Good morning, everybody here in the room, and also for the people who are dialing in on the webcast. Welcome to my first scheduled announcement today for our H1 results. My name is Tjeerd Jegen, and I am the CEO of B&M since June. I am here with our CFO, Mike Schmidt. Today, we would like to give you an update on our H1 results, also the actions we are taking, and of course, our ambitions for the future. Giving you an outline for today, a couple of areas. First of all, I am doing introduction now, obviously, but Mike is then going over the financials, both the headline and also statutory measures. I will give an update on B&M, Back to B&M Basics, that we launched October 7, and delighted to give you also an update on progress we are making there, and then the broader plan.
In the end, confirming capital allocation framework and value creation. Of course, at the end, there's a chance for answering questions in the room and online. Reflections on my first half. Clearly, let me be very clear, it fell short of our expectations. If you look at the half, U.K.-like sales, of course, were soft, were flat. Then combined with a year-on-year gross margin decline, obviously, we did not have a chance to offset the cost that came through in our business. Unfortunately, that, of course, affected our profitability. Not happy with this outcome. Of course, that is why we launched Back to B&M Basics, because that is ultimately the key driver of bringing our like-for-likes back on track. We are seeing already the first implementations of Back to B&M Basics, and I will give more color on the four work streams shortly.
To manage your expectations, the full impact of Back to B&M Basics will take about 12-18 months to come to fruition. The focus is really about getting U.K. like-for-likes back on track. I think we should not lose sight of the fact that we are still a growing business, and we reported 4% sales growth today. Opening stores both in the U.K. and France, and I will give also more color on the U.K. network and our ambitions there. A good quarter for France and a good half for France in a very competitive market, and of course, competing very strongly there. The value proposition for B&M is strong and powerful. I think getting into a more uncertain economic climate, my experience is that discount is a sector to be in, that is where the growth opportunity is. Finally, we are a cash-generative business.
We've always been very disciplined in capital allocation, supporting very strong returns. That is still core in our model, and we're not walking away from that at all. Focusing on the team now, because ultimately, with a new plan and a plan that needs execution, you need the best team to support that and lead that. We're making three announcements today in terms of people appointments. I think the first one is a very important one for me because it's strengthening the buying and merchandising team. We've been able to secure and hire Simon Hathaway as our Group Trading Director. He historically also worked for Action, but he started a career at Sainsbury's, worked at Watson, and also at Wilko. I can't wait to see his input and impact in the business, especially on our value for customers and our pricing and our products.
We've announced, of course, or effectively, Mike announced on the 20th of October his intention to resign from B&M. Obviously, that leaves us with a vacancy, and we've been able to secure a new CFO, starting in an interim capacity, Helen Cowing. She has worked in various industries, consumer services, FMCG, but also retail. She starts next Monday, and there will be a handoff period with Mike. Mike will officially step down on the 1st of December, and Helen will then be appointed to the board of B&M. Finally, this is not a new hire. This is a person who's been with us for the last three years, John Parry, very strong retail background. He currently runs our distribution center, so Director of Supply Chain. In his career, he probably worked as much in stores as he's worked in running supply chain.
I've decided to bring both supply chain teams and the retail teams under one leader, which is John, which basically creates for me a very solid, compact management team of four, which will be the driving engine of the business: CEO, CFO, trading director, and retail and supply chain. Of course, on the back of the announcements, Gareth Bilton, Mike, and James are leaving. Of course, we're thanking them for their commitment and wishing them well for their future. An update then, and of course, focusing on the announcement on the 20th of October. After this, of course, I'll hand over to Mike. First of all, we'd like to focus on the forecasting error, the accounting error that we disclosed last month.
Just to remind all in the room and also on the webcast, on the 20th of October, we made an announcement that we had a systems issue. The flow-on effect was that we incorrectly did not recognize freight costs in our accounts, and that, of course, had a quite sizable impact on the outlook. As a consequence, the outlook we initially gave on the 7th of October, we had to restate on the 20th of October, and we provided new guidance for the year. This is, of course, a very disappointing event and clearly not something that has happened at B&M before. We take this very seriously. We commissioned EY to do a review of this matter. EY has started. It is underway. The outcome is expected, and the results will come out in the upcoming weeks.
We plan to share an update of this at our scheduled Q3 results announcement, which is in January. In a way, linked to this, we are still very committed, and it is a strong priority for us to migrate from Luxembourg to Jersey. Obviously, it will provide us more flexibility and more options for returning excess capital to shareholders. We have decided, in the light of making sure we follow all the recommendations of the third-party review, but also full oversight of the new CFO, that it was more prudent to move the actual redouble sale into the new calendar year. We are confident we will complete it in the new calendar year, and obviously, subject to excess capital being available and subject to shareholder approvals, that will enable us to basically commence with share buybacks over time.
With that, I would like now to hand over to Mike, and I will then return shortly with a strategic update. Thank you very much.
Thank you, Tjeerd, and good morning, everyone. Let me take you through the financial performance for the first half. Group revenue rose by 4% to GBP 2.75 billion, driven by new store openings and good like-for-like trading in France. However, our profit performance did see Adjusted EBITDA decline significantly to GBP 191 million for the half from GBP 274 million in the prior year. This was due to the limited like-for-like sales growth in the U.K., gross margin pressures, but also the cost inflation that was very much as we expected entering the year, which arose principally from increased government taxation and minimum wage increases. Our cash conversion in the half has been strong, and our leverage ratio ended at 1.6x pre-IFRS 16 EBITDA, which is slightly above our target range of 1x, 1.5x due to the lower profits.
