150 stores in the month of December and about 150 items, we are having a very different process across those stores, where we see good sales growth on the items where we've given a greater focus and a different way of managing the availability. And we would like now to roll this out across the nation later this month and early next month and then we'll cover 250 of our best-selling lines. And we believe that will really help those lines and ultimately, of course, also the broader categories and will lead, in our view, to support increasing sales. So that's the availability trial. So we scaled up even in this Growing Quarter to now 150 stores, and we're ready to roll out the focus on 250 best-selling lines to all of our stores in the next weeks. The next one, which is also very important and part of Back to B&M basics is range rationalization. And you might recall there were three FMCG category pilots we started in the third quarter. We've got really good insights in the performance of those pilots. We are now adding four categories to this trial later this month. And that means in February, we'll have about seven categories with a reduced range live in our estate. And the objective is to reduce range by about 25%, but ultimately deliver a sales uplift and simplification of the business. So once the results of the pilots are in, we will then start to push the button of the rollout through all categories, which means more focused ranges, and that will start in the first quarter of the new financial year. And then promotions, also an important part of Back to B&M Basics. In November, we have taken a new approach. We communicated that our especially front of store manager special area, where we're taking a more flexible approach trading at the moment. At the back end of the quarter, we decided to dedicate this fully to Christmas ranges. And we've really seen that this has helped significantly the sell-through of these categories, but also which I think is quite important to really establish B&M as a destination store for the Christmas season. And I think we did trading of the front of store harder than we did in the past. In my view, has really helped drive the decent like-for-likes we saw in December. But then apart from trading, EY has completed their review, the review we announced in October of the freight issue that we encountered. And to recall, EY was commissioned by the Board to examine the issue from an accounting and an IT perspective. And we're now implementing the report's recommendations on specific IT and financial operational processes raised in this report. The full year impact financial -- the full year financial impact of the issue remains unchanged and is in line with our announcement in October. So rounding up this update, I would like to summarize that from a trading standpoint, I think we delivered our Golden Quarter with a soft start, but a solid finish and early trading in Q4 shows positive like-for-like sales at B&M UK. We've identified opportunities to deepen investments in range reduction and availability on the Back to B&M Basics. And in combination with underperformance at Heron, we've adjusted our guidance range for FY '26 to GBP 440 million to GBP 475 million from the previous range of GBP 470 million to GBP 520 million. We're continuing to make good progress with Back to B&M Basics. And very excitingly, in Q4, we'll see the rollout of the new availability working practices for our bestsellers across the nation, and we're putting in place the foundations for the rollout of the FMCG range rationalizations ready to kick off in the new financial year. And finally, EY has delivered its review, and we're implementing their recommendations. But before I open to questions, I would like to emphasize that, that's a major business reset, and I think that's how you can call Back to B&M Basics. Like the one we're bringing about inevitably bring with them choices, many of which provide opportunities for securing the outcomes you're aiming to achieve. And B&M Basics is no different. And we're approaching every one of those choices with the mindset of owners of a business we all feel very passionate about, and which we believe has a bright future. And I firmly believe making investments in these opportunities now is the right thing to do and will help us achieve our goal of returning like-for-like growth back to the U.K. within the time frame we've outlined. And with this, I would like to open the floor to questions.

[Operator Instructions] And the first question come from the line of Warwick Okines from BNP Paribas.

Two questions, please. Firstly, could you just comment on Q4. You're planning to accelerate clearance in the quarter. What do you think this will add to, to like-for-like growth? And maybe as part of that, was Q3 sort of boosted by extraordinary clearance? And then my second question is whether you could just comment on in a bit more precision the sort of uplift in sales that you're seeing for the availability trials that you've been conducting so far?

