JD Sports Fashion Plc (JD) Earnings Call Transcript & Summary

Welcome to everyone. Welcome to the one who joined us on the webcast. Welcome to JD update. Unfortunately or fortunately, as we will explain to you in his video, Andrew Higginson, JD Group Chairman, is not with us. But let's share with you his welcome video.

Good afternoon. It's Andrew Higginson here. I just want to apologize for not being with you today. The reason I'm not with you is I'm in Vancouver, visiting my elder son who I've not seen for 18 months and more importantly, meeting my new granddaughter, saw her for the first time. I'm afraid that took precedent on this particular occasion. What I wanted to do is just really as an introduction to day, give you a little bit of a view from the chair, a personal view of what's happened in the last 2.5 years and the progress we've made. There's no question that we failed to manage our city comms properly. We got our forecasting wrong. And that's led to a disappointment, which is you see reflected in the share price. But I think what it does mask is just the underlying strength of this business and the great work that Regis and the team have done, which perhaps doesn't get the attention it deserves. And we've been here 2.5 years now, I think it is. And '22, when we joined in 2022, which seems like a bit of a distant land in a way. We inherited this incredible platform, this global platform from which to grow and which we're so grateful for in terms of the way we work every day. Having said that, the infrastructure that we inherited, the good and the bad, the infrastructure was very weak. And the infrastructure was weak on IT. It was weak in terms of our online offer. It was weak in terms of our distribution infrastructure. And most importantly, particularly in the context of the city, our accounting and finance infrastructure was woefully short of what was needed. We spent 2 years, 2.5 years fixing a lot of that. It's important to say that we have a strong and stable leadership team. We have grown the business, okay, with the help of new stores and so on. But we've continued to grow the business through a very difficult time trading wise. But we have achieved growth. We've retained strong cash flows and then we retained a very strong cash position. We funded the two acquisitions in the last year after our own resources. And we've rationalized our strategy to a significant extent. We sold off the sprawling fashion business. We bought in minority stakes in MIG and ISRG in Spain. We bought new acquisitions of Courir and Hibbett to come into the business. And we are in the process of rationalizing our DC strategy around the world. Most importantly, we now have a clear and obvious platform for growth as we look forward. Our strategy is very simple in a way. We are selling lots of sports-related gear to customers, primarily through JD, which is our international brand that's present in all the markets. But we have complementary businesses that allow us to sell to a wider group of similar sort of gear, but which gives us heft in the marketplace, whether that's with the brands, whether that's with the landlords, whether it's with the distribution companies that send our products out to customers. All of that helps and they're complementary to the JD first strategy. So where do we go from here? Well, I think looking forward, we're obviously in an uncertain world. It doesn't take me to tell you that the political developments in the last few weeks have been seismic. But we're in great shape. We're a business that generates a lot of cash. We can fund our own expansion. We're able to take a long-term view and invest through difficult times to make sure that we come out of those times in fantastic shape. We have really great growth opportunities in front of us, organic growth opportunities primarily, whether that's in Europe, in Asia or of course, in North America, in our fledgling Canadian business or getting JD into more cities across the United States. I think that opportunity of growth comes in apparel as well. We have an opportunity to get our apparel business stronger in the U.S. and see good growth from that. And of course, our digital and omnichannel business needs to capitalize on the good work that's already been done and really make sure that we're available to customers whenever it suits them through our online portals in different markets. As I say, we have the strong financials to be able to do that. We have our own cash flows and we wish to do that. We're not dependent on others. We can deliver that ourselves. And we look into this difficult time for world markets with a great degree of confidence that we can continue to deliver a strong JD performance around the world. Anyway, I wanted to leave it at that, hand over to Regis and Dominic now to take you through the strategy and hope you'll see the great strength in the business as well as some of the challenges we faced and face going forward.