It is within seasonal tolerances, particularly as we stock up during the first half on our ranges for the important Golden Quarter trading period. Looking at group revenue progression in more detail, as mentioned, the main contributors here were the continued expansion of our store estate and also a strong performance from B&M France. We opened 31 new stores across the group during the half on a gross basis, which is 15 net new stores. As you can see on the bottom right-hand chart for B&M U.K., we opened 23 gross new stores and 9 net after relocations and closures. That puts us on track in the U.K., in B&M U.K., to open between 40-45 new U.K. stores on a gross basis in the 2026 financial year, more on which Tjeerd will come on to later.
In the U.K., our like-for-like sales were broadly flat, up 10 basis points or so year on year, with a positive performance in general merchandise that was offset by a decline in FMCG. Within the half, the timing of Easter and early good weather boosted our outdoor ranges in April. We then saw weaker sales in May as that trend reversed, following which we saw progressive moderation in our like-for-like sales declines in June and each period following during the second quarter. That was helped by a return towards higher average value products in general merchandise and some out-of-bridge selling price inflation in FMCG. B&M France delivered double-digit revenue growth from new stores and good like-for-like sales growth in a competitive and challenging marketplace. We did see a notable step up from the first quarter into the second quarter.
I think that particularly reflected good underlying trading, but also a base-effective Q2 last year, where we did see some limited disruption while we implemented our new warehouse management system. Turning to gross profit and margin at B&M U.K., which is important to note as part of our overall profit drivers. Gross profit of GBP 794 million at B&M U.K. is down slightly from the prior year, which reflects the limited revenue growth rate we saw and also the three negative factors affecting the U.K. trading gross margin percentages shown on the slide. Firstly, in terms of the impacts we saw, we saw lower bought-in margins in general merchandise. Discussed this previously as we implemented lower price points. Secondly, we did see the price investment that we made in the latter part of the first half in our key FMCG lines taking effect.
Finally, to a more limited extent, there was an increase in markdowns late in the first half as we started to reduce range counts as part of our Back to B&M Basics plan. We did benefit overall from a positive mix effect towards our higher margin general merchandise categories, but this tailwind was actually less prominent than we saw exiting the second half last year. Net new stores and the small contribution from B&M like-for-like growth roughly offset the gross profit impact of that overall margin decline. Taking a closer look at costs of B&M U.K. during the half. Firstly, of course, there are the costs and pre-opening costs of new stores. These are, as we expected. I should note head-on that it is not correct to simply compare the gross profit of the new stores that have opened to the new store operating and pre-opening costs.
Very much as usual, there are moving parts from year-on-year phasing in different store types and sizes. As Tjeerd will come on to say, the new stores that we have opened continue to perform as very much as we would expect and are delivering payback on average in about a year. As we previously communicated with our full-year results back in June, we do face higher staff costs this financial year as a result of the statutory rise in national minimum wage and higher national insurance charges. Together, these incremental costs amounted to GBP 30 million for the group as a whole, including Heron. Within B&M U.K., the total staff cost increases, including those statutory pressures, were held down to GBP 24 million, which reflects ongoing mitigating actions being taken to offset the statutory pressures and also our routine annual pay increases.
The new Extended Producer Responsibility tax added a further GBP 14 million of costs in the half. It is important to recognize that GBP 14 million reflects the full annual cost, and that needs to be expensed in the first half due to the accounting standards approach. Other costs here include investment in our distribution center infrastructure, IT, new store openings, and general cost inflation across our operations, net and mitigations. Actually, when you look at that other bar relative to the size of our infrastructure, you can see that in our business overall, other than through taxation and employment packaging and minimum wages, there is very minimal levels of inflation feeding through.
Bringing all of these elements together, the profit outturn for B&M U.K. reflects the impact of the revenue growth from new stores and like-for-like sales, providing an offset for lower gross margin rates, but not for the higher statutory staff and other costs despite the work on mitigations. This is reflected in the adjusted EBITDA margin outturn for the 1/2 of B&M U.K. of 7.7% versus 11.3% in the first half last year. I'd flag here that the EPR charge of GBP 14 million will not repeat in the second half, as I said before. Looking ahead, I'd emphasize that we continue to see like-for-like sales as the primary determinant of margin outcome. It's important to recognize that point. The margin is the outcome. It's not the threshold that we work to as a business.
That being said, the actions that we're taking under our Back to B&M Basics plan are focused on restoring sustainable U.K. like-for-like growth, and we expect those actions will enable our U.K. EBITDA margin to recover and stabilize at low double-digit levels in the medium term. Looking at the group overall, the decline in group Adjusted EBITDA, as we've discussed, is largely as a result of the disappointing performance in B&M U.K. France's operational performance was pleasing, growing both from new stores and like-for-likes, with the small decline in margin rate overall relative to prior years reflecting the larger infrastructure in place for its future growth. Heron shows a similar trend to B&M U.K., with the operating leverage effect of like-for-like performance and cost inflation pressuring its margin. Despite the pressure on profits, we did generate a healthy free cash flow of GBP 51 million during the period.
This was achieved through disciplined working capital management, as always, and is despite having invested GBP 74 million in CapEx in the half, including investing for growth with GBP 32 million spent on new store openings and GBP 13 million on infrastructure, having in addition also incurred GBP 7 million on one-off bits out for Ellesmere Port. We also did spend GBP 22 million within that number on maintenance, which is very much in line with the prior year. Let me sum up before handing back to Tjeerd. Overall, we've seen a challenging half with low like-for-like growth in B&M U.K. and a decline in the gross margin rates, and also managing a sizable cost inflation from statutory changes to minimum wage, national insurance, and EPR taxation. However, France and new U.K. stores continue to perform well, and our cash conversion remains a core strength of our business.