Yes. Very good. So basically, if you focus on Q4, we actually have a significant focus and strategic focus on clearance in January on the back of seasonal ranges that we would like to clear and January is, of course, is the obvious month to sell your seasonal autumn/winter ranges, but also to start selling all of the discontinued lines that we have accumulated in our store warehouses and especially when they are seasonal, that's the right moment to sell. And at the back end of Q4, so somewhere in March, we will then start having a very strong focus on starting to sell in a clearance way, all of the ranges we already have decided no longer to need in our, say, range rationalization program, which will start rolling out, let's say, in the first quarter of financial year. So basically, it's more or less a strong focus throughout the quarter, the beginning of the quarter, very much linked to clearing seasonal and discontinued lines that we took from our store warehouses and the back end of Q4 is really starting to clear all of the ranges that we no longer need on the result of the review of the range rationalization. And to put it in perspective, in Q3, obviously, you've got a normal, let's say, clearance -- ongoing clearance that we have, but I can tell you, I think the contribution of clearance to the like-for-likes in Q3 were probably very small. It was really -- the sales really was driven by many, many different categories and actually equally in FMCG and brown box and very much the season categories, of which majority of them, we were selling full price. So that's basically Q4, Q3 clearance in terms of uplift of the availability trial. So I think it's important to note that we decided to even though normally you would not want to change things from an operational perspective throughout December, we did decide to scale up from the 11 trial stores to 153 stores in December because we really saw good encouraging results coming out of the first 11 stores. And we've seen also now in that 153 stores that the 250 best-selling lines that we have given significant focus, that receive more space on shelf, we have a very diligent and stringent focus on stock record accuracy. We leave the gaps when the supplier hasn't delivered the product to our DC, which is new for the company. We're looking at shelf capacity enhancement. We've actually seen that in those stores, 153 stores, those items actually have seen double-digit sales increases. Obviously, some of it is, let's say, sales that probably will be driven in other brands, if we wouldn't have done so. So it's not completely, let's say, accretive sales number. But it's very encouraging to see that the customers are, let's say, buying significantly more of it. And ultimately, what it actually does, it establishes B&M as a more reliable place, a more reliable store where you can buy the items you buy most, and you know they're always there. And in the past, we were not always, let's say, best positioned in terms of availability. And the good thing is, on the back of the 153 stores where we now have rolled out the availability trial, which we're very confident to successfully roll out at the end of January, early Feb to all of our 791 stores in the U.K. This is just a start. So it's 250 lines. There's thousands of lines in FMCG. So clearly, the next step will be to enlarge the scope of products we have the different focus on, but I would say, so far, good progress in this area.

And the next questions come from the line of Jonathan Pritchard from Peel Hunt.

Two or three, if I may. Two or three. Just the continued better performance in FMCG, obviously, clearance is very strong in January, but how has FMCG continued to be a bit better in January? And has the pricing investment actually ushered in a change in pricing perception where FMCG is concerned? And then a couple of other quickly. Just on Heron, just give us a bit of level of granularity on the profitability issues. Is it purely operational gearing, the like-for-like was worse than you expected? Or is there something more structural there? And continuing to use the word sort of structural, would it be fair just to say that on the margin investments in B&M, the price investment is slightly more structural, but it's more one-off when it comes to the clearance side? I think I might be stepping obviously a little bit there but just to confirm that one.