Great. Thank you, Andy. So good afternoon, good morning to the U.S. and for our U.S. joiner. Please. be reassure as far as we know and as far as the latest news, there is no tariff on webcast. So we should be okay for the time being. So after that, I'm Regis Schultz, I'm JD CEO, I'm joined here today by Dominic Platt, our CFO; and Michael Armstrong, our JD Global Managing Director, who I'm sure you will have plenty of questions for. As Andy has said, we have been moving at fast pace over the last 2 years, investing in our organic and inorganic growth to become the leading global sports fashion powerhouse. And developing the infrastructure and the governance, you will expect from a company of our size. At the same time, the market has changed, and it is now the time for us to move to the next phase of our strategy by adapting our plan to focus on organic growth and on profit, leveraging last year's investment to improve return to our shareholders. So let's go back to our CMD in February 2023. We share with you our vision for JD Group to be the leading sports fashion powerhouse structured around 4 pillars: JD Brand First, JD Complementary Concept, JD Beyond Physical Retail and JD Best for People, Best for our Partner and Best for the Community. JD Brand First is our commitment to put JD at the forefront of premium sports fashion answering that we are the first choice for consumers around the globe and our first priority as a group. JD Complementary Concept is about broadening our customer reach, our geography reach, our category reach and contributing to our scale. JD Beyond Physical retail is our investment in infrastructure, governance and digital transformation to support our past and future growth. Last but most important, JD People, Partner, Community, reflect our commitment to our people, to our partner and the community in which we operate. And we set out 3 objectives using a sport reference, we are in sports, with a triple double objective, double-digit growth, double-digit market share and double-digit profit. So let's start by focusing -- before focusing on the next phase of our plan, I would like to share with you our reflection on successes and challenging over the last 2 years and the lessons learned. So starting with our success. First pillar, JD First. JD Brand has a global organization with one leader being Michael. We have now a consistent customer proposition across the world, leveraging our product, merchandising, marketing expertise and our excellence in retail execution. Michael has been with JD for more than 25 years, starting in store, moving to buying, merchandising, marketing, general manager. He is JD and he is certainly one of the most talented and experienced leader in our industry. Second priority was to accelerate our store opening and conversion program to capture a larger share of the market. We set up the ambitious target to open 200 new JD stores per year, including conversion, with a disciplined approach on 3 years payback order. We have done it with 405 stores opened, 84 conversion and a payback of less than 3 years on average, and Dominic will give you more details around the numbers. And outside of our strategic markets, which are Europe and North America, we stopped our existing model of joint venture or acquisition to develop a franchise model with no CapEx, done with the opening of Middle East, South Africa and the flip of our Indonesia JV into a franchise. Second pillar of our strategy, JD Complementary Concept. We have simplified the group with the divestment of nonstrategic businesses, and the acquisition of the minority interest in ISRG and MIG. It does accelerate the development of JD in Iberia and Eastern Europe. And we have done two acquisitions, in our strategic market in U.S. with Hibbett and in Europe with Courir. Third pillar, Beyond Physical Retail. We have expanded our U.S. loyalty program, JD status in the U.K., in Ireland, in France and Eastern Europe with more than 10 million downloads globally. This is the foundation to develop a closer relationship with our customer, more targeted, more personalized and more valuable. We have moved from a multichannel to an omnichannel model. Omnichannel, as you know, is the right customer proposition. It's a competitive advantage that we have versus the D2C and versus pure player as it is more efficient and less costly. For example, we have developed our ship from store capability to shorten our lead time in Europe and to reduce our fixed cost with the closure of a distribution center in U.K. This ongoing omnichannel program, a disciplined commercial policy and the optimization of our digital marketing spend has resulted in a significant improvement of the profitability of our online business to a double-digit operating margin. I'm pleased to say that the gap between off-line and off-line is almost minimum today. We are a very respected and experienced leader, Wim van Aalst to build our global supply chain and to fix our European operation. We have opened 3 major warehouses, one in each of our strategic geography in the last 12 months. With Dominic joining us 18 months ago, we have embarked in a major governance process and control program. This program started with the separation of the share and CEO position with the appointment of Andy Higginson as JD share in July 2022. And he has restructured the Board and bring more expertise, more experience and more U.S. exposure. We have changed auditors, built from scratch an audit and risk team, doubled the size of the group finance team, triple our legal team and built the cybersecurity team. Just to give you an example of the things that we have fixed, IFRS 16 lease adjustment we calculate all on Excel. It is possible when you have 300 leases in U.K., not when you have 8,000 leases across 35 countries. And I can go on and on, on different examples. Best for our people. To serve our people better, we have put in place for the first time in JD, a global engagement survey. In our last year survey, we reached 88% participation from our almost 100,000 people and delivered a record level of engagement. It demonstrates the commitment and the motivation of our people to drive JD long-term success and growth. In a nutshell, we have done what we say we will do, but we have faced challenge too. And if I go to the challenge, first and most important one, we have seen a slower growth of the sportswear market across the world. This slowdown has impacted us, especially in the U.K. With more than 400 JD stores, we have reached our maximum store number. With a slower market and a high increase of people costs, our profitability has been challenged. U.K. is a mature market, where we need to focus on productivity to maintain our profitability. In Germany, we have not delivered the profit we were expecting. So our priority should, would be to fix our economic model before growth. And to make sure we continue to be disciplined in our expansion, we have done a full review of our Accelerate expansion program, to adjust going forward our plan as Dominic will explain to you. Our second big challenge has been the cost to fix the past on the investment in our people, in our infrastructure and in our governance. It is fair to say that it has both taken more time and now require more cost than we originally anticipated. First, the European warehouse project initiated after the Brexit has seen delays and increased costs. We are more than 1 year behind the original plan. We have changed 2x the team in charge, but we are now on track. This has a major impact on our European margin profit as Dominic will show you in his section. Second, over the past 2 years, we spent around GBP 60 million of OpEx to secure IT infrastructure and back office system. We have put in place IT general control, built a cybersecurity function, and we have upgraded nonsupported legacy system with new solutions. As of last month, we have a new HRIS system, a new solution for our store network, and a new platform for our e-com. We have implemented SaaS-based solution resulting in OpEx rather than CapEx and with a much higher short-term impact on our P&L. Third, our investment in our people. Not only we had to invest in our head office to upskill our finance and governance structure, but we had to invest in our people in store to correct some past practice. We have removed the edge banding in U.K., resulting in an average -- in an increased cost of GBP 45 million per year. At the same time, wages, especially minimum wage have increased significantly across most of the markets we operate, resulting in an additional cost of more than GBP 100 million in the last 2 years. Last, the length of time, the cost and the remedies it took to complete Courir acquisition has been horrendous. Lesson learned, doing M&A in Europe is not welcome. So as a result, of those extra costs and delays, we are not delivering upon the third element of our triple double, a double-digit operating margin. Our operating margin has decreased for the reason I just covered, increased staff cost, investment in infrastructure and governance. So despite the fact that we have delivered a positive