Back to B&M Basics plan is underway, and we remain focused on restoring sustainable like-for-like growth in B&M U.K. We have prudent leverage and a strong liquidity position and long-dated maturities across our credit instruments, the first refinancing of which does not fall due until the end of 2028. We enter the second half with our gross margin trajectory showing some signs of improvement. Trading in the early third quarter has been at the lower end of our like-for-like sales guidance range of low single-digit negative to low single-digit positive percentage for the second half. With the majority of our critical Golden Quarter still ahead of us, we are reiterating our Adjusted EBITDA guidance between GBP 470 million-GBP 520 million for the financial year. Let me hand back to Tjeerd.
Thanks, Mike. Let's move to the strategic priorities and the progress we're making, mainly focusing on the execution. Back in October, I think October 7th, we shared this. My first task after becoming CEO in June was focusing on diagnostic of the business. Where was execution good and where was execution not in a good place? We basically focused on four areas: sharpening prices, promotions, ranges, and improving on-shelf availability. If you bring that actually back into a framework, we call this Back to B&M Basics. It is very much focusing on getting back to the original value proposition of B&M that made us successful in the past and making sure we were able to grow. It is action-focused, and actually some of it is already on the way, and I'll give some more color later.
It's not just about doing the basics better. It's also going back to growth in the longer term. There's a second and a third phase that basically is about deepening our foundations, more data, more customer insights, and then also looking at a faster growth path once we have restored like-for-likes in the U.K. The U.K. and its value proposition and its like-for-likes is now our focus next 12 to 18 months. Again, as Michael alluded to, with returning positive like-for-likes in the U.K., we also believe that the U.K.`` EBITDA margin as an outcome should go back to low double-digit levels in the medium term. Just to put things in perspective in our earnings flywheel, we also, I think, shared this on 7th of October just to give some more, let's say, background to this. Fundamentally, I think it's a really strong business.
The teams that we have and also the strengthening of the announcement today, in combination with a compelling grant, a local store model really allows for great outcomes. Again, serving 5 million, more than 5 million customers' visits a week, I think, is a testament to this. Our direct sourcing setup with multi-lines in the Far East and very cost-efficient operations allows us to really offer great value every day for customers. In principle, the targeted FMCG offer that needs a bit of sharpening and a broad GM range really helps us to deliver great value for customers. Skilled footprint, of course, fractionalizing cost and growing in the U.K. and France. I think today you'll hear that we are confirming again the growth potential we see in the U.K. We strongly believe we can continue to be covered and grow.
There is an underpin of a very financial discipline approach to space. I think today also we have given you some insight in the quality of the estate with not only fast paybacks, but also a very healthy estate across the board. This has not changed fundamentally in terms of its structure. What has changed, though, is the execution where we have drifted. That is exactly what we are addressing with the Back to B&M Basics. That ultimately is what I would like to share with you after this. Back to B&M Basics is the first phase, 12-18 months, price, product, range, availability. The second phase is deepening our foundations, using customer insights. At B&M U.K., we have kept things really simple and lean, but I think there is also a chance for us to use analytics a bit more than we could. That is what we are doing.
I'll give you a bit of a flavor of how we're using insights to improve our store locations and the offer to our customers. Finally, we will also address and come to a decision on e-commerce, loyalty, and private label. That, of course, is the next phase of our plan. Let's bring it back to the basics, to Back to B&M Basics. Just want to refresh your memory. On price, we've always communicated 15% cheaper, 15% better value than main supermarkets on a total basket level. What has changed since August, September time is that we basically are now reviewing not just on a total basket, but also on a line-by-line basis. Pricing is an ever-going and always-ongoing and always-on process. I can tell you since we've started, 35% of the key items that matter most to customers we've changed and reduced prices.
We have a ratio that we're looking very carefully, L ratio, higher, equal, lower versus our main competitors. We use a lot of internal KPIs to monitor this. We are going to also look carefully at other peers. Currently, we're focusing on the big supermarkets and the operator closest to us in this market. We are also looking at the discount supermarkets and other discount operators just to make sure we've got the best pricing in the market for our customers. Over time, we will also add general merchandise ranges to our FMCG. Really making sure we provide great value all across the store. In terms of promo, we had always manager specials. The inception of manager specials from the Blackpool days was a great item which was bought for a short period, was decided by the manager to put on display.
That became a bit static, and we're bringing back the more dynamic, customer-relevant merchandising of promos. We've already started addressing this from October. Actually, already during the summer, we brought back to school to the front, Halloween, and now Christmas. We are going to also use analytics and promotional review tools to really find out what promotions and which items really grow the category and really impact and increase basket penetration. To really basically have an ongoing improvement in our promotions, but all that's already starting and on the way. Moving on to range, I think we shared that we had quite a significant increase in our range. If you think about discounts, it's all about discount in price, time, and complexity. We haven't really made shopping easy at B&M.
The flip side of having a larger range is that it's more costly and more difficult to operate in terms of stores and DCs. Ultimately, with a larger range, you can't really get your economies of buying, economies of sourcing, so you lose out on value. We're started now with testing an edited range in three categories. We have three categories live in 22 stores where we've reduced the range about 35% in wine, in snacks and crisps, and in rice and pasta. We're testing the method that we have used to apply the range reductions. We're testing the method for stores to remove those lines. We're now assessing how they're performing. We will use those insights to inform us how to then proceed for the next phase. Mind you, just in FMCG, there are 200 subcategories.