Yes, very good. So three very good questions. So I'll start with the first one. So clearance, I would say, at this stage, has a smaller impact on FMCG. But we do clear some FMCG in January, but the larger impact of clearance in FMCG will come in March. If you would look at the -- we signaled that we had an elevated FMCG price investment, and it's mainly to do with the fact that we had a -- we follow, of course, price in the market. And we've seen in December, there was quite a significant enhancement of competitive activity on seasonal fruit lines, and we just participated in that fight. And we wanted to give our customers best prices, while the rest of the market was offering also great value. So we saw elevated, let's say, pricing impact in December on the back of, let's say, a seasonal fight on, let's say, Quality Street tins and the like. So we've continued to invest. Price perception ultimately builds up over time. Anecdotally, I hear that especially stores where we face our most important domestic competitor, with a concept, which is quite similar to ours, that customers are, let's say, acknowledging the fact that we have better prices, and we see some of the FMCG sales in those stores trending upwards. But I would say it's a slow burn. So I wouldn't say it is all linked to the fact that we decided to be more competitive in December. And on Heron, I think you know that Heron actually is built -- originally built on a clearance model. So a significant part of its sales historically has been the ability to acquire stock lots of food suppliers, perishable and nonperishable with short shelf life, where the producer had issues with forecasting their demand properly and they had overstocks they couldn't sell it with their regular customers. And then we had the opportunity within 24 hours to acquire significant stock lots at great discounts for us, but also at great discount ultimately for our customer. And the interesting element of the clearance model was, it wasn't just a great deal for the consumer. Also, it was accretive to our let's say, gross profit margins on the back of this clearance model. Many of our suppliers in the U.K. but globally have invested in better forecasting tools so that, that clearance model, supply of clearance products, unfortunately, is reducing. So we don't have access to the same levels and quantities of clearance that we saw historically. So we've become more or less now a convenient discount store, low prices, convenience means a higher cost to run a shop without the clearance element helping our profitability. That has been actually the main and most important driver of reducing profitability in Heron. And obviously, it's something we're very unhappy with. We are doing a proper review of the customer proposition. And of course, we continue to assess the asset. Then final question, price investment being structural, your words and clearance being more one-off. I would -- so I would look at pricing also a bit more in a dynamic way. Obviously, we've taken the decision in August to reduce pricing or let's say, be more competitive in FMCG with the consequence that we reduce prices because we needed to because we were, in my view, not best placed competitively. That has led indeed to an investment in gross profit margins in FMCG. And I don't expect competitiveness in FMCG in the U.K. will weaken or soften. So this might be a prolonged investment, yes, but it's the right thing to do for the business. But I also would like to share that I think I've already, let's say, shared a few previously, but I would like then to repeat today. I believe that 18 months ago, 12 months ago, the decision was taken at B&M to reduce pricing and reduce margin rate in our nonfood ranges, our brown box ranges. I think that was not a strategic decision that was taken in the right direction. I believe that ultimately, because we develop all our range ourselves, we've got unique price points, we've got a great sourcing platform in Asia, in my view, there's an opportunity for us to improve our margin rates in brown box and nonfood, which means we could actually absorb over time, in my view, the investments we're now making in FMCG. Unfortunately, as you know, most of our brown box is prepriced and most of the brown box is seasonal. So it will take several buying seasons to fix this, but that's the way I would ask you to look at pricing more strategically and long term at B&M. So don't assume that our pricing now is permanently depressed on the back of our investments in FMCG. It will take probably 12 months, 18 months in brown box to get to a more solid healthy margin rate, given the nature of buys. But I think dynamically, we are still aiming to improve our rates in brown box. And in clearance, yes, 100%, especially the way we are now clearing, if you would walk into our stores, you would see we're using Managers Specials stage for clearance. We've got to reduce the clear area. There's a very strong focus. Every single store has scanned every single item in the warehouse to make sure that everything discontinued is out for sale for customers, we are applying significant, let's say, price reductions to really clean our warehouses. That is, I would say, you could argue in the end, a one-off because we're not intending to do a strategic program like we do now every year. And this is really then the foundation for clean ranges, easier to execute in our supply chain, easier to execute in our stores and easier to shop for customers.

And our next questions come from the line of Richard Chamberlain from RBC.

A couple for me, please. In terms of the SKU rationalization, Tjeerd, how -- can you just talk about how you're sort of intending to manage that and sort of edit the range but not reduce perceived choice for customers? I guess there's a sort of balancing act there. And then the second one, I guess, looking ahead to this spring, post the heavier period for clearance. What sort of changes will customers be noticing now in stores across the estate in terms of more compelling price messaging, better availability, better price communication, all of those sort of execution or operational improvement? So I was wondering if you can sort of talk to any obvious changes that B&M customers will start to notice as from this spring?

