Marks and Spencer Group plc (MKS) Earnings Call Transcript & Summary

Good day, and welcome to the Marks and Spencer Earnings Call. This meeting is being recorded. At this time, I'd like to hand the call over to Archie Norman. Please go ahead, sir.

Good morning, everybody, and welcome to the call. It's Archie here. I'm here with Stuart, Jeremy, Alex Freudmann and the whole team in the room. Look, it's a good set of results. And I would say that, Stuart, when you were strong [indiscernible]. He wants me to introduce the meeting and have a few words today, and then we'll take the questions.

Good morning, everyone. As ever, thank you, Archie. Look, before we go to questions, I just wanted to lay out a few things about how I see the results, where I think we are as an organization, and importantly, as we look ahead to the future. As you've seen, this morning, our profits are a little better than we expected, resilient customer demand has provided a favorable backdrop. But also, our strategy has also enabled us to deliver growth, importantly, volume growth. We sold more products and served more customers across Food and Clothing & Home, and both businesses are now outperforming the market. To touch on Food, we outperformed all supermarkets. And you will have seen, yet again, yesterday's market share data, which shows it outperformed the market again on volume and value quite significantly. So I think the work that Alex and the team are doing on quality and on value is really paying off. You should also be reminded of course, that within the half year, we did have a benefit from the Gist contribution of maybe GBP 33 million. That means our overall Food margin, therefore, was around 4.3%. In Clothing & Home, I think Richard and the team are really getting into their rhythm. I've spent quite a bit of time looking at ranges and going through supply chain value. And Richard, Maggie, Mitch and the rest of the team are really starting to push our style credentials with increased confidence, but also remaining laying a focus on how they're restructuring the Clothing business and are laser focused on the key areas of quality and value. And as a result, in Clothing & Home, our perception metrics have improved. There's also good work in the Clothing & Home supply chain. In fact, we had a benefit through efficiencies of supply chain of GBP 13 million in Clothing & Home, which means our first year margin is 12.1%. And then just on cash, Jeremy and I are very focused on the 3 financial statements. We talk a lot on the P&L, the balance sheet and the cash flow. And I have to say, I've learned a lot in my first [ 8-plus ] months as CEO with Jeremy's support. We've implemented very clear hurdle rates, targeted strong paybacks on the big strategic programs that we need to invest in. And those programs I set out a year ago, haven't changed, store rotation, supply chain in both businesses. And we're pretty focused on both the digital and IT, but we know we've got quite a lot of work to do in that area. As I said in May, we're on a journey. We have a clear plan, but it's not just what we say. We are very focused on what we say and what we're doing. And this afternoon's Capital Markets Day we're very focused on, we said this a year ago, this is what we've done. And as you know, the Capital Markets Day is this afternoon at Waterside House. So I think in summary, we remain positively dissatisfied. Again, one of my colleagues said you're not going to use that word or those 2 words again. And I said, yes, because actually being positively dissatisfied is a positive hit. It means we're positive about the progress and the work we are doing to drive or reshape M&S. But we have to be dissatisfied because there is so much opportunity, and not everything goes right every day, of course. So we're focused on always aiming higher, and that's one of our new behaviors in our business. So we're pleased with progress. But I do just want to say, in many ways, in my mind, this is just the beginning. You've seen from our outlook that we have trading momentum for October, and customers are responding well, especially on our Christmas ranges already, whether that's Food or Clothing. But we don't want to over promise in the next 6 months, something I'm very wary of. I don't want to overpromise and underdeliver. We know there's so much in our control, but we also know there's quite a bit of uncertainty as we think about the second half. So my summary is we're on track. Lots has been achieved. There's lot more still to do, but there's lots of opportunity ahead of us. So I will hand over for questions.

We're going to take some questions. Of course, we're all meeting this afternoon, so we can cover everything again. But who wants to -- Clive. Let's have Clive Black. Clive, I can't see you on the list, but I'm sure you got a question, you had a great headline this morning. So...

Can you hear me, Archie?

Yes, we can hear you loud and clear.