Three is just a start. Now, moving on, availability. We've never really had a clear read of availability because we do not have an online channel. If you're an online retailer and you do store-based picking, you've got a very clear customer availability measure. We do not do depth scans, so we did not really have good insights. We actually, through analyzing items in stock but no sales, came to an 86% availability for B&M, which is far below best practice on those lines. We've put in place now in 11 stores a trial to merchandise the best-selling FMCG items, about 240 lines, in a different way, with the aim to actually roll this out to all stores. Over time, we have the aim to roll it out to all ranges in FMCG.
We're also trying to see if we can actually skip a number of generations of gap management or availability management. We are not going to do the classical gap scanning that every retailer in this country is doing. We are moving straight to an AI tool which alerts the store manager where in the store of the thousands of lines we sell, there will be a gap which he needs to correct the stock record. Availability can then straight away improve without having to spend a lot of time in non-value add work. Moving on to the next slide. We are also deepening our foundations, and that is the next phase. That is ultimately using customer insights for making better and informed decisions. This is phase two. In phase two, it is all about insights. It is looking at formats. Basically, the stores, it is looking at locations.
It's looking at simplifying ways of working for stores. Finally, over time, we also would like to update our store concept and reflecting an improved and a better B&M store for customers. We've already started, let's say, laying the foundation for phase II. What we've done, we've analyzed transaction data from every single store in the U.K. We've taken external data like local competition, demographic, income levels. We came actually to the conclusion that there are six groups of stores with very similar patterns that actually you could cluster in six different ways. The upside here is you could actually then start ranging those stores in a different way. You could have different marketing programs for those stores. Actually, also for your location strategy, you could straight away bring the best possible range to that local location. Historically, we've not really tailored.
Historically, we've always kept range based on size and space and never tailored to the local customer. If you look at the data, customers shop very, very different across the six clusters. This is the next phase. We will use the insights to start piloting adapted ranges, different layouts, different FMCG, GM space allocation, different range allocations across the six clusters. My experience in other retailers is that normally gives you a good sales uplift, which then gives a nice perspective for over time updating the estate and becoming more tailored and relevant for local customers. Talking about the estate, very strong U.K. brand presence. We closed the H1 with 786 sites across the U.K. We are also now providing some insight actually how those stores are performing.
I must say, the screen, I'm not sure if you can see the axis, but the four dots on the bottom basically have a negative contribution, and every other dot above is positive, which means 99.5% of all stores in B&M U.K. have a positive contribution. I can tell you, I've not worked for any retailer with that health of an estate, which I think is reflecting, I think, the great work which has been done in the past on being really, really strict with capital allocation and really only opening stores where you can. If you would now look at the opportunity going forward, and if you would look at some more insights in our estate, we actually are confirming today because I've had a question quite a few times since I started confirming the 1,200 opportunity across the U.K. We use a third-party location analytics company.
We've asked them to do a complete review of our estate. They've also now been able to actually add credit card and debit card data to their analytics, which means we can actually see where customers live in certain catchments. We've updated the model with the stores we've opened in the last two years, and we actually came with an opportunity for about 1,200 stores again over time. We're also going to use the updated model with better insights to even make better decisions going forward. That said, if you look at the latest openings, payback is still on average 12 months, which I think is very, very solid. New stores are open with accretive contribution margins, and they're accretive to company margins. Opening stores in the U.K., there's still a very good growth pipeline.
We see good, let's say, accretion of company margins with that. We are also breaking down the actual number because we have had 45 store openings last year, more or less. We are guiding to 40 to 45 store openings this year, and we are on track to deliver between 40 and 45. I think it is important to note that underlying this number basically consists of an organic site acquisition pipeline of about 25 to 35 stores. Basically, being a very considered approach with landlords, with shopping center owners, with developers to build a pipeline of stores, which normally takes multiple years to open. Every single year, we have also seen, or at least in recent years, we have seen distressed opportunities being offered to us, which of course we have seized when they made sense economically and financially.
The combination of the two is the 40 to 45 stores, but underlying is 25 to 35 organic and then 10 to 15 opportunities. Clearly, you cannot plan for opportunistic sites being offered to us, but clearly that has been part of the pipeline. Moving on to value creation, how can we actually create shareholder value? Ultimately, our value creation is designed to support shareholder returns. Clearly, standing here, I can honestly say that, of course, performance has not been where we want to be, and the actual result of this is not where it needs to be. If you would stand back, I think we still have significant opportunities to grow in both the U.K. and France with healthy margins.
We believe that with returning of like-for-like, sustainable like-for-likes back to the U.K., we can bring our EBITDA margin in the U.K. back to low double-digit margins as an outcome. If you could combine that with the compelling stage growth and the very efficient way of using capital, so the very solid return on capital employed, we believe over time we will be able to return excess cash back to shareholders. There is a sequence here, which is basically our capital allocation principle, which I would like to provide more color on the next slide. We are basically confirming our capital allocation framework going forward. I think the starting point is our leverage. I think that is important to note. We really believe the fundamental of this business is a pre-IFRS 16 lease leverage of 1x to 1.5x, which we believe is a prudent number to have.
There's also, of course, seasonal swings. Currently, in the half, we finished at 1.6x, but that's both in the tolerance of a seasonal swing, but the focus is 1x to 1.5x. If you would prioritize and rank the four drivers of capital allocation, I think the first one, and will always remain, is investing in our business. Making sure we have a good pipeline of stores coming through and maintaining those stores in good shape. The second one is the dividend payout between 40% and 50%. That's also what we have confirmed with the interim dividend payout. Obviously, M&A is on this chart, but to be very clear, we're not actually looking at M&A opportunities, but clearly when something would arise, we would, of course, seriously look at it. Right now, this is not our focus.