impact on our operating margin of the Accelerate space expansion and the divestment of businesses. If you look at our first 2 double, double-digit growth and double-digit market share, I'm pleased to say that we are on track to deliver the growth and the market share. If you look at growth, the revenue growth coming from our space growth is in line with our plan. Our like-for-like is below the plan, mostly because of offline -- online as our priority has been, as I said before, to build a profitable and sustainable economic model versus short-term sales. but it has been compensated by M&A activity with the acquisition of Courir and Hibbett. In terms of market share, for those who remember, in 2022, we only had 3 countries with more than 10% market share. Now we have more than 10% market share across Europe, and JD Group is a market leader in U.K., Ireland, France, Spain, Portugal, Poland, Greece. In North America, JD is bigger than Foot Locker and we are a market leader in Australia and New Zealand. As a conclusion, we have done what we said we will do. We have delivered the space growth and the market share. We have fixed the governance issue. We have invested in the infrastructure and the people that are higher cost than forecasted and a lower like-for-like as the market has changed. The market has changed. And when we did our CMD, our like-for-like for Q4 was almost plus 20%. In fact, it was plus 19.6% to be precise. And the [indiscernible] forecast for the market growth was 8% per annum between 2022 and 2027. In reality, the market has grown at around 3% per year in the last 2 years. So global sports fashion is an attractive and growing market, but we now expect the market to grow at a slower rate over the medium term, in line or slightly lower than the last 2 years, around 2% to 3% annual growth on average. And the last word is important average. Retail and even more fashion because we are in fashion, are volatile and cyclical. It's never linear growth, especially in the current environment. At the time of the CMD, we were also in a market of aid product with a concentration of sales on key franchise. We have seen now a market with multiple new emerging brands and less concentration on key franchise. And I will go into more details because I think it's important to understand our markets in more details. If you go in more details of the market dynamic, footwear and apparel market are flat market in the world. It's not growing. So the driver of sportswear growth is an increased penetration of the market. And if you look at the chart on the left, you will see the sportswear footwear was 27% of the total footwear market in 2010. And over the last 15 years, the penetration of sportswear and footwear has increased by 17 points to reach 44%. Sneaker are becoming the shoes of every day, not always here, but it's coming. And in most of occasion. If you take the U.S., the most advanced country, the penetration of sportswear, footwear is already higher than 50%. Concerning apparel, which is the chart on the right, it is the same, but at a lower scale and at a lower penetration. If sneaker are becoming the shoes, sportswear apparel is one style part of many. It's a basic and a fashion element of the customer white drop. So it is clear that footwear penetration has driven sportswear globally. And we have seen an acceleration of the penetration of sportswear during COVID, but post-COVID, the trend has continued, driven by cash realization and active lifestyle. And it is important to say that the penetration of support wear in the total market has increased every year, in the last 15 years, pre, during and post-COVID and is still growing. However, as the scale of the sportswear market has changed and the penetration has increased a lot, the growth has been less quick, especially in percentage, 100% of 0 is still 0. So when you get bigger, the percentage gets lower. Therefore, we forecast a more modest outperformance of sportswear versus wider footwear and apparel market going forward, resulting in a slower market growth. In a slower market growth and a market with growth coming from emerging brands and new product our strong global, agile, multi-brand model give us the ability to grow ahead of the market. And it all starts with the consumer, JD customer, our customer. Our greatest strength is our focus on our customer. Our ability to see the world through the mindset of our customer. Our customer is a young adult, the 16, 24 years old. They move fast. They wear the latest brand and take on new trends quickly. They want more assortment, more access, more choice, more brands and look like -- and more looks that blur the line of sports and fashion. They are looking at global trends, they are TikTok, social network. They are global. They are not monobrand. They want to be free to mix brands, to mix sports and fashion, to shop with their friends in a multi-brand environment. They are trend setter and critical for the brand, and JD is responding to their need. Our concept is new, modern, we are global, we are multi-brand. We are sports and fashion. So this close relationship with a young customer gives us this strong partnership with the brand. We are usually the #1 partner in the world. We are a full-price retailer, so we access new products, innovation first, and we attract brands in their early stage. For example, we were the first major retailer in UK to sell on running. This is because we are a full-price retailer. We are connected to our customer. So we are first to discover to capture trends in the key sport fashion city where we have store. We are defining range by store. This gives us the ability to test and scale brands, new franchise, new products better than anyone else. We pride ourselves to be the best partner for the sports fashion brand. This strong partnership with the brand gives us the ability to offer the latest and the greatest product to our customer. We are a demanding partner with the brand. Working closely with each of them to create the offer, to select products, to develop products or SMU exclusive to us. As a result of that, half of our apparel and 30% of our footwear offering is exclusive to us. When brands are not able to respond to our customer needs, we are developing our own product, own brand which allow us to target niche or new category. Danine is a good example. We saw the trend coming and we developed products with our own brand supply and demand to respond to the trend. But to offer the latest product, we need to be fast and agile. And let's look at some facts to demonstrate our agility. On the slide, you have the mix of our sales in footwear. This is on the left. And apparel on the right. First, you will see that we are not looking at our range per brand. You always ask us a question around brands. That's not the way we build our range. We build it by category, by style to make sure that we are customer led. And if you take footwear and this is a simplified segmentation. We have 4 key categories: running, new running what we call new running or what you call performance reading, but that's the same for us, retro running, retro basketball, classic or tennis, skate, and we -- to simplify the chart, we put tariffs in it, which was more football, I would say, and other. You can see the movement. If you take retro basketball, which from 20% in 2020 to almost 40% of our sales in 2024 and back to almost 25% in '25. So the question that you always ask us, are we agile to change? Yes, we are. Yes, we are doing it. And if you take running, we believe that running will soon be back to 60% as it was in 2020, especially with the development of new running or performance running with -- on running, HOKA, Adidas, EVO and the coming new exciting Nike running product. So thanks to our agility, we have been able to navigate the change of the trend and deliver a 9% annual growth in footwear during the last 5 years. If you go to apparel, you can see how we have been able to pivot and develop performance apparel and street fashion to continue to grow at a fast pace with an average annual growth of 12%. Performance apparel show our agility to capture growth within the sports category and to pivot when things are changing. This has been done very quickly, as we have more than doubled our sales in performance every year in the last 3 years and grew more than 5x over the last 5 years. Our development in street fashion, which is the other part. You have core sports performance and street as demonstrate our ability to expand to new category, even when the brand are not responding to the customer need by developing our own brand or new brand to respond to this customer need. So we are agile. We drive trends and as a result, we have a strong model that outperform our peers in all core operating metrics. If we compare ourselves, JD Group revenue growth rate is almost 5x the market average with particularly strong growth coming from our underpenetrated market, Europe, U.S., APAC, demonstrating our growth potential for the coming years. We have expanded globally at a faster pace than most. This global diversification provides us with a