Good stuff. Well, obviously, well done to you all. Stuart, you said there that just the beginning. And in the analyst video this morning, Archie talked about being in the foothills of what the business can achieve. I just wondered if you both can characterize just some meaning to that, frankly, given where the company has come from in the last 6 or 7 years. And then just a second one, if I may, building on your wish not to overpromise, Stuart. Last year, you talked about an aspiration of 10% plus Clothing margins, I think 4% Food. I mean you have smashed that in the first half. Maybe just tell us why something closer to 10% should be considered more normal given what you've just achieved.

I'll start, Jeremy can chip in as well, but very good questions. I think just on, first, when I started just the beginning, I won't go through all of that programs. But we'll discuss those at the session this afternoon. But when you look at those programs and you're working through the actions every day, you actually look at the progress. But you're very more focused on what left to do. So whether that's product, whether that's property, store rotation. I mean, it dawned on me, looking at the store rotation numbers in our last property committee, that we've only actually got 92 renewal stores -- all of those are performing way ahead of our expectations. We've just projected a [indiscernible] in Birmingham, third less space, 30% more sales. Liverpool from the old store to the new store, 30% their space, 30-plus percent more sales across both Clothing & Home and Food. And you've only got to then think, well, imagine if we had 180 new format stores; or in Food, the 400 food stores, what's an opportunity? You have to look at our supply chain. We've only just acquired Gist a year ago, and the good news is we've delivered GBP 60 million of benefits in that 12 months. And all credit to Alex and the focus on the team. But the hard work now begins, we have to redo our whole network, automation, new sites, less sites, et cetera, and ambient full capacity. The work and the growth opportunity in Ocado, that hasn't even started yet. I'm excited really on Ocado. But not really next year, I'm probably thinking Ocado is as a 3-plus year, maybe 5-year significant opportunity. And they're just a few things. I'll ask -- my last example, data digital technology. We know we've done some good work. We're trying to think about online Clothing & Home. The apps have to make it more personalized, spark to the loyalty program or in next couple, whatever you want to call it. And actually, we haven't made as much progress in the last 12 months in that area than we would have liked. So my summary of just the beginning is we're on track, and we're very laser-focused on what we said, what's in our plan and how we executed it. But you've only got to work through the detail and realize the opportunity ahead of us, and that's what actually is exciting. On your second point about margin, quite rightly -- and I'm not changing this afternoon on those targets. You'll notice I put a greater band in front of it. But actually, we think the economics stack up very well if we really focus on driving sales volume across both our businesses, Clothing & Home, Beauty and Food. We want to be a volume retailer. And therefore, we think a healthy operating margin is around slightly higher than 10% for Clothing & Home, and the same for Food. I think that gives us room for investment. And where our performance has paid off is where we've invested in quality and we've invested in value. And it's also important to note in the first half, there has been some one-offs. So for example, there's just GBP 30 million in H1 and the -- or more heavily weighted, should I say, to the first half and the GBP 30 million supply chain costs in Clothing & Home. Our overall cost reduction program, the GBP 150 million for the year, GBP 100 million of that was in H1. And of course, we had GBP 25 million of benefit in interest charges based on our buybacks. So there's also some reasons why H1 was slightly better. Jeremy?

Yes. Just picking up on some of the points Stuart made. First of all, the 10% is a full year margin and the margin in Clothing & Home does tend to be higher in the first half and the second half. We do tend to have some small markdown particularly when we get into Q4. So there's a fee on that aspect. Just building on some of the things that Stuart said as well, in the second half, we had some tailwinds from FX in the first half. FX actually moved against us in the second half, an implied dollar rate of 130 last year versus 118 this year. So that's going to move against us. And then -- just one of the things we flagged half-on-half, but it will affect both Clothing & Home and Food margins, we are looking to -- given the strong performance of the first half, we are looking to accelerate some of the investments in the business that we probably had fund for next year around maintaining the stores and getting ahead of the game on some of our IT infrastructure and that will suppress margins in both businesses in the second half as well. So that 12%, we're very pleased with it. But second half, that should come down a bit.

Okay. Thanks, Clive. Let's move on. We've got a few questions pending. Jon Pritchard from Peel Hunt.

Well then just start on value perception. You mentioned it in passing in the presentation. Has the pace of improvement of value perception accelerated? Are you investing a lot, I think 500 products have been improved. That suggest that actually the sort of quality versus price into play is getting being customers' eyes at a rapid rate. Secondly, a quick one on...

Let's take that question. Because we will get the second one, we'll come back to it.