Of course, when we have excess capital, we can return this to shareholders. In the past, we had only one tool, as you know very well, special dividends. We aim to conclude our redomicile to Jersey, which will give us the chance, subject to shareholder approval, to start buybacks. The board has decided that actually the current preferred option, in the event there is excess capital available and there is shareholder approval, is basically going through the share buybacks. Concluding and summarizing, I think we are responding to a half that was falling short of our expectations. We have launched Back to B&M Basics. Some of it is already underway, mainly pricing promo. Some of it is now being tested, which means in products and availability. To lead the plan, execution of the plan, we are strengthening the team.
Three strong announcements today in terms of appointments: two external hires and one promotion from within. We're already starting to work on phase II, mainly on the format piece. We're using customer insights to improve our offer to local customers. I'm confident that will give us an even better customer response to our offer in the local markets. I think we could be, even though the results are falling short of our expectations, I think the perspective is still one of optimism. We have a very healthy estate, and we have a significant widespread opportunity we're confirming here today. We can still grow the store count by about 50% in the U.K. to 1,200 stores. Also, we see in a market that is also highly competitive, our French business doing well with also plenty of opportunities to grow in that market.
With that, I would like to conclude and hand over the floor here to questions, but also mindful of people on the webcast. I think, Andrew James, you're also making sure that people who are not in the room but still have listened are able to ask their questions. Happy to move over to Q&A.
Thank you very much. Good morning, Tjeerd, Mike, Fintan Ryan here from Goodbody. Two questions for me, please. Firstly, in the longer term, you reiterated the 1,200 store count for the U.K. Is it fair to say that maybe the pace of achieving that target is going to be slightly slower in the next sort of two to three years while you're implementing the Back to B&M Basics plan?
Related to that, is it fair to say as well as you sort of invest behind greater data analytics capabilities, maybe need to refresh the stores that actually CapEx might pick up from current levels and what you see as sort of a medium-term CapEx for the business? Just finally, I know it is very short term, but could you give a sense of color of what were the moving parts around the sort of Q3 trading to date, GM versus FMCG, and yeah, just sort of what your hopes for Christmas execution?
Yeah. The first question, clearly, we normally do not guide multi-year store expansion targets. I think we historically guided within year.
I think the exceptional guidance we gave two years ago on the 40 to 45 was in the deck of a significant amount of stores we were able to take over from a Wilko estate. I think we have been very transparent today of confirming 40 to 45. I think we have also been very transparent to show the breakdown of our store expansion. Clearly, I cannot predict distressed opportunities, but I think the breakdown is what we showed today is what you should expect from us. We will seize every single opportunity that is offered to us, and we will keep working on a good organic pipeline. I think in terms of capital expenditure on refreshing the estate, clearly our growth of B&M has been done predominantly in the last 10 years. Many of our stores are in good shape, and actual cost of fit-out is pretty low.
If you would be sitting here, if I would be sitting here in the chair of supermarket chief exec, refreshing supermarkets is very expensive. Our stores have very low fit-out cost. Clearly, if you would update stores with an improved roof, so you can spray paint it. If you would remove some of the tiles of our vinyl floors, if you would improve the speaker system, you bring some more technology to our checkouts. In some stores where it is really warm, you put air conditioning in. You still talk about a relatively low expense for a store, but a great improvement for customers. I think every single pound we invest in our business goes through a rigorous investment proposal. If these trials will turn out to be very helpful and the returns are there, clearly we will then, of course, not hesitate to invest.
For now, we're just trialing and learning. In terms of golden quarter trading, we still have the vast majority of the quarter ahead of us. I think we just thought it was helpful to be transparent. We've guided to a low single digit at the bottom of the range and high single digit, sorry, positive low single digit at the high end of the range and negative low single digit low end of the range. We're just sharing today that we started at the low end of guidance in terms of like-for-like. The only thing we can say, and I think we're not the only one saying this, uncertainty doesn't really help in terms of consumer confidence. More certainty would be helpful. That said, we need to fix our own opportunities and trade harder.
Again, we started, we only have had a very small portion of the golden quarter. That trading was at the low end of our expectations. There is still a significant time ahead of us. I think our Christmas ranges are good. I was not here last year, but I have asked many, many of our store colleagues how they have looked at our Christmas ranges. I get consistent feedback that the Christmas ranges this year are really strong. Early trading of Christmas ranges, I am talking Christmas category, has been very solid. It is a good perspective. That said, we started the golden quarter slow.
Good morning, Ben Hunt from Peel Hunt. Just on the range rationalization, it seems to me to be a bit of a juggling act. I am just sort of wondering, what sort of drag should we expect from the potential for sort of smaller baskets? Obviously, as you clear out those ranges, there's going to be an element of dilution. How old is your stock now? How confident you are and how clean it is really as well?
Yeah. I'll talk about the actual commercial implication. You might talk about the age of the stock. The reason we're doing the three trials is actually making sure that when we remove products, it doesn't lead to lower sales. Actually, the aim is to increase sales. That's what I've seen consistently with other retailers where I work. The moment you bring clarity on shelf, you make it easier to shop, and you actually bring out the best-selling lines and you give them the right space. You restore value credentials. You restore value perception, but also practically, you give more space to the best sellers. Let me give you an example.
Our coffee range, I think we have got more coffee SKUs than Tesco has at the moment, which is interesting. Our best-selling range selling in the store I was in, 38 items per week per store, had only two facings. We cannot even cover the best-selling lines. The target of those trials is actually doing more sales. Otherwise, we would not do it. Having the flow-on effect of much simpler execution and, as it is, much simpler execution in our stores. The other benefit that comes with a tighter range is that you actually have the flexibility then to go for short-coded products, parallel products, traded products. When it is gone, it is gone because you have the capacity to do those things. There was, I think, a stronghold of B&M, and we can bring that back. In terms of age of stock.