So the first one, so there's three categories in about 23 stores where we have -- just before we did the H1 announcement, went live with about a 35% reduced SKU count in pasta and rice, in crisps and snacks and in wine. We've learned a lot there. And indeed, the goal is significantly reduced SKU count, but ultimately more sales because I strongly believe that we've become very blurred with our offer. And indeed, the way to do so is take out redundant choice, not unique choice. So customer offer actually is still providing all of the needs, but in a much simpler way to shop for customers. And just -- and ultimately being a true discounter because complexity comes with cost and cost is something we don't want to have. We're adding four new categories to this mix at the end of the month. So end of January, early February, we've seven categories. We've learned a lot. I can tell you in those first three categories, and the aim is that starting in April, we will then roll out, let's say, about 200 subcategories across the estate, where we aim to be done somewhere in mid-summer. And then we have some seasonal categories in autumn, which we'll then update. So by the end of the current year, basically, we're done with this part of the program. And yes, we're -- I think I'm pleased we did the trial, we learned a lot, and we're making good progress also with the next four. And we've used -- just to be clear, we've used transaction data in combination with payment card identifiers, so either debit or credit, so we could actually track customer behavior, and we would know if customers would be very loyal to a certain item or customers would basically have very low loyalty. And those indicators we have used to reduce range or to clients in our range. And in terms of what our customers are going to see in our stores, now in the end, this is not a sprint, but it will take time to build. What we are doing, though, so the availability trial, which will go into full rollout this spring, will become visible in our stores. So the 250 best-selling items you will notice the customer, they will have sufficiency -- they have significantly more space and they have sufficient shelf capacity. They will also be marked with different shelf communication, different color coding of price tags, but also more shelf talkers because those 250 items are not just our best-selling items, they're also the items where we are sharpest on price. So that will help us building the very strong price message on those items. We've also started a, let's say, on our socials and a bit on paid advertising, our everyday value campaign. So really showcasing every single day, you can buy great value at B&M. And of course, obviously, the most important one is, as of this month, we're launching all of our new spring/summer ranges that are not flowing into our stores. And I can tell you that there will be, in my view, quite strong perception this year because I think, historically, we had to cut in those lines, not on the back of a very strong clearance program. This time, stores are clean, warehouses are clean. So I expect really the spring/summer ranges to shine. So I would say those are the changes customers will see spring/summer and then over the summer period, then we'll see the full implementation of the range rationalization, so on more focused ranges.

And the next questions come from the line of Karine Elias from Barclays.

I had two, please. Actually, you've mentioned the end of the review. Just wondering is there any particular implications that we should think about in terms of CapEx that you can share? Or anything on the interim financials' impact that we should be aware of? And then secondly, obviously, it's great to see the like-for-likes turning positive and obviously the availability improves. But just thinking about clearly, what sort of level of leverage are you comfortable with? And how should we think about the passive earnings and leverage in particular?

Yes. Great. So on the EY review, clearly, we've commissioned them to focus on the accounting controls and the IT change, and they come back with a significant number of recommendations, a good number of recommendations rather. And there were four areas where basically the recommendations were focused on. It was -- area one was formalizing and documenting policies and procedures to a larger extent than we've done historically at B&M. Standardizing our IT change. We had a really solid IT change process for projects but less, let's say, a standardized approach for business as usual changes. A stronger cross-functional business partnering. Unfortunately, I think it occurs with many companies, but also B&M is quite siloed and something we would like to break down. But we can't do this overnight, but having a stronger cross-functional business partnering would have helped here, and we are doing that now significantly better and then improving segregation of duties. Those are the four, say, main improvement themes. And as you can hear, it's not -- it doesn't require a significant CapEx investment. It doesn't require adding significant amounts of people to our business. It is more formalizing and changing the way we work and being more intelligent in terms of how we operate. So that's on the EY. And I would say, a significant amount of recommendations have already been implemented. And we are concluding all of that and some other recommendations in the remainder of the months ahead. And so on like-for-like turning positive, I would like to just put it in perspective. I think it's important to note how pleasing it is that December and also going into January, we saw positive like-for-likes. In my view, and I'll be very clear, the real hard yards and the real customer impact from Back to B&M Basics isn't yet visible in our stores. And we've always said sustainable like-for-like growth requires 12 to 18 months. So I'll just make sure that everybody realized that. In terms of leverage, I think we updated our capital allocation policy in November, and we feel really still comfortable with that. And we basically said that we would like to stay within 1 to 1.5x leverage. We were 1.6x on the half. Clearly, you can't always plan leverage to the final detail, but we aim to remain within this range, and there's no change in this policy.

The next questions come from the line of Ben Hunt from Panmure Liberum.

I just wondered if you could provide us with an update with the actual sort of price competitiveness. Around the time of the strategy, I think you said that you're going to reduce lines on an average of about 2% on 35% of KPIs. Where is that now trending today following the -- what looks like further price investment in FMCG? That's question number one.