Yes. No, I think, Jonathan, it's Stuart. Look, it's a good question and a good point. Actually, our value perception in Clothing has always been strong. We've always been the #1 on value perception. But what's quite surprising but we're pleased about is customers have really noticed the improvement in style. We've always been one for quality and value in Clothing & Home, but style has gone up considerably. In Womenswear, our style perception has gone up 5% just in 18 months. And by the way, I see well deserved by Maggie and the team. And Menswear, I'm not surprised, it's been checked and verified, but I am the #1 menswear shopper in M&S. The Menswear stall perception has gone up 7% in the last 18 months. So the reason I start with that is value is always been strong in Clothing, and that's been actually growing year-on-year, but we've also improved style. In Food, it's very similar. I think the work the team has done -- obviously, we really started our investment and price program maybe 4 years ago now. But Alex has been very focused on the remarkable program, quality M&S products at a supermarket equivalent price. And actually, that program, 200 lines have increased nearly 50% year-on-year. And price locked of 150 lines has actually gone up 40% year-on-year. And therefore, no surprise that value perception in Food is stronger now than it has ever been. So yes, everything on perception is going in the right direction. And I think it is because we -- it isn't just about price, it's the price you pay for the quality. And although I'm very challenging constantly on our quality, whether it's Clothing & Home or Food, and I'm constantly challenging our value position, our customers have definitely noted and it's resonating.

And Jonathan, your next question.

Well, feel free to kick these into the afternoon session, if you want to. But will we see more small sort of partner impacts into stores like yes, you're at Colony, for example, will we see a bit more of that? And then lastly, just on Sparks, you have touched on it. What can we expect from that in the next 12 months?

Very good questions, Jonathan. Look, I can't really comment on the brands in stores. They will be probably for rollout of our brands. So whether it's the Autograph, Jaeger, we're very encouraged by the work actually the team are doing on Jaeger. It's under Maggie as Womenswear. And I think we're narrowing the range but absolutely going back to the core heritage of the Jaeger. And I dare to say Maggie we'll have strong plans for that. Autograph -- since the soft relaunch, Autograph sales are already up double digit as well in the last few months, Paruna as well, up 20% on the year. So I think there's an opportunity to not just look at those brands, but ranging, and ranging is top of mind for Richard. On Sparks, reason this is a good question is -- I mean, it's quite remarkable we've got nearly 18 million customers on Sparks. Our opportunity is we only have 5 million active Sparks members, i.e., that use their cards once or twice a month. The other thing is we have some trials of Sparks, where we have 20% of our customers having a more personalized Sparks experience. Now I'm slightly dubious because I've been asking to be part of this program, and I'm not yet. So we really -- I really want to know what this is. I've seen it, but we know as a team, we've got work to do. But why they're quite exciting if you can imagine 18 million people, if we can start really getting out data in shape, really driving a more personal experience -- and I will touch on this afternoon, by the way, then this is such a big opportunity. There is another small thing that's on my mind on Sparks. We talk about the average customer, whether it's demographics, age, et cetera, but actually, when I'm walking our stores, calling 50 centers, and I'm looking at the customers on Womenswear or Menswear, we are attracting a younger customer. Now they're not going to sign up for a Sparks program or Sparks Card, unless it's really relevant to them. So we've got lots of work still on this, but it could be a big unlocker in the future.

Okay. Thanks, Jon. We're going to cover off this afternoon. So probably best we can try and to focus on the results section. Otherwise, we'll steal his thunder, Jon. Anyway, so we have David Roux from Bank of America, and then we go to Richard Chamberlain.

Well done on the results, just on the gross margin, there's a lot of kind of moving parts to it. But as you look into FY '25, I mean, should we expect a tailwind from freight and FX? And I've just got 2 more questions, but I don't know if you want to go ahead with that first.