competitive advantage over those who remain heavily reliant on one single market. More important, JD Group store productivity is about 50% higher than competitor. Space productivity is the most important KPI in retail as it means that you can secure the best location in the best mall and deliver superior return. Our mix with a higher penetration of apparel than our peers, partly explains the performance as it increased frequency and traffic, and our digital revenue share is higher than many others. And with the development of our omnichannel capability, we have now a profitable business model close to the profitability of our store. Those strong metrics make us a chosen route to market for our brand partner, increasing our agility of our multi-brand model. Now let's look to the future and explain how we are adapting our strategy and taking action to deliver improved returns to our shareholders. First, we are refining our growth strategy to take into account the slower market growth, the achievement of the last 2 years and the lesson learned. As I already mentioned, U.K. is a maturing market for us. It is our most established market, our focus will be on productivity and maintaining our market-leading position by investing in bigger, better and fewer stores and keeping our store estate up to date. We have the huge competitive advantage to have short lease and a well-invested store estate. In North America, having completed the acquisition of Hibbett, the focus is to develop JD brand, and to improve our return on space by leveraging our different fashion, which I will come to in more details in the next slide. In Europe, this is a case of refining our approach. We have seen great success, tremendous success in South of Europe, in Italy, Spain, Greece, Romania, Portugal. But it's fair to say that Germany, on the other side has been more challenging due to high cost and less appetite from the consumer on sports fashion. So we will take those learnings and direct future investment on the market where we see room to profitability growth. Having finally completed the Courir acquisition, we will leverage a strong position in France and use JD Group strong position in Spain and Italy to accelerate Courir expansion in those markets. In Spain, Portugal and Greece, we have a strong sporting goods business. Since the purchase of the minority shareholding, we have taken full control. We have exited Netherlands and converting a number of stores to JD in Iberia. We are now very well positioned to focus on developing our market share in sporting goods and our profit. In relation to the rest of the world, we are looking to expand our reach via our capital-light franchise model. So our second priority, leverage our investment in supply chain, infrastructure and governance and delivery efficiency. As mentioned, we have opened 3 new warehouses. We have all the cost of doing that in the last 12 months as they are all in operation but only 1 in full operation. So Alen for Europe should begin to deliver benefits beginning of next year now that the project is back on track and set to be fully live at the end of 2026. [indiscernible] for our U.S. West Coast will be our first multi-brand warehouse in U.S. end of this year. This will unlock improvement in the speed to market for our West Coast stores and give us a blueprint to move our other warehouse in the U.S. to become multifacet. This will deliver significant cost savings and increase our capacity in the future. On digital, we are at the end of a 2-year investment replatform -- to replatform our omnichannel business. We'll be live at the end of the first half in the U.S., and in Europe, U.K. in 2026. In both cases, we have incurred significant double running cost and constraint in delivery of fully omnichannel experience for our customer. Meanwhile, we are currently working on opportunity for efficiency in our head office in U.K., in Europe as well as post-acquisition synergy across the back office function in North America. As a conclusion, our strategic framework stays the same, but our focus change with 2 clear priority, refine our growth strategy and deliver efficiency. Let's now go to our biggest opportunity and to spend a little bit of time on our North America business since it is now our biggest market as well as the one where we have seen the most change in the last year and the most important, the one where we see the biggest opportunity. So this is history, but we entered the U.S. in 2018 with the acquisition of Finish Line. We have done 2 other acquisitions with Shoe Palace and with DTLR. We have 3x, not once, not twice, but 3x double the size of the business and more than quadrupled the profit of the business we bought. Our secret sauce, JD Group operational excellence in buying and merchandising, developing a truly agile multi-brand customer proposition and leveraging infrastructure, and we look forward to continue this with Hibbett. I hope that this track record show on the slide speak for itself, but I cannot resist to share 2 numbers with you. In 2019, we were making a turnover of USD 1 billion in the U.S., USD 1 in U.S. And in 2025, our turnover will be USD 6 billion bigger than Foot Locker in 6 years. And our geographical reach has now dramatically changed with the cost to cost and the full coverage of the country. And I thought it would be helpful for us to outline the different fascia we operate in North America. Currently, we operate 6 key fascia, JD, Hibbett, Finish Line, Shoe Palace, City Gear and DTLR. And together, we have a comprehensive geographic and customer coverage. We categorize them strategically into 3 buckets, mass, reach and focus. Our mass is JD, aligned to JD brand first. The U.S. JD customer is the same young customer as our global customer target that I've described before. JD operates in key venue, mostly A and B Mall. JD store, our destination store, the best sport fashion store in the catchment are, the one that delivers more sales compared to everyone in the market. Our reach fascia is Hibbett. It's a sport fashion convenient format, expanding our reach in underserved market and rural area. It's a JD local convenient offer. Finish Line, Corner in Macy's is a great business that extend our reach to an older, more female customer, a little bit like Courir in Europe. And our focus is our city specialist, Shoe Palace, DTLR and City Gear, are community store in urban area. All other customers grew toward specific community, the Hispanic community for Shoe Palace, the African American community for City Gear and DTLR. They are mostly strip mall venue with some presence in mall. They are fully complementary on a geographical basis. Shoe Palace are situated on the West Coast and Southwest. DTLR store on the East Coast and in the middle City Gear store fills the geographical gap between Shoe Palace and DTLR, with less than a 10% store overlap with the 2 other banner. So looking at the difference in terms of return on space, between City Gear, City Gear is doing around USD 250 per square foot. And DTLR and Shoe Palace, which averaged around USD 500 per square foot, we have taken the decision to rationalize our portfolio and to convert City Gear store to DTLR with a limited number of stores converted to Shoe Palace. The 5 pilot stores have shown strong uplift in both sales and profitability post conversion. It looked like triple-digit increase in terms of sales. And we will be finding synergy and efficiency to rationalization of the back-office function with those fascia. As said before, we have a strong track record in the U.S., double sales and credible profit of all our acquired business, a strong team and a strong plan to continue to do what we have done in the last 6 years. leveraging existing assets to deliver an improved performance and a higher return. In addition, I'm pleased to share with you that we have agreed with the Merco family, our current minority shareholder in our North America business to extend our put and call arrangement to 2029 and 2030 to give both parties the ability to fully leverage investment made in the last 2 years. I think there is no more proof to demonstrate the confidence of the Merco. We are managing our city specialist concept in our North America business and give us more visibility for our capital allocation that Dominic is going to cover in his part. So before I hand over to Dominic, let me share with you 4 key messages. We are adapting to a slower market growth with a refined organic growth strategy and a focus on delivery efficiency for our past investment. We have a strong and agile multi-brand, multi-geography model. We have demonstrated our ability to navigate short-term headwinds. We are positioned to outperform in North America and Europe by leveraging our different customer proposition. We are disciplined and focused on delivering shareholder return with a strong and stable cash generation. We have delivered around GBP 1.3 billion EBITDA for the last 3 years. Now I will hand over to Dominic to go through the financials and our strong cash generation, which will fund growth and deliver return to our shareholders. Thank you.