Yes, so I would say pricing is cumulative and continuous. Clearly, we've made a step in August, and we've continued in every single week we track about 400 lines and we compare ourselves line by line and so higher, equal, lower with the four grocers, and we see consistently that our, let's say, target price index of 15% cheaper after Rollback, after Nectar, after Clubcard, we're achieving to the largest extent, and we're achieving that is mainly because there was a new set of Rollback, Nectar, discounts, Clubcard discounts where we're adjusting. What we did see though in December, we've added -- and which is the right thing to do, we added the core seasonal ranges to this price basket, that price basket is dynamic, it's not static. So you always look at if you've got the right range covered in your basket. And we've added in this basket all of the seasonal sweet, let's say, items. I mentioned Quality Street tins, but there's all the roses as well, but there's a significant, I'd say, amount of seasonal products. And we've seen that those items were used by the four main grocers and to an extent also by the German discounters as a price fight where we decided to also reflect a more compelling pricing in our ranges. And that focus on price and that fight has, of course, been concluded with the start of the new year because those ranges are no longer relevant for customers. So we've seen in January, a bit more easing of that price investment to levels where we were before December. So then I'm not disclosing today the cumulative investment. It's the right thing to do for the business. We feel good about the investments we've made, and we'll continue to do so. And I think in the end, strategically, we have an opportunity uniquely so with our nonfood ranges to make sure that we compensate investments in FMCG over time with better rates in brown box, and that's the aim and the focus of our buying teams.

Okay. Great. And then secondly, I'm a little bit confused on the performance of the general merchandise gross margin. I think the previous management has indicated that by the second half of this year, financial year, the ASP cuts that they have made would have annualized and therefore, the gross margin would have started to trend upward. And yet that doesn't seem to be following your narrative of the big box or the brown box rather rate cuts. So if you could just clarify what's happening on that.

Yes, yes. So I think it's important to note that, clearly, margin rate is always, let's say, a combination of your underlying, let's say, buys that you make in the Far East, so let's say, full price margin rate. Second element is then your clearance, the clearance, let's say, reductions, which reduces that rate, and the third element in promotions that are basically, let's say, conscious decision to reduce prices to clear few more stock. And then there's a fourth element, which is then basically shrinkage or stock losses. And that combination will lead to a gross profit number. We've seen indeed that underlying the brown box margin rate is slowly, slowly improving. That said, the real improvements are still to come. And obviously, we are trying to look at all opportunities to improve gross profit rate, but you can imagine that when we are taking a strategic decision to focus on reducing discontinued lines and seasonal lines, that the element of clearance in the margin rate of brown box is diluting its rate and not accretive. But it's underlying the margin brown box rate is indeed step by step improving.

Great. That's brilliant. Just one final one. There's not much commentary on store openings or prospects of -- anything you can add on that?

Yes, there's no change. That's why we didn't feel the need to disclose or we should talk about it. So we're still on track to open between 40 and 45 gross new stores this year. So it's still very much in the pipeline.

And the next questions comes from the line of Adam Cochrane from Deutsche Bank.

A couple of questions, if I can. Previously, when you outlined the EBITDA guidance, you said that the main difference between the upper and the lower end is going to be like-for-like sales performance. I can understand that Heron has changed, and I can maybe understand that you're doing a bit more price investment. But in terms of the impact of clearance on the margin, you knew that you're going to reduce the SKU count. When did you think that, that clearance impact was going to hit the profitability? Or is the clearance just costing you more than you thought it was going to do when you gave the guidance previously? And then on that tone, you talked about the clearance accelerating in March. Will all of it be done in this fiscal year or as we look into April of the next fiscal year, will there still be some of the clearance ongoing then? Or would you expect the majority of it to be done in this -- in Q4 in March? And then sort of finally, my question is you're doing so many things at the same time with regards availability, SKU count, pricing. How are you able to really work out which of these initiatives is delivering the sales uplift that you're seeing? And so where do you spend more time and effort on which of the areas are having the biggest benefit?