Yeah. Look, I think if you look at the stock picture overall, you can see it's very consistent relative to sales year- on- year. We provide for stock where it's not moving or it's being sold at lower prices, and that provisioning policy has remained wholly consistent. Ultimately, the point about our stock model is that it's all designed around rapid turn of stock, and that's consistently what we see. I think what we're talking about here is a reduction in the number of ranges that we have. I think to the extent that we pursue that, we choose to do that, we're talking about that. That's because there's a perceived financial benefit of doing that overall. I think that'll be just part of the considerations, part of the picture as the full year develops.
Yeah. It is ultimately restoring the discipline we used to have as one in, one out. I think we are bringing that back.
Okay. Just maybe one more if I can. You talked about maybe flexing formats, stores, space allocation. How should we think about the continued rollout in the U.K.? Will there be changes in the size of the stores going forward or in the locations? If you do,
I think it is fair to say that our bread and butter is a 25,000 sq ft retail park, out-of-town store with a 6,000-8,000 sq ft garden center. I think then we are at our best. We are at our best because we can offer the breadth of GM, we can offer the breadth of FMCG, and we cater to quite a homogeneous customer mission. I think where there are opportunities is town center stores.
Our format is not really yet optimized for that because the customer mission is very different. I think what I'm trying to share on the format work we're now doing, the emerging insights are that we should really have a bit of a different offering in town center stores. It actually does not change our expansion target, does not change our expansion, let's say, goals, because ultimately we've seen both town center stores and out-of-town stores performing well with very good margins. It just means that we will be operating those stores, I think, with better results if we are tailoring more to the customer.
Thanks. Andy Wade, Jefferies. First one, you obviously disclosed on current trading around running towards the lower end of your range and FMCG underperforming that. Just interested as to what impact you think the pricing changes that you've had so far are having.
Is it having the impact you hoped it would have? Is it going to take longer to come through because it needs repeat shops? First, a bit of color on that.
Yeah. It's very difficult to actually share that. I see that my experience normally takes about six months for customers to really notice a change in price. We have mainly addressed not so much a total basket because a total basket, we were about 15% cheaper than the four main grocers. We've mainly addressed anomalies, so where lines were completely not in line with our policy on a line-by-line basis. I think we've shared in the last update that the actual financial impact for the investment we had to make was actually not very significant. But it's mainly making sure we're really competitive on those lines. My experience, again, is price perception, value perception builds over time.
To the extent that we have changed our prices, I would not expect that actually that has now, say, a deflationary impact in our overall sales.
You mentioned price perception area. It takes a while to improve or recover. Why then? Certainly, the team, Mike, and the rest of the team had talked to over an extended period, price perception not having really declined. How do we square the circle there? If it has not declined and likely have been negative, why is?
I think it is fair to say that I think we have not really applied as a company customer insights to the best possible way. I think there are various pieces of research that indicate that our overall value perception is still solid. If you would zoom into FMCG, I think that is where we have slipped. Actually, you do not need a lot of research.
I think our store teams recognize that we were not sharp enough on certain items. I think it is very obvious to me that if you are with your closest competitor and your target is to be same price and in food, 65% of the lines are more expensive, even if it is only two or five pence, that builds up over time in terms of negative customer perception. That is what we have addressed.
Okay. Finally, just looking at the four elements, you sort of talk about price. As you just said, it is pennies in some cases you are investing. Range where you are slimming it. I appreciate your examples there of where it can increase sales, but as often, range increases can be a driver of revenue.
Not in a discount environment. Fine.
Availability, which had increased at times. I'm sort of interested as to what drives your confidence that those measures are going to get you from a sort of - 3 run rate to a + 3 run rate. It seems like an awful big swing.
I think run rate in the half or split. Clearly, soft training.
Sure. Longer term and current.
No, no. It's a good point. I think retail is about the total proposition. There's not really one silver bullet because if it was one silver bullet, would it be very easy to run shops? I think it's investing in price. As I said before, price is ongoing. Every single week, every single day, we check our prices and we correct and we adjust.
On range, that's the biggest, let's say, the biggest impact over time because I can tell you if you've got a really sharp range, it's really clear to shop. Value is really clear. You're able to merchandise your best lines in a confident way. You don't need one item extra from the basket to have a significant increase of sales. I think our promotions were enormously static. Actually, the first six days of all our stores actually didn't really drive incremental traffic. We are addressing that and getting better at it. Availability, if on your best-selling fast-moving consumer goods lines, the lines that actually customers buy most, you have such an enormous gap in products available. The combination of the four is my strong conviction we will bring down like-for-like, positive like-for-likes back.
You only need to say if every single customer picked up one extra line, you've already smashed that target massively. Clearly, it's a bit easy to say, but it's a combination of the four. If you would stand back, if we would be looking, if I would be looking at a business that had a massive transaction decline, we would have a very different problem. It is a basket decline. Our transactions have more or less held up. It's the basket where we've lost it, which means customers are still shopping with us. Customers are still coming back to B&M. They're just not buying the same level they did in the past.
Thanks. Good morning, Jonathan Pritchard at Peel. Just to lay the point on wage reduction.
I mean, to be honest, I was stunned myself when I saw that 13,000 was the starting point to get to 16,500 was way above what I thought it was. But have you got a number in mind for the ideal number of ranges in there? I know you're doing a lot of data analytics at the moment. And then just on the point on perception, how do you speed that up? How are you intending to communicate what you're doing? I mean that in store, obviously, but also out of store and marketing, etc.