Normally, a video separates for Regis and me, but Andy took that today, so no video. Right. So thank you, Regis. I'd like to spend a few minutes talking you through the updated plan and how we're evolving our capital allocation priorities. When we announced our 5-year plan back in February '23, the global sportswear market was very strong, and there were plenty of high heat products helping to fuel that market growth. Looking ahead, our market will continue to grow but less quickly. Back in '23 against the background of stronger growth markets, we announced upweighted growth and infrastructure and governance investment plans. Two years since delivering the strategy, reflecting a market growing less quickly and the significant investment that we have made in the business to develop our infrastructure, we're moving to a new phase in our strategy. Our investment over the medium term will be focused on growing share where we are underrepresented. We will start to benefit from the investment we have made in our infrastructure and governance and deliver efficiencies across the group. And finally, we will move to balance the use of our strong cash generation on both investment in longer-term growth for the group and delivering returns to our shareholders. Now let's turn to the updated plan. Now I admit there's a lot on this slide. But I hope it's helpful in laying out how our plans by brand and geography work and how they work together to deliver the overall improved performance and returns over the medium term. It lays out the value driver for each business and the key levers we are working on to deliver that value. The table shows the share of group revenue that each area represents and how we see that evolving over the medium term. We also show the operating margin, how we see that evolving too. And just to clarify, operating margin here reflects operating margin, including lease interest as we think that gives the best indication of underlying profitability. We'll provide more detail on that with our year-end results. Finally, we indicate where we will prioritize our capital expenditure. So working across from left to right. We start with JD U.K., where our focus will be on improving the overall productivity of that business. JD U.K. is at the heart and soul of the group. It has market-leading concept and a good store of state with almost all stores providing a positive contribution. However, it's important that we continue to invest and manage our space locations to maintain that leadership ensuring consistent customer experience and optimizing productivity across the estate. Secondly, we will invest to support continued growth in our profitable and highly successful gyms business. And finally, cost pressures are impacting our U.K. operating margins. We will now focus on delivering efficiencies in the face of those cost pressures to stabilize our profit margins. Turning to North America. We already have a scale business, but there remains a significant growth opportunity. We will grow revenue and profit by growing space for the JD fascia, optimizing our complementary concepts, and delivering supply chain and back-office synergies. So first, we will continue with our successful JD store opening program targeting 700 to 800 JD stores and completing the conversion of the Finish Line stores to JD over the next 2 to 3 years. Alongside this, with critical mass for the JD brand in key population centers will increase our investment in brand awareness to underpin the further success of that business. Secondly, we have a clear plan to leverage our complementary portfolio fascias. This plan allows us to extend our customer reach and provides a range of store economic models to optimize our returns in different sized markets, something I will return to you later. And as Regis said, we will be rebranding the City Gear stores we acquired with Hibbett into DTLR and Shoe Palace, replicating the successful Finish Line to JD conversion program that we have been running. And finally, important to improving returns is the delivery of synergies following the acquisition of Hibbett through developing a multi-fascia supply chain and support function efficiencies. These, together with growing scale, will see the North America operating margin edging up over the medium term. In Europe, our plan will grow revenue and improve the operating margin to high single digits. We can segment the plan into 3. Firstly, looking at the JD fascia, we will focus on growth in key markets, adding new stores where we are underrepresented and delivering margin and supply chain benefits as we complete the automation of our Heerlen DC in the Netherlands. Secondly, with our complementary concept, we will continue to convert to JD where appropriate and look to drive efficiencies across the different fascias. And thirdly, we're focused on maintaining the strong performance of our sporting goods businesses in Europe. We will continue to grow our market share, opening a small number of new stores and improving efficiency as we grow scale. Quickly touching on the rest of the world. This is a JD fascia growth story. We will continue to grow our store estates in Asia Pacific, where we have existing successful businesses. Elsewhere, we will grow the JD brand through franchise, a capital-light route to bringing the JD offer to a wider set of customers. And finally, we will continue to improve margins in our outdoor business. This framework and priorities by region will drive our capital allocation, directing our capital expenditures to support the key areas of growth and profit increase. This will see 70% of our CapEx directed to North America and Europe with the balance spread across the rest of the group. So how will this drive shareholder value over the medium term? Well, firstly, we will grow our revenue, led by our investment in space growth. We will see the contribution from space growth settled at around 3% of revenue in the medium term as our CapEx becomes more targeted and the like-for-like base grows larger. Next, we're planning to deliver profit growth ahead of sales. We will drive operating leverage not only through our growing scale, but as we deliver benefits from the significant investments we've made over the last 2 years and drive efficiencies in the business. And thirdly, we will focus on generating stronger cash generation through more focused store investments and lower supply chain investment now that our major infrastructure investment programs are behind us. And using the light -- capital -- or capital-light franchise model to expand outside our existing markets. Added up, this means we'll start to improve our return on capital and enhance returns to shareholders. Now this is the view over the medium term. Each year, of course, will reflect the underlying market in year. And in the short term, if you look to the current year and before the yet to be determined impact of recent changes to the tariffs, it's also a year of transition as we move from a period of significant investment in M&A to a period focused on leveraging those investments and delivering improved returns. Our key elements to improving returns is a focus on our operating efficiency and cost base. Our profit margins have declined in recent years, reflecting a slower market and the investments we have made in people and our infrastructure. Looking forward, there are a number of factors that will support the stabilization of and then improvement in our operating margins. First, our growth in scale benefits as we leverage a fixed cost base. Then we will see the benefits of our operating excellence, the day-to-day trading focus on optimizing results that JD has delivered over the years. In addition to that, there are some major areas that give us confidence we can see further efficiencies coming through in time. First, supply chain and back-office synergies in the U.S. We have plans to deliver the $25 million we announced on acquiring Hibbett, and we're looking to deliver more. The benefits will start to flow from this year and grow thereafter. Then we have a supply chain and platform benefits. As our new DCs come online and we roll out our new digital platforms over the next 2 years, we were able to remove the over GBP 20 million of double running costs that we have been incurring on this. And the move to full automation of the Heerlen distribution center will also further reduce duties we pay on product imported from the U.K. into Europe. And with much of our investment in upgrading our governance and central systems and infrastructure now complete, we'll start to leverage these to deliver overhead efficiencies. So turning to cash. JD is a highly cash-generative business. Over the last 3 years, we have delivered IFRS 16 EBITDA of GBP 5 billion. Taking into account lease payments in old money, that's a cash EBITDA of over GBP 1.2 billion a year. Now after allowing for the investment in working capital as we've grown the business, our increased capital expenditure and tax, we've delivered cumulative free cash flow of over GBP 1 billion over the last 3 years. This cash flow generation, however, has been more than offset by the important investments we have made in buying out the minorities in ISRG in Iberia and MIG in Eastern Europe and acquiring Hibbett and Courir. With this significant M&A investment behind us and more targeted capital expenditure we will see our cash generation improve. As I just mentioned, we have stepped up our capital expenditure over the last 3 years, investing over GBP 500 million alone in the last 2 years as we capitalized on growth opportunities across the group and invested to ensure our supply chain was fit for purpose for a group of our size. With the peak spend on our supply chain behind us and more targeted store CapEx, we will see CapEx trending to around 3% to 3.5% of revenue. The majority of our spend around 2/3 will be on store growth as we capitalize on the growth opportunity in North America and Europe, with a lower share on supply chain that we have seen and the balance on ongoing central and systems projects. In terms of detail, we'll provide guidance on store openings on a yearly basis, and we have shared our expectations for the current year in our trading update today. Our spend over the last couple of years have seen investments across a number of areas. Firstly, necessary investments in core infrastructure where the priority has been stability and risk avoidance. Secondly, investment in supply chain, where returns will start to come through as the new distribution centers come online. And then finally, our significant investment in stores, which I'll turn down to. We've seen good returns on our store investments. Looking here at Europe, we've opened 144 new stores across JD Europe in the last 2 years and either delivering an average return on investment of 37% on average CapEx of GBP 700,000 per store. We've also undertaken 28 conversions in Spain, Portugal and Eastern Europe. These have typically delivered a 72% sales uplift and 32% return on investment on GBP 500,000 per store. This is within our 3-year payback criteria. And turning to the U.S., you see a similar picture. We've delivered returns in line with our 3-year payback criteria across new openings, conversions and relocations and expansions. New store openings have led the way in terms of returns, we've also seen good uplifts in returns in conversions and relocations, underpinning our ongoing program of new store openings and conversions. And we've seen similar returns elsewhere across the group. Now with store returns I've just been focusing on have been JD. Our portfolio fascia across the group operate with different metrics, but similar returns. Here, you can see how our U.S. fascia economics are differentiated allowing us to vary our proposition to match different markets across the country. From the mass market, high footfall locations we're targeting with JD, where the higher revenue supports the higher investment to Hibbett, which has a store economic concept which works well for the underserved markets it operates in. Shoe Palace and DTLR store economic model fits well with their community focus in higher population urban areas. This differentiation across our fascias positions us well to optimize our returns across the range of different markets we serve in the U.S. As an operationally geared business, like any retail company, it's important to maintain a strong balance sheet. Notwithstanding our increased capital expenditure and recent significant M&A investments we've ended FY '25 with net cash on an IAS 17 basis. And on an IFRS 16 basis, including leases, we had net debt-to-EBITDA of around 2x. Our strong cash generation will continue to underpin this strong balance sheet position and provides headroom for investments and commitments, such as the Genesis option. Before we move on, it's worth a couple of minutes on the Genesis option. The Genesis put and call option is over the 20% of our North American business that we do not own. As Regis mentioned earlier, we've agreed with our partners to defer the exercise window. Under the previous arrangement, that 20% could be put or called in 5% tranches from FY '25 to FY '28. Under the revised arrangements, the 20% can be put or called into 10% tranches with payments falling in FY '30 and FY '31. Other than these changes, all other terms remain unchanged, including the cap of GBP 1.5 billion. As we adapt to our plans, we've updated our capital allocation priorities. With the underpin of a strong balance sheet, the priority for our cash will be investing in the business on an organic basis, funding working capital and capital expenditure with the majority of our investments focused on the key growth opportunities of North America and Europe. Secondly, we need to maintain headroom to fund our commitments. The material commitment is the Genesis option. And with that deferred, we now have significant liquidity headroom in the short term. Thirdly, we will continue with a progressive ordinary dividend. After this, with our surplus cash, we can invest in further M&A or increased investment that improves our return on capital and/or we can return cash to our shareholders. Reflecting our strong cash generation and with no material M&A in the pipeline as we bed in and generate value from our recent acquisitions, we are now in a position to return cash to shareholders and have announced an intention to launch an initial GBP 100 million share buyback program. So I'd like to close my section with a summary of our investment case, following the update to our medium-term strategic plan. Let's start with the fact that we operate in a scale and growing market, growing less quickly than we have seen, but supported by ongoing casualization and activity trends. Within this market, we are positioned to grow our share as we generate organic growth ahead of the market. Why will we achieve this? We're a leading player in scale markets. We have headroom to grow in North America and Europe. We are a key partner for the main global and regional brands, and we have a high level of brand love across all our fascias. Next, we have a strong and agile multi-brand model. We have strong store economics. We have wide-ranging brand relationships, and we have a proven ability to drive and respond to trends. Next, we have a customer-focused omnichannel model. We're improving the ease of our cross-channel offer across a number of customer touch points, all supported by strengthening customer loyalty proposition. Then we come to JD's operational excellence, which has been clearly demonstrated over a number of years. This puts us in a great position to leverage our well-invested infrastructure and continue strength -- as we continue strengthening our governance and controls environment to deliver profit growth ahead of sales over the medium term. And finally, is improving profitability and more targeted CapEx underpins strong cash generation and a strong balance sheet. And with disciplined capital allocation, we will invest in growth while delivering returns to shareholders. Now bringing this all together, we are well positioned to deliver growth. Our operational excellence will drive improved profit and cash flow over the medium term. We are committed to delivering strong shareholder returns. As a demonstration of that, we intend to launch an initial GBP 100 million buyback program. So thank you for listening to that. I'll now hand over to Regis, who will chair the Q&A.