Yes. Good question. So I think from a guidance perspective, clearly, like-for-like sales are still a very sizable impact and will have sizable impact on the outcome and the outturn of the results for the financial year. So there's no change in that understanding. And you could say with a minus 0.6% like-for-like for the quarter, we probably came out slightly below the midpoint of what we initially said. But it's fair to say that and it's progressive insight, I think the quality of our stock and especially the amount of items that need to be discontinued was significantly larger than we anticipated. So that's why we took the decision to make those clearance investments, and they were clearly not as planned in the outlook and do not underestimate, even though it's a smaller business, Heron Foods, especially in the final quarter, had quite a sizable impact on the business. And in the end, these are the right things to do for this company. There's only one month of January for 12 months. This is the month to clear autumn/winter stock. This is the month to clear discontinued lines that are seasonal. You could, of course, decide to keep it in your warehouse, wait for another year and then potentially bring up margin rate. But that's not what I would like to do. I see this business, and I would like to act this business in its best interest and its best interest is to act as an owner and to make sure we do the right things long term. So that's why we decided to make those investments in conjunction with the Heron underperformance. And you're right, we're looking at many elements of the customer proposition on your second question. But I wouldn't say we're doing many things at the same time. It's four key work streams, of which two we are trying properly in a let's say, isolated group of stores. And two, we've implemented because we felt they were the right things to do. Pricing promotions, I would say, has been now implemented, and we're continuing to improve and strengthen, but on availability and on range rationalization, we are not, let's say, executing things without proper planning. We can actually measure the impact quite a bit of both availability and the range rationalization trials. So just to be very clear, we are aiming to reduce range between 25% and 35% and still see a low single-digit sales uplift coming out of those range rationalization trials. And with the availability trials we've seen on those 250 lines, a double-digit sales uplift in those lines. So we will be able to actually track the contribution of those projects to our overall sales development over time. That's the way we work. And I think this whole test and learn approach, it's quite new to be in them, but it's a way, in my view, to run this business in a better way. We've got 791 stores, soon 800 stores. So we've got 791 opportunities to learn and improve and get the estate in better shape, yes.

I'm more thinking about cutting price on certain lines and then you are changing the SKU cap, it was all how you -- I get your point about just doing the two trials in different stores. But I assume the pricing element is done across all of your store estate.

Yes, yes, it is. And we're not cutting prices for the sake of cutting prices. We're cutting prices to make sure we keep a 15% distance to the four grocers. We're making sure that we are never more expensive then the operator in this market who is more similar to us. And that is an ongoing commitment to our customers. And if the market heats up and people become more competitive and invest more in price, we will invest more in price. And if the market is less competitive, happy days for our margin rate, but we will always do the right thing for pricing for our customers because we're a discount operator and at the premise, the essential premise to our customers is it's always great value at B&M.

And just on the first question about the clearance that you're doing in March, do you expect that all to be completed in March? Or will any carryover?

Yes, it's good question. So I would say if you look at the quarter, the start of this quarter is very much influenced by clearance of seasonal and discontinued lines out of our warehouses that we have built up over time. March is the start of clearance of the range rationalization. There will be an element of clearance of the range rationalization also going into a new financial year because the implementation of the rollout will take several months going into summer.

And the next questions come from the line of David Hughes from Shore Capital.

I just wanted to dig into kind of stock levels and working capital. So first of all, with this additional clearance that you're doing and kind of the ongoing program of SKU count, are you expecting to see any benefit from the working capital and stock levels of that and any improvement in inventory hold? And then similarly on stock levels, I just wanted some clarity on a comment in the trading statement. You say that early results from the trials are helping improve the quality of your stock records. What kind of -- what do you mean by that? And what were the kind of challenges that you had with the stock records beforehand?

Yes, and that's a good question, David. So first of all, with less SKUs, you could say there will be less stock needed in the business, but you could also say we also want to make sure we have stock available for customers. So I think on balance, I'm not so sure it will be, let's say, a significant reduction in working capital. I think that, that said, I think it's something we need to look into as a business in terms of how we can improve and how we can work in a more efficient way, but the focus is now on range, on price, promo and availability. In terms of the stock records, yes, it's mainly linked to a different way of working. So in the past, we had the tendency, especially in the food areas, whenever there was a gap to phase over the gap, remove the price ticket. And ultimately, that led to the significantly below market standard availability. Any retailer would investigate when a shelf is empty, why. And the first point of call is to get your stock record in your system, count the stock of that item in your store, and if there's a discrepancy, you adjust the stock record. That discipline wasn't always there because actually, people really don't focus that much on interrogating gaps because gaps were phased over. We are now, I think, a very disciplined process of every single store on those 250 lines checking every gap. And as a consequence, it leads to more frequent adjustments of stock records because the accuracy of stock records is driver of availability. That's the only thing we wanted to share, which, I could tell you, in my career in retail, that's retail basics. But unfortunately, it's something we haven't done disciplined in B&M.

This concludes the question-and-answer session. I will now hand back to management for closing remarks.

Yes. Thanks very much for your time, and thanks very much for your attention. And I think this concludes -- we concluded the Golden Quarter, I would say, with solid like-for-likes, but there's much more to go after, and that's the journey that we're on. Thank you very much.

Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a good rest of your day.