Yeah. In terms of range counts, I think I quoted the number of 35% reduction in three pilots. I think that's a good starting point, which basically will bring us back to the level where we were about two, two and a half years ago.
I think it actually goes hand in hand, not just with active line reduction, but it's also a more disciplined end-of-season clearance, which we're strengthening as we speak. That will ultimately help reducing range also on our shop floor, which I think is the right thing to do. In terms of your other questions. In terms of communication of the product. In terms of communication, there are obvious ways how to communicate value to customers. I think we have a chance to actually do one very simple thing in a much better way. If you would walk into a B&M and if you would look at a shelf batch label, which is a bit larger, so we call it price barker, we would never, ever communicate the recommended retail price from manufacturer. We never communicate value. That's a fundamental way to communicate value to customers.
Nobody knows if Kellogg's is 219 with us or somewhere else. That is something we're going to implement, obviously, as well. We have always run a very lean model in terms of marketing and advertising, which I think is really solid. We have a very large social media fan base, which we're leveraging. I think the moment we have our range reduced, we will then strengthen our communication on the lines that matter most. We'll communicate much more the actual value, the saving that customers are making. That's really the way to drive value perception. I think we've been very restrained in doing so.
Thanks for morning. It's [Richard Jane Burner], RBC. Just got a question on, I guess, on-shelf availability and labor hours. Just my impression was certainly under the in recent years that there seems to have been a big drive to optimize sort of on-shelf availability.
I'm surprised it's so low on your analysis. I wondered if there's an opportunity actually to reduce labor hours because it feels like maybe availability in stock would still be pretty good, but maybe the shelves don't need to be 100% stocked all the time. I'm just wondering what your thoughts are on that or actually whether there's a need to go up to get that availability metric better.
There's a couple of elements in there which I think it's good to reflect on. I think we've always had good stock levels. If you look at our stock levels in terms of day stock on hand and working capital, I think we have significant stock in our business. As always with retail, you probably don't have then the right stock in your stores.
I think the process that was executed until, let's say, summer this year is a very, very strong focus on making sure that every single shelf is properly faced up, which means no gaps. It looks pretty. If I now go one level deeper, what actually happens is an item runs out, there's no stock in the back room, there's a shelf edge label with price on it, then you face over the adjacent item. Clearly, shelf edge label and item do not match. People remove the shelf edge label and throw it in the bin. If then there's a stock record issue with that item, so the item actually is zero stock, or there's in the system stock, but actually there's no stock in the store, it will not trigger a delivery from the DC.
The item will be lost and will not come back in our range. That is the consequence of facing up and making shelves look pretty. That is the reason why availability of the right lines is relatively low at B&M. The way to do this, of course, is, A, make sure your stock records are accurate. B, when there is a gap, leave the gap. It is what it is. Then make sure that the product comes back.
In terms of hours in stores, if you would look at the complexity that comes with increasing stock count, SKU count from 13,000 to 16,500, and if you would multiply that with the amount of products that you need then to order, that you have to keep in your warehouse, that you have to replenish on shelf, the amount of pick locations you have in the DC, I think there will be a flow-through effect from simplifying range into also simplifying store operations. That is why in the second phase of our plan, simplifying store operations is very much in scope, with the aim indeed to reduce hours of non-value add work, but to reinvest them in areas which matter most, which is customer service, which is checkouts, to make sure customers can go through the till as soon as they can, making sure our prices are correct. There is price integrity.
I think there are areas in B&M we can reinvest those hours.
Okay. Great. Thanks for the color. On the point about making the stores more appealing to customers to come in and maybe improve their basket sizes again, what are going to be the key drivers of that? I mean, you talked about price cuts. I think we were talking about just under 2% before, but presumably that is an average. I am presuming that is going to be much more in certain areas to have that impact on customer psych and perception. Is it going to be that along with promo signage, all of that stuff? What is actually going to make people feel they are slightly more appealing? Yeah. Yeah.
I think my experience is that there's always three areas if you want to improve the performance in the store and if you invest money in it. You refresh the store, you invest in picturing, and you make sure the walls are painted and the ceiling looks great and the floor is great and you've got a 10-hour system that works and checkouts work. You need to offer range because just updating a store and you don't change the range, you don't get a better outcome. That's why in tandem we're actually doing the work on clustering because that means you bring new categories to the store that customers hadn't seen before, and that drives incremental sales. The third one is you also invest in training for your store. You give them tools and technology to make their work do better.
If you do all three, you get the best possible outcome of a refresh. That is why we are building the plan as we are building it. You have to improve ranges or change ranges. You have to invest in store, let's say, hardware, and then you have to make sure your team is better eq uipped.
Perfect. Thanks. Good morning, Kate Calvert with Investec. Just two questions for me. As you start to tailor your formats more to this sort of six clusters, how do you see the space allocation changing between GM and FMCG?
We are very early days with that piece of work. What you see is that two of the six are town center clusters. There we see a significant share of FMCG, which is not really reflected in our layouts.
But also in some of the other clusters, we see certain customer groups not being served properly. There is, by cluster, very different space layouts and range layouts. That is what we are going to te st in the new year.
Okay. My second question is just, obviously, in your short-term strategy, it is very focused on what the customer sees. You have mentioned there is an opportunity in the operations. Are you happy with the way the supply chain works? Therefore, the operational bit is really about store labor hours.
It is a good question. I think if we look at the way B&M's supply chain is designed, it is very cost-efficient. We are picking in a very optimal way for the DC, and we are having a very high fill of our trucks. If you look at the amount of deliveries per week, I think it is super efficient.