Thank you, Dominic.

So let's move to Q&A. Just before we move to Q&A because I know that you would like to ask us about tariffs. So we are digesting tariff. We are looking at it. It's a very serious matter. We are working on it. But we -- as you have seen, the position is likely to evolve. It's volatile. So we don't want to be hypothetical -- the same word in French but not the same pronunciation. So we love to be more helpful, but anything we say no will be misleading or could be misleading. So we just -- so just to prepare you, so we're not going to answer any question on tariffs. So just to prepare you on the Q&A. So -- but we are welcoming all your questions around our strategy and our midterm plan. And if you can give your name first and your company.

Jonathan Pritchard with Peel Hunt. Just on brand awareness in the States, I think it's probably a little below where you'd hope it would be by now. Can you explain why that hasn't quite lived up to your expectations and how the next tranche of stores is going to help first that forward? Another couple of quickies on progress. Firstly, status, you talked about 10 million customers on that. What are you doing in terms of personalization of contact with those customers and how far developed is that process? And then similarly, on Courir, obviously, some best practice switch change over there, sharing of best practice. How is that going in terms of their formats, perhaps educating JD a little bit.

Yes. So Michael, if you can take the first question, I will take the 2 other.

Yes, yes, of course. So we're actually seeing some really good brand awareness gains in the U.S. in the key markets that we measure where we are most active, and we have the majority of the stores, which is New York and the I-95 corridor, Houston, Dallas, Miami, Los Angeles, we're up to about 50% aided awareness, which is a massive increase year-on-year. So we're definitely headed in the right direction, and we've got somewhat -- we're feeling pretty comfortable with the marketing strategy that we've got, which is very much focused on communities, and we're going to look to expand that into some more markets as well as we go into next year. So we're actually making really good progress on that front. Do you want to...

I will take those. So status, I think that you're right. I think we just started the program. I think for the moment, it's more on downloading and to be able to build the relationship with the consumer, we are really on the -- scratching on the surface. So there's plenty to go for. But for the moment, our priority has been to build and to have enough customer downloaded the app in order to get to the next phase of personalization. So a lot to go for, not a lot to report on. On Courir, I think that they had a great year last year. I think that we see the benefit of having a different type of customer. And we are -- and the integration is going well. So there's nothing really special to report on that one. But I think the team is very motivated and really happy to join the JD Group. Let's go -- Yes. So sorry, I just got around...

Ashton here from Redburn. The first question is just for Dominic on the guidance range for FY '26. Obviously, it does exclude tariffs. But could you give us some color on what you are assuming, maybe around cost inflation, synergies, the potential range of like-for-like...

Good try. Good try.

And also any guidance on maybe H1 versus H2. And then I guess, secondly, what are you seeing with Nike at the moment? Are you seeing any evidence of them being more disciplined around promos? Or are you seeing partners being more disciplined around promos? And then when you look into the future, when do you expect them to return to growth with you? And then I guess the third question just on apparel. Obviously, you've made a lot of progress over the past few years. It seems like calendar '24 was a bit more challenging. Just any update on what you're seeing there at the moment?

I'll start with the [indiscernible].

Michael will take Nike.

Nike yes. So when we look to the current year, space growth, we expect to be around 4% in the coming year. We expect to get around 10% uplift from a full year of Courir and Hibbett. We expect like-for-like to be negative. Now if I look to where the market is, it's around 1% to minus 1%, 1.5% consensus. I think I'll come to consensus at the moment, that sort of range or a bit lower, I think it's likely that we'll see. Cost inflation, a big driver of our cost inflation this year will actually just be a full year of Hibbett and Courir, and that will bring about 12% to 14% uplift. And then -- there are a number of moving parts in our cost base this year. Clearly, we have just general inflation in the U.K., we have National Insurance, National Minimum Wage. As we said in the release, we've got some investment -- tech investments. And these days, it falls more into OpEx than into CapEx. So all of those things will could add up to GBP 50 million. But offsetting that, we just work hard every day. That's what we get paid for, unfortunately as well as driving the business forward. But equally, we will start to see some of the benefits of the U.S. synergies coming through this year. We've made good progress on supply chain in the sort of transport area. So a good example, bringing 5 businesses together, you put 5 contracts together with the DHLs and the UPS in this world, and you get significant savings. That's a nice quick one. Multi-fascia will take longer. So some of those things are already starting to come through. And some of the savings around double running costs and the European supply chain will be back ended in the year. So puts and takes, but we probably won't see all the benefits of that this year. It won't fully offset the cost increases, but we'll start to move in the right direction for the next year. And just to complete the picture, coming to consensus, it's around GBP 920 million, as we saw in the release today. It's a range of GBP 878 million to GBP 983 million. There are 2, 3 at the top end who haven't updated for a while. So I think naturally, you'll see that coming down overall whether it'll come forward that sort of, I'd say, range, that's not at the top end because I think we just haven't updated on. Okay.

Okay. Nike, I think it started with pricing, I think, I mean, clearly, Elliott's been pretty vocal about where he sees Nike business headed. You see the DTC business really creating the halo effect for the brand, which gives a premium positioning, we're very much early into Elliott's tenure in the business, and we have no reason to suggest doing anything differently from what Elliott suggested. As far as getting back to growth, I mean, it's obviously a very different picture globally across the business because lots of different markets were at different phases of maturity with those kind of 3 big franchises that we just mentioned. But I think generally, we feel really good about the direction the brand is headed. We're seeing green shoots in the men's business in Europe, particularly, which is really encouraging. And we're working really closely with those guys to get it back on track in every market we operate, and we feel really good about the relationship, the partnership that we have with Nike and I'm pretty sure we can get it back. So full speed, certainly pretty quickly, really.

Richard Chamberlain from RBC. Just 3 for me, if that's all right. It looks like you guys had a pretty strong January by the looks of it and I just wondered what drove that. Was that sort of more on the Europe side? Or was that driven by sort of promo markets like U.S., France, Spain, and so on? And then what's your sort of planning assumption on pricing for the coming year? I mean, sort of pre-tariff or what would it have been up until sort of last week. I'd be interested on that. And we're in that sort of low single-digit market growth that you're looking for very low single digit. To what extent is that driven by price? And then finally, maybe, Regis, you can say what still needs to be done on the Europe side in terms of warehousing and further benefits to come through there.

Okay. you take January.

I'll take January. In terms of January, I wouldn't read too much into that. When we do our peak trading, we're taking raw sales data for November, December, we haven't got all of the sort of final adjustments around delivery or everything else. So January does reflect a bit of that for the whole quarter. And January is a sales period and sometimes you might have a little bit more sales, a bit less sales, and that's the way it goes through. So I wouldn't read too much into that.

Pricing...

I mean our pricing strategy doesn't change. We want to get as much for the product as we possibly can. I don't really think of we can say too much on that for obvious reasons. But our strategy doesn't change We're certainly not going to chase a web business that's highly promotional right now at the expense of margin. That's not what we've been doing clearly. You can see that, and we don't intend to pivot from that at all.

And I think I just -- to pick up a part of your question there, Richard. You talked about 2% to 3% growth. That's over the medium term. And I think in retail, you have high years and lower years as the product is stronger or weaker, customer demand is stronger or weaker. I think this year, for a whole host of reasons we're seeing as being more subdued on that trajectory rather than positive.