Well, let me touch on that, David, and Jeremy as well could talk about FX, et cetera. I mean on margin, if I think about Food, first of all, I mean our gross margin was up slightly. But actually, we got benefits from logistics of about 43% retail costs and other proxy costs and savings in central costs, and that's all part of our cost restructuring program. So that really, if you add all that up, that's why the Food's operating margin went from 2.2% to 4.3%. I think the most important thing for the Food business is maintaining the volume sales growth. And that's why Christmas, we're pretty confident the early signs of Christmas are strong, and I do hope every single one of you on the call are shopping with us this Christmas for Food and for Clothing & Home. But we're slightly worried about what January will look like because although customers are planning for a good Christmas. January, there's a few question marks about some of the challenges they're facing. And although our customers are more cushioned than other retailers, we're just mindful. So what's key for Alex and his team is really a continuation on the strategy of volume, and that's what we do through quality and value. We still think it will also the logistics savings will continue to flow in the second half. When we think about Clothing, I mean, Clothing on their operating margin obviously went from 6.9% last year to 9% -- sorry, 12% this year. Now stores were a big improvement. Stores went from 11% to 13.5%. Online, we normally get a higher margin in H1 than we do in H2. Now that is where I think the challenge is. Because our online margin in the first half was 7% -- sorry, last year was 7%. This year, 9%. And normally, in the second half, history tells us, that margin is dilutive, mainly because of sales, et cetera. But that is where I think our opportunity is for future years.

Thanks, Stuart. Just focusing on the dynamic on gross margin in Clothing & Home a bit, David. There are lots of moving parts. Some of the benefit in the first half of this year is price increases that went through first half last year. We actually haven't taken any price increases since then. So as that flows its way through, we're not probably take price increases either in H2. There will be some reduction in gross margin as some inflation flows through. Freight is a tailwind. FX, as I've just said, declined because headwinds in the second half. Actually, as you flow into '25, FX should work in our benefit. But obviously, FX moves around a bit. But at the moment, based on current FX rates, we will get the benefit from that. And obviously, then we have to set our pricing accordingly as we ahead in '25. So lots of moving parts, quite hard to call, and quite a mixture of headwind and tailwinds and all that.

Great. That's very clear. And then my last 2 questions, I'll just bundle together, they're quite straightforward. How should we think about the dividend payout ratio looking forward? And then the second one is just on the Ocado Retail JV. I see there are some levers to adjust the performance targets under certain circumstances. And I'm just wondering if there's any chance of that happening.

Okay. Jeremy, go ahead.

Yes. So on the dividend, we've announced a nominal dividend. Our priority is on investing in the business, and we'll talk about that this afternoon. We're looking to share an investment-grade credit rating. We need to think about our pension scheme. But we are -- dividends are important, the tangible debt realization of shareholder returns. So it's a nominal dividend, 0.01 at the interim and on [indiscernible] basis will be roughly [indiscernible] for the year. So that's the approach to the dividend. On Ocado, you'll see in the accounts, our position is it would appear that Ocado Retail, if it isn't going to hit the number, it needs to do -- to achieve the contingent consideration. And on the back of that, it's been written down to 0. There is the provision in the contract for adjustments we made, and Ocado may argue in due course that the numbers should be adjusted, which could mean that [indiscernible] for the moment, we're not aware of any such adjustments and we've rebalanced and there.

Okay. Richard Chamberlain, and then we'll go to Harry.

Yes. Well done again on the strong first half results. Just a couple from me, please. How should we think about -- on the Food side, how should we think about the Food piece contribution for the second half in view of the recent sort of ramp-up of store openings. That's the first one. And then the second one...

We'll take that, Richard, Yes. Yes, answer that.

I'll touch on that. I mean, look, in H2, we've got plenty of openings, it's not a significant change of space. I mean it would be small in the grand scheme of things, 2 new openings, 9 store closures, 6 renewals. So all of those, of course, Food. And by the end of H2, we'll have 108 new format stores. I mean what I would say on some of the big stores, like [indiscernible] and Traffic Center, pretty big stores and the Food performance will be very strong there. And if I speak about the stores we've just opened or in yesterday, as I said, the third less space, overall is 30% more sales. Same as Liverpool one, by the way. So I mean, it won't make a significant material change to the numbers, but over time, it will. It will be a key growth factor business.

Got it. And my other one was on the working capital outlook for the second half. I wondered if Jeremy or some of you can run through this drivers there? I guess the Clothing payables.

Richard, we're still targeting a GBP 50 million outflow for the year. If you remember, we had a pretty strong inflow at the year-end last year end and I talked about some of that being savings. Some of the variables in there, we've got too much stock in India. We're looking to get that down, which should help. We do have Easter in Food coming at the year-end, and that creates actually a working capital drain just in terms of the build at free, so that should be a phasing issue, obviously. And you're right, on Clothing & Home suppliers, payment days moved up during COVID and we are looking to bring down to 75 from 90 over time. So that is part of the reason for that outflow in the year.