So on Europe warehousing, so we have opened Alen now 18 months ago, operating on a manual basis where we face issue has been the automation. We have changed the team. We are bringing expertise from out of the group with them and with some people that we have in our Spanish warehouse, which is using exactly the same solution. So we are on track now. Our plan is to deliver to start using automation during summer in order to ramp up before the peak period. We could have done that last year, but it was at the time of peak and we say, don't take a risk. So you will appreciate the way we have looked at it. We could have been more risky and take some risk. We have taken no risk, but we have the double running cost for longer, which I think is the right way to do. So that's where we are, but we feel confident. We have the right team plan to start to ramp up and to start to use automation that will increase the capacity will help us to close the other warehouse that we are temporarily using, that should close at the beginning of 2026, and we start to have a full operation on the B2B place, and we move our B2C after that for next year. So the full benefit of Heerlen will be in 2027, that will get the B2B benefit in 2026.

David Hughes from Shore Cap. So 3 questions from me as well, please. First of all, in the U.S., how much progress/success have you had in bringing some of your other really strong brands over there to perhaps kind of reduce how much of the sales there is so tied to Nike. Secondly, I call it tariff adjacent, in your full year '24 results, it looked like around 60% by revenue of products were sourced from China. Would you say the mix is kind of currently similar? Or has any of that shifted out to Vietnam and other countries in kind of last year? And then finally, on the return of excess cash, do you have a threshold in terms of the preference for share buybacks versus special dividends?

Michael, are you happy to take the first one?

Yes. I mean, the brand mix in the U.S., particularly on apparel, we've seen some great success with the own brands and the licensed brands, and we'll continue to grow on that. We launched another one actually just recently unlike Humans, which is one we've developed in-house, and it's got off to a flying start. So we'll continue to do that wherever the opportunities allow us. It's not -- as always, like we just said, we'll react to the consumer demand and where the consumers are going. So it's not like we have a directive to build an own brand business in the U.S. That's not what it is. We'll always go with where the consumer is going. If the own brands can fill that consumer need, then that's where we'll play.

Second one was on China. So I think China represents a very small part of our sourcing and a small part of the industry because most of what is produced in China is for China. So most of what is used out of China is produced not in China. So our exposure to China is very minimum.

And on the return of cash, we haven't set the threshold. We're starting initial buyback program now. In many ways, it reflects when we talk to shareholders their preference. So we'll update on that in due course as things evolve.

But it was a strong message from our shareholders. We show that we are listening to them. And want to, please them.

[indiscernible] from Bank of America. Two questions for me. First, you mentioned on liquidity headroom, right? So going back to net cash position more visibly. Can you give us a sort of level or threshold or parameter where you think that you'll be comfortable to face Genesis or any other opportunity and you think would be a minimum. And secondly, if I'm not mistaken, January was more or less low single-digit positive in terms of like-for-like, you expect the whole year to be down 1% to 2%. Can you tell us since the beginning of the year what you've seen, has it been deteriorating or further improving?

So dealing with the second first -- second question first, we'll update on our Q1 trading full year results on May 21. And I think as with all quarters, particularly this year, we've got Easter moving from March to April, and we've got Eid moving from April to March. So that does create change in the phasing through the period. So we'll update on the full quarter -- the full results. On liquidity headroom, what's important to us is maintaining a strong balance sheet. We haven't set a leverage target. But broadly speaking, that's around 2x lease-adjusted EBITDA. And when we do that and the numbers I put up there, we do include the Genesis option liability, okay? Now we can see that 2x may be slightly elevated above 2x, maybe slightly below. But in terms of setting our capital allocation, we are always mindful of that liability over the future terms. So it creates cash liquidity headroom, but we're not thinking about it in terms of leverage headroom at this point in time.

And Genesis, how is it valued?

Genesis is valued at 6.5x the EBITDA in the relevant period less net debt.

Which could be a nice indication for our shareholders to value the same for us. A good benchmark.

Alison Lygo from Deutsche Numis. So 3 for me as well, if that's okay, please. First, on the CapEx, so 70% going towards Europe and the U.S. Could you help us a little bit with the split between those markets in that. And how maybe it's split down sort of last year, should we be assuming a sort of similar kind of cash run rate going into the U.S. from here? Second one, just on omnichannel. So the slide you put out suggested it's really the online business that you feel like has not been performing? I guess, interested in terms of what your expectations were and now what they are going forward and kind of what you're really doing to sort of drive that and change that going forward? And then finally, just one on Hibbett. So just interested in terms of, if you could update how sort of their full year '25 revenue maybe compared to full year '24 revenue in terms of the performance there and whether that consumer is at all more exposed to kind of recession, economic pressures, those sorts of things?

You take the CapEx and the omnichannel first and can take...

Yes. So Okay, I'll do the omnichannel first. I think that -- the way we put on this slide is that our like-for-like has been higher in stores than it has been online. And I think we assume the same because we believe that today, there is no reason to have an increased penetration or decreased penetration in terms of our online business. So it has been more challenging online, mostly because of the fact that it is more promotional, and we have stopped -- we get out of the drug of doing promotion. So we have reduced the level of promotion significantly to have more and more the same policy online and offline. So we don't have any more different promotion online and off-line. And that has given a little bit of sales going down. But at the same moment, our profit has gone where we want to be, which is something where we make as much money online and offline. So that's really what's happened on online. So yes, it has been going down. But at the same moment, I think we are on track with what we want to do in terms of the way we look at it in an omnichannel way. We have taken a lot of cost out. Some of the costs are marketing costs, which are driving some sales, which we are not interested in it because at the end, it's not profitable, especially in Europe because we have not yet the supply chain that we want to have. So that's where we are. But I think that the way you should look at it is one business and the fact the consumer buy online or off-line doesn't really matter, and we want to make sure that the same in terms of our economics, it doesn't matter between both business.

Turning to CapEx, probably 50-50. I mean, it might be a little bit more, a little bit less between U.S. and Europe as we look forward in terms of number of the opportunities there, they're broadly similar. I think if we go back to FY '25 and Alison, I don't have the exact numbers in my head, but I think we've probably seen more elevated investment in Europe just because of the cost of the Heerlen distribution center over and above the store opening. We have been spending on distribution centers in the U.S., but they've been most lot less than the Dutch one. So I think is probably slightly more balanced and probably more skewed to Europe in the last year, but we can confirm that. On the Hibbett revenue position, I think we're sort of seeing consistent revenue from last year in terms of pre-acquisition and where we are and the run rate of about $1.3 billion business. I think you think about -- you talked about that customer being under pressure, I think, is what you said?

No. The question was to say, is the Hibbett customer more on the...

No, no, I don't think so. And I think one of the things to bear in mind about Hibbett is it serves underserved communities. So actually, it's often the only place in the community where you can get the products that we sell. And therefore, that in some way underpins the demand relative to the higher population areas where there's more competition. So it's sort of -- it work sort of -- it's a positive and negative. So it's sort of a relatively consistent.

And don't forget in Hibbett you had in the past Hibbett and City Gear. So you will see the difference between the 2 business. So Hibbett will continue as Hibbett, but City Gear will be transformed as DTLR and Shoe Palace, that will happen...