Okay. Thanks, Richard. We'll go to [indiscernible] and then Kate Calvert from Investec.

Just back on the store renewals, you've talked about some of those renewals and the sales uplift. And I think on the video, you said Victoria Cardinal Place was quite a long way ahead of your plan, as well as obviously higher than before. Could you talk about some of the dynamics that drive those uplifts in customer traffic basket and perhaps also whether you're experiencing any unplanned cannibalization in adjacent stores?

Yes. I'll keep it high level, Warrick. We can put a bit more detail if I get a few numbers later for you. But I mean I've just had a message from the team at Cardinal Place, say, we love the video, thank you for calling our store out, and they just sit these videos for themselves this morning. But the reason I mentioned that just because --- also our other stores, if we think about Food, first of all, I mean, it's quite amazing. If I go back now nearly 5 years, our first renewal store at [indiscernible]. That store was 100 years old, an old type of store with Clothing & Home and Food, food at the back, clothing at the front. And that store was doing around GBP 200,000 a week, and we were going to close it. In fact, I still remember the day where we were sort of arguing about opening -- or closing or keeping it. And I was determined that it was going to be a Food store. In fact, Archie got me the number of the landlords, and it was Will from Dadeland and I met him. And within the space of 2 weeks, we agreed to keep the store. I've got a piece of paper out and scrolled on a piece of paper what I thought the store should look like. And 2 months later, Sasha and I are knocking down the store building a new Food store. I mean that Food store every year has been a double-digit growth. Year 1, 25%. Year 2, 20-something percent. Year 3, 18%, et cetera. And 5 years on, continues to perform. And there are a few things. The first is the shopping experience in those renewal stores, as you know, is quite different. The first is we focus on what Alex calls the spine of the basket. So features more heavily, ag does, fresh meats and poultry. And that is helping drive a slightly bigger basket. And it's also helping our customers do a full shop with us in those stores. But that leads to more range, because more range is helping drive those baskets. Our basket in renewal stores, over 30 baskets, are actually up always around 20%. And ranges were very important. And I think what does remain core to the Food strategy is we are still going to focus over well on M&S. We've got some gaps in the range. Alex has identified a couple of thousand SKUs that he wants to introduce over time. But we can't see these stores being as big as supermarket. We want to be very tight on space, return on space. And therefore, those larger stores will be about 20 to 25. And on average 15,000 square foot. So the summary range is really driving a big difference. If we think about some of the renewal stores where we just added that range and make the store environment, whether it's Cardinal Place, which has performed extremely well, and a few of our shareholders and investors and its shop there, and thank you for that. But also other stores like York Center Store, trading 20% up when we renewed that as well. So all renewals are in line with the business case. All actually exceeding. There isn't one that isn't exceeding the uplift we expect. And I should just mention on Clothing & Home, those the Food question, when we right-size Clothing and we get a better layout and a better edited range, like in Cardinal Place, Clothing sales not only go up but have a halo effect from Food. So Cardinal Place, although we reduced Clothing by around 6,000 - 7,000 square foot, sales went up 30%. So there's a lot of good metrics going in the right direction when it comes to store renewal and paybacks are good.

And if I may, a second question is, I think you also said that you expect to see just thinking about Clothing & Home online. I think you said you expect to see a stronger online growth performance over the next 12 months. Any particular reasons for that? I imagine you see some of the last 6 months as a sort of normalization of traffic to store, but any particular reason why you think online will reaccelerate?

Well, I think this is more based on -- I don't really think 6 months. But I do think over 12 and beyond. I don't think we should change our strategy. Our target was always rightsize Clothing, reduce our Clothing footprint, target 180 flagship stores full line with Clothing & Home feature and rightsize space at around 60,000 square feet as a maximum. When it comes to online, where we see the opportunity is, one, we underperformed in real key categories. So we have high share in Womenswear, but actually, we see some of those categories underperforming online at the moment. Menswear, when we think about Menswear, we have a big opportunity. We have 9.2% of the Menswear market. Online, were 4.9%. If we think about lingerie, we have nearly 30% market share. Online, we're only 20%. And so the story goes on. Womenswear, 9.5% market share in stores. But actually online, is just 4.5%. So why I am very focused on this online thing -- and as is Richard, is I keep identifying the opportunities in categories that absolutely gives you opportunities to drive online growth in the future. And the last point online, we need to do a much better job when it comes to the app experience and personalization and we've talked about it for a few years, and we've really got to get some momentum behind that program, and that will deliver medium term, I think, growth online.

[indiscernible] that. I think people underestimate in the last year, we've seen a continued resurgence of return to service. And this is obviously being beneficial for us, because stores created less number of competition. The result is online and has been subdued, and people talk about it a lot. But we don't think that's a long-term trend. We think that's an interruption to a trend. So we do expect online and market-wise and on business to revert to stronger growth. Whether it's the next 6 months or next 12 months is going to resume. Now look, we're not getting through that many questions, quite a few people are waiting. So let's try and keep it clipped. Should we go to Kate Calvert and then Anne Critchlow. Kate?

I'll just say I love the Clothing and Food store. So 2 questions for me. First, in Clothing & Home, your full price mix was up to 82%. Given your sort of positive dissatisfaction, I mean what is the ideal level of full price sales? And how much further can you push it? And in terms of my second question, could you just talk about the level of disruption cost, preopening costs, year-on-year from the store relocation strategy? Was it sort of higher or lower? And should we be looking for this to increase over the next 2 years, if you're going to contract the program?

Got it. Kate, that second question was a big one. I'm looking around -- let's give [indiscernible]. I hope you're doing Christmas shop, and please remount me any feedback. On your full price point, our full price mix was 82%. I mean last year actually was quite high in 81%. And pre-COVID, of course, it was in the 60s. So the team has done a good job 3 years in a row over 80% full price. It's hard to put a number on it, but I tell you a few things that are on our minds, both for myself and also for Richard mainly. The first is, I do like the clarity of first price, right price. We want to be the most trusted retailer. And that means promotions don't read each of the best product for the best price. And the other key thing that Richard is really focused on with his team is maximizing the full price sales and reducing the amount of markdown going into sale. Now there are a few contextual issues I would like us to get out of sale in half the time. So instead of all of January, which I think would just be awful to see a whole month of sale, I would love a [ 2 2-week sale ]. And I know Richard is listening into this call, and I know he's very focused on how we're going to reduce the amount of sales, maybe get out a bit quicker. So I think meet 80s, and the high 80s will be a good long-term number. And there's just a few things still on trusted value and sales that we want to work through.

I can tell you categorically, Kate, I don't have an answer for your second question. I can say that in some of our renewals, we look to keep the store even so known Victoria Place and -- the Cardinal Place we have, look to work with the store and manage the renewal while we have the horizon. On the relocations, and we were up in Liverpool earlier in the year and Birmingham this week, we'll tend to keep the old store open right until the last minute and then reopen. So I don't think the cost of preopening costs, certainly in terms of closure costs will be significant. But we'll come back to you in terms of impact, we'll do a bit of analysis on that and get back to you.

Get the figure on it, yes.

Okay. Anything else from you, Kate?

That's it.

Thank you. Okay, we'll go to Anne Critchlow then. And then I would get to James Anstead.

I've got 2 questions, please. The first one, has there been any increase in shrinkage in either business? And then the second one on the experience of markdown rates in the third-party brands where you said on a wholesale basis.

Thank you, Anne. I mean firstly, on shrinkage, I mean, actually, Food was slightly favorable and we've done a lot of work on shrink. So there's no real standout concerns. The first is that Alex has done a lot of good work. Sparks was a classic example we know is a target category. And on space, we've repositioned the offer, standardized the sizes. In fact, one of Alex's first ideas was fixed pricing on stakes. And that has worked very well for customers. It's very well for sales and has reduced the loss. We've also relooked at how we lay out our stores. It's a real small detail, but having stake at the end of the aisle obviously at checkout helps a lot rather than in the aisle or hidden. And we've done a lot of work on process, stock accuracy. And what that means is we can target any areas where we have an emitting stock. I should also say the acquisition of Gist has helped us, because we've been able to be clearer on our end-to-end stock flow and stock holding and that helps with accuracy. So really, no big standouts for us when it comes to shrink. Your second question, I sort of forgot really. What was it? Third-party brands or something, I forgot.