That's a good point. It's about GBP 1 billion for Hibbett and about 200 million for City Gear to get help with that.

New modeling is important.

Anne Critchlow from Berenberg. Two questions from me, please. First, if you could talk a bit about the male, female split in JD, whether it varies by geography and whether you see an opportunity to maybe attract more female customers. And then secondly, if you could talk a bit just the background information really about price elasticity and what you've seen in the past and again, by the product category and by country, if it varies.

Yes. So on price elasticity, it depends on the cycle in the product and all that. So there is no answer to that. So I see where you're coming from and what you're getting, but frankly, there is no answer. If the product is out, there is no price elasticity. If the product is not out, there is price elasticity. So it depends on the cycle and all that stuff. So it's very difficult to give you a number, which I'm sure you would like to have, but there is no number around it. On male, female...

Yes, I can answer that. I think our mix in the majority of markets is pretty similar, actually. It's around 20% I think as an industry, it's always -- it's generally going to be male dominated because of the nature of the product and the nature of sports marketing. We invest a lot in big space in key malls, so we can offer a much better experience for and that works really well for us. And we are -- we can see we're able to capture more of that market that's out there. But I think, by and large, there's so many other things you can spend the money on. Trainers aren't always top of the list. So I think we've got to be realistic. There's probably a glass ceiling there for us as well.

And I think it's important that we stay on our format, and that's why we get challenged by the brand a lot around the female customer. And our answer was more to say, let's have a different concept to address the female customer, more than doing a lesser good job than we do today for our key customers that we have in JD, I think that's the way we look at it.

It's Richard Taylor from Barclays. Just a question on the operating margin. I tried to write down on Dominic's side, all the numbers and time them together. So it might be wrong, but it looked like it was just under 8% on the operating margin. So can I just check whether that's right or not? So I know that there's potential for rounding over there? And also, is that the operating margin that you reported last year at 9.3%? I think you said it was post leases. So I was just trying to make sure what the number was and what you're alluding to in the medium term.

Yes. So we're evolving that because I think, if I'm honest, we've been varied in the operating margins that we have taken. So I think when we look at the business, an IFRS 16, if I'm honest, doesn't help in understanding the underlying profitability of the business but that's accounting for you. So what we're looking at is operating profit and including lease interest. So that old IAS 17 profit, operating profit. The number of 8% is what we we'll finish this year, including that. It's also -- the numbers up there pro forma for a full year of Hibbett, okay? So that does slightly lower operating margin than the rest of the group.

So can you just say what -- so you'd finish this year around 8% on that basis?

Sorry?

This year, the margin on that space will be 8%, is that what you just said?

About 8% to 9%, that sort of magnitude, yes.

8% or 9%?

8% to 9%.

For FY '26?

Yes.

Okay. And just to be clear, that is the operating profit or the PBT?

Operating profit. So this is going back to the slide. So this is operating profit, including lease interest. So doing that illustratively to help you understand where we are today pro forma with Hibbett in terms of that operating profit margin where we see that over time.

So it excludes group financing charges?

It excludes group financing charges.

Nick Barker from BNP Paribas. A couple of questions from my end. Firstly, I'd be great if you could touch on a bit about products and what products you're selling well and what you're seeing in the innovation pipeline that you're excited about? And secondly, just touching wider then on your target demographic and given the increasing blend of fashion within your proposition and within sportswear in general, how much you say a threat is a company like say [indiscernible] to your offering?

Will you do it?

Yes, yes. I mean I think demographically, the nature of our consumer and young people as trends are going to ebb and flow and brand appetite. It's going to shift a little bit within that as well. And the beauty of our business model is very adaptable. As we've said already, we're multi-brand or multi-category and we can pivot and adapt depending on where the consumer goes. We have a foot-in performance again, as Regis has illustrated earlier, we have a foot in lifestyle and fashion right now. The marketplace is probably a little bit more edging towards the fashion side of things in certain markets. and we've adjusted accordingly. But as I say, we remain pretty agile in that respect. As far as product specifics are concerned, probably no surprises, Adidas, New Balance. Our own business have been massively successful and continues to be momentum there, ASICs, again, probably no surprise, is in really good shape as a brand. So yes, there's still lots of energy momentum in the marketplace. And obviously, looking towards 2026, we're going into a year with the biggest World Cup ever, which is really exciting for us.

Victoria Campion from [indiscernible] Capital. Three quick ones from me. So first, could you give us some examples of the kind of efficiencies that you might be able to get in the U.K., whether it's kind of more automation or if there's anything you can do with rent renegotiations, Any examples there? Then the second would be, could you remind us what percentage of products are exclusive? And maybe if there's any examples of you getting access to drops in advance given your increased size and kind of share of the industry now? And then finally will be on the outdoor business. Is there any kind of potential for significant improvement in the short term there? Is there any chance of you reassessing you continue to earn that business or any improvements you can give us in the medium term?

Yes. I will do the outdoor. Michael, you do the exclusive product. And Dominic, you will do the efficiency. So outdoor, the good news is that outdoor back to profitability for this -- for the year that we finished. So that's a good news. I think we are -- and we are working on the rationalization of the fascia. We have changed the management. So we believe that we are in a good place in order to turn around the business and to deliver from the scale of this business is #1 in U.K. It's a strong business. We need to do a better job to deliver the profitability that we are seeking for business of that size and with this type of market share.

As far as the kind of the product drops and exclusivity, we're about up 50% on apparel and about 30% on footwear. But what I would say is we are -- the exclusivity is really nice to have. It gives us a better protection, but the exclusivity by and large, is driven through consumer insight and appetite to deliver products that are consumer right that aren't available in the collection. So the brands will work with us collaboratively to deliver that kind of product because they don't cater to it. So it's kind of a byproduct of a business model and our consumer connection. And what's more important to us is the overall assortment. And you can see behind you that we just launched a new global brand platform Forever Forward, which is something that we're really excited about and proud of. And that's more important to us is about the brand overall and how we show up and consistently and how we can create energy in the marketplace every single day and not just around individual drops, I think individual drops and high heat clearly are not particularly -- they're great when you've got it, but they're not great when you don't. So it's more about consistency for us.

And on the U.K. efficiencies, I think it comes in a number of areas. On the store point, you said about rent renegotiations. We do find that every time we renegotiate or extend the lease, we do better so that, that's good. I think the other thing is just about the state as a whole. And we've got the number of stores broadly the space that we want. We can make that more productive and often that might mean moving from 4 stores to 3 stores in an area, upsizing a particular location area, which means you get more productivity out of a particular location. One of the things that Regis talked about earlier on was a new HRIS system that will aid and improve our store staff scheduling. So not necessarily about fewer people. It's just about better timing in the stores when they're there. And therefore, that's more efficient. And then as you move back from there as we do more things like ship from store with our omnichannel offer, that means we can be more efficient in the back office supply chain. So those are some of the areas there. And then we go back to the back office and the head office. We've been investing a lot in the last couple of years in addressing some of the things that Regis talked about. And as we go through that come out of the back of that period. We haven't quite finished it yet, but a lot of it is done, we'll start to be able to see some head office efficiencies coming on the back of that. So it's like there are no big single items that will change it, but it's just lots of things that we just need to work hard on and do work hard on every day.

If there is no other question, I think that I would like to thank you to come. I think we have a full room today, and I wish you a great day, and see you soon. Thank you very much. Thank you.