Yes. I mean you've talked about the full price percentage across Clothing & Home. Just wondered was it was for the third-party brand specifically on the wholesale basis?

I actually haven't got that on me. And apologies, I think we'll come back to you. I can't really remember, but we will come back.

I don't think it's an issue on third-party brans. The only thing you find there's slightly more [indiscernible] where you get entire store.

And I'm very excited to kind of specific number on it. Anne, we'll come back with you on that.

Okay. Let's have James Anstead, and then we'll get a couple more. And then loads of time this afternoon for those out there.

Two questions, please. So firstly, if I interpreted your comments earlier rightly, it sounds that progress in Home is lagging the improvement you made in Clothing. I wonder if you can talk a little bit about the size of the opportunity and what are the major things you need to do to execute on that? And then perhaps one for Jeremy. I don't know if you can narrow down at all your comments on PBT guidance the year ahead. I mean, one way of looking at it would be, given some of the greater headwinds in the second half, do you think it's realistic to get PBT growth to H2?

James, thank you. I mean it's right for you to pick up Home. It's funny, because as I reflect, it's not like you actually refer what you're going to say. But naturally, Home rolls off the thumb. Because I do think this is an opportunity for us, and I know Richard agrees. There's a couple of things. We've had some strong performance in Home, by the way. Veggies was up 10%, for example. And I do think if we really focus on the key hero categories that we're famous for, like Veggie and Bar, for example, may be Kitchen to some extent. If we really focus our attention on that and build on the good work the team has done around style and quality and value, I think our opportunity, as Rich and I agree on this, is driving more volume. I mean don't forget our Home market share has gone up by only 3 percentage -- 0.3 percent points. So our Home market share is 5.2%. And therefore, that's why I talk about Home. I also, by the way, the Home is an opportunity online more than just stores. And I think we've got a particular challenge on Furniture. And I should call that out because we're just reviewing that business at the moment. So in Home, it's a mixed result. There's some underperforming categories and I think there's some big opportunities to drive more volume value in the future.

On the second half, James, on the numbers for the year, if you take -- if we deliver exactly in line with last year's second half and that back to the first half delivery, that would land us at about 6 35. And as we said, given our strong performance in the first half, we are looking to make a GBP 20 million or so of investments back into the business, accelerating investments that we'd have made next year. Based on where people are coming out at the 6 40 level, I think that implies an underlying growth in the second half of around about GBP 25 million. So there should be some growth, but it's in that order of magnitude based on a 6 40 outcome for the year.

Okay. Look, well, great example. James, you want to chip in? And then we'll go to Izabel Dobreva.

Yes, I don't have a question.

Don't have a question. That's unusual. Okay. Izabel?

Yes, I have 2 questions. So the first one was around the run rate of your cost savings, which are annualizing at about GBP 100 million now out of the GBP 150 million target. So could you give us a sense of is this you outperforming relative to your initial budget expectations? Or how much of it is the question of timing given the various flow-throughs? And in general, what are the main areas of savings, which remain over the next 6 months? And then I have another question after that.

I'll kick off, and then Jeremy can say out on savings -- or fill the gap. But thank you, Izabel. I mean the first thing to call out is obviously, we laid out a plan for GBP 400 million of structural cost savings. And the reason that's important, it shouldn't just be about getting cost out, it should be about restructuring M&S to be a lower-cost business over time. And we will touch on that this afternoon at the Capital Markets Day. In the first half, as you know, we delivered GBP 100-plus million of cost savings, really because that came from logistics, GBP 30 million in Clothing & Home, and also the same in Clothing -- I mean, Food. We did have some savings in D&T as well. Some of that is because we paused some of our work is GBP 20 million, where we paused some work until we will be clearer on the returns of those investment programs. We had GBP 30 million in retail and GBP 15 million in other simplification programs. So costs, of course, still grew. Good news, sales grew lower -- sales grew faster than cost growth, and that's our overall plan. What I would say at the moment for us, is our overall GBP 400 million is still in place. Our GBP 150 million for this year is still our target for this year, and that's where we're on track to deliver.

Yes. The only thing I'd add, Izabel. It's about a year since I started working with Stuart. I think the program kicked off at the -- this time and last year is on the Capital Markets Day. And inevitably, based on when the program started and how that flowed into the current year, we've had a stronger weighting in the first half. Stuart and I are absolutely keen to make sure we maintain the momentum. So we'll be working with the business to try and keep the activity going and the opportunities going as we head into the budget for next year. But it's the part of the -- waiting actually just about the timing of the program and the successes we've made in the first half in delivering that. So -- but we'll be looking for opportunities as we head into the next financial year as Stuart mentioned to go.

Okay. Now I'll go to Nick Coulter, and I can call a halt because we've got 4 more hours of this afternoon. The team has a lot to do. So Nick, do you want to chip in and then we'll call a halt.

So 2 quick ones, if I may. And firstly, I guess and this is maybe a question for this afternoon. But on Food, strategically, which shopping missions or baskets are you going after? Is it still a case of being part of the customer's basket, but getting more? Or are you going after 4 basket shops in the larger stores? And then I guess, how does Ocado dovetail into that longer term, please? And I have a quick follow-up on Bangladesh as well, if I may.

Well, I think the first thing on basket, I mean, our overall basket value is over GBP 15 -- GBP 15, GBP 30, something like that, and it is ahead of pre-COVID levels. Now obviously, units per basket is now starting to grow as our volume is growing. I think what's more interesting is in our underlying core store estate, the top-up basket for tonight is still very important. That's because our stores are smaller, and they're a bit more top-up driven stores. They're smaller, smaller range. So for tonight it's still critically important. In our renewal stores, it's quite different, though, because our basket growth where people are doing a bigger shop is obviously paying on. Our basket in renewal stores is 10-plus percent higher than it is in our average store. So I think it's all about format. We have different formats. We have the very small 2,000 to 4,000 convenience store formats. We have a 7,000 store format, which is top-up, what we call top-up and dinner for tonight. And then we have our bigger store format, where we want to give customers the opportunity to buy a forward shop, i.e., all of the new space, and that seems to be working well. Just on the Ocado, I think Ocado is just complementary. We haven't seen cannibalization. We are seeing now with the work that Alex and Hannah are doing and they're talking this afternoon, so they can touch on this afternoon. But we're not seeing cannibalization and we are starting to see some growth now. The beauty for Ocado, I think, in the long term, at the moment, we've got 4,000 lines range, that's 80% of the range from the Food business. Sales are growing up. M&S sales on Ocado are up, at the moment, 7%. Average orders are up and active customers are up. So we might not be happy with the loss number, but I think it's going in the right direction. And I do think I'm not overly worried for the next 12 months or 2 years. But I think 3-plus years from now, Ocado should be a Food growth story for M&S.

That's great. That's very helpful. And one maybe to discuss a bit later as well, where you see the opportunity for market share growth. Very quickly, if I may, on Bangladesh. Do you have any initial thoughts on the wage settlement in Bangladesh, and maybe how important that country is to you as a sourcing location, please?

Yes. Look, thank you. I mean it is important. And obviously, source and responsibility and everything we want to do is very important to us. While we will not endorse a sort of figure, we do support the process of the minimum wage negotiations. Our global in-sourcing principles for us is pay a fair wage, pay workers good wages, meet their basic needs. And therefore, we're doing a lot of work when it comes to our source and arrangements with Bangladesh, and it is a very important country. In fact, I'm visiting them with our sourcing team next year and very much looking forward to it.

And I think you have to recognize, Bangladesh has been very important to us historically and it is today. And if you look at Bangladesh, it is right that, over time, we should see wages improving in Bangladesh, we want to see that. And obviously, [indiscernible].

The stuff also I did mention it is about 43% of our sourcing overall.

It's our most important -- but remember, what's happened in Bangladesh in the last 10 years is huge investments in more and more sustainable, better managed factories where working conditions have vastly improved. So it's not the Bangladesh of 20 years ago. And so with the wage inflation, which is inevitable and which is right, we're also seeing very good capital investments and very, very long plans there. So long-term for the long troops. Okay. Look, apologies for those who haven't got in. But honestly, there's going to be lots of time this afternoon. The format is going to be very open. I hope you're all coming. There's plenty of time to talk to the team individually, as well as the Q&A session collectively. And of course, a lot of great presentation. So look forward to seeing you all then, and thanks for joining us now. Thanks.

Thank you very much, everyone.