I think we've really optimized our current supply chain. We're now commissioning Ellesmere Port, which basically centralizes the inflow of all of the Far East general merchandise containers to centralize in one way because depalletizing a container with Far East products is a very different skill set from, I would say, unloading a pallet of FMCG product from a British supplier. We are concentrating. That will actually give us more flexibility to better allocate stock, but also lower cost of depalletizing that general merchandise product. The reason John Parry takes over both is I think there's a chance to actually improve the focus on helping stores better in our logistics. To give you an example, currently, we pick in the best possible way for the DC, and our pallets come mixed.
That means at the store, it could be that in a pallet, there are items at the beginning of the store or in the back end of the store. At store level, you need to start dividing the pallets, and you need to regroup them. Most retailers would have already picked the pallets in line with the layout of the store. I think that is an opportunity for B&M to do so that you are helping the stores in a better way. If you look at standalone, I think our supply chain network is very efficient and very cost-effective.
A number of questions online, and thank you for those. Two first from Wayne Brown at Liberum, both on phase three objectives, one on private label, one on loyalty.
For Ched, in terms of private label, what's your thinking there in terms of the value proposition, and why is that a phase three consideration earlier given the current focus on the value proposition? Secondly, on loyalty, any early thoughts in terms of what B&M may be trying to achieve there in the context of thinking around customer segmentation and gathering data?
Yeah. I think private label is basically a catch-all for an entry price point for customers to find great value. If you would go back to the beginning of B&M, the origin of B&M was big brands, big savings, but there was no Aldi, there was no Lidl. Ultimately, people were used to buying the big brands, and there were some private label opportunities.
I think the two German discounters have completely reset value expectations in certain categories, and certain categories are just dominated by their price points. Take an example of Kellogg's Corn Flakes, where the 45 g Kellogg's packet is GBP 2.19 at us, B&M, and then everybody sells an 85-89p Aldi fighter in their stores. Even if we would reduce Corn Flakes product to GBP 1.75, it would still be double the price of the Aldi product. I think over time, I think there's an opportunity for us to look also at entry price. It doesn't necessarily need to be private label. It could also be a secondary or tertiary brand. It's more about the architecture of our range that we are basically providing choice for customers. That's what we're looking into.
In terms of loyalty, most retailers are, I think every single retailer I worked before, B&M had a loyalty offering, either a classic point system or a more gamified system with vouchers and spend stretches. I think ultimately, this is what you do with the data and what you do with optimizing the relationship with your customer. I think there's become an expectation, I think, with most customers now that there's an offering, and that's why we're seriously looking into it. You can do it in much smarter ways and much more cost-efficient ways than the old days of one pound, one point with points on the balance sheet and all that nice complexity that they used to have. That's no longer needed.
You can actually do it in a much smarter way where you help suppliers and help their sales marketing funds to reach our consumers and actually combine their investment in brands with our reach out to customers in, let's say, a more exciting way. A loyalty scheme would make sense. Again, we're looking into it. It's no decision. I think customers would expect probably over time B&M also to have such an offering. That's why it's on a roadmap to make a decision on that.
Just one other question online around cost and number, but let me summarize two for Mike. Firstly, how is the company mitigating those increases in statutory costs and other costs that you've indicated today? Secondly, other retailers are facing the same and taking decisions to pass those costs on. What's your approach?
I think the culture of B&M is about cost efficiency and about seeking to mitigate where possible. Ultimately, it's about finding ways in stores to reduce the number of hours being spent to carry out each of the tasks. I think Tjeerd's talked about some of the things we can explore in looking at the supply chain and retail operations integration. Actually, the actions that we're seeing come through in the first half are the ones that we planned in probably sort of 6 to 12 months ago as well in anticipation of these costs coming through. They would be things like improving the design of shelf-ready packaging, thinking about the ranges that we have and how we display the ranges in stores, thinking about the promotional churn and the in-store activities, and making sure that's all as efficient as possible.
I think all of those changes do add up to a large amount. I think Tjeerd's touched on the fact that there will be more opportunities in mind as we look at that integration between retail and supply chain. In terms of passing cost increases on to customers, ultimately, I think the message that I think we have been delivering as a business is that we recognize price is absolutely paramount for customers, and we are going to make sure that our price position is at the right point for customers. That is what we have been doing over the first six months of the year. Clearly, we do watch and we do track with data with Insight as to where those price points are at any moment in time. It is a daily, weekly, monthly process.
Yeah. Hi there. David Hughes from Shore Capital. A couple from me. Firstly, on the store rollout plan, obviously, the net new stores was kind of a fair bit lower than the gross stores. How would you expect that to play out in the second half? What's driving that? Is it store closures, or is it the case that it's relocations with the new stores? Secondly, on Heron Foods, I was wondering if you could give a bit more color on the strategy there, because obviously, it's slightly different from the rest of the business.
Yeah. As you look at the first half, I think what we saw in B&M U.K. was 14 reductions, which when you broke them down, there were seven closures, seven relocations.
The seven relocations we sort of touched on before is a new store, potentially sort of better location, larger store, better customer proposition coming through that we think looks attractive financially. That was driving part of that net number. Seven closures, which is all about the discipline about where we've got our capital employed in the business. I think as we look at the second half, we anticipate that there'll be fewer relocations and closures based on what we can see today. I think that does factor into our thinking. Fundamentally, we're not seeing any changes in the underlying trends, but these short-term periods can always be to a degree lumpy, as you see batches of trends coming through. I think the key point that we talk about is look at the health of the existing estate.
99% of stores plus delivering positive contribution margins. It is by having that discipline about the relocation program and about the closure program that means that we have both that health of the estate, but also that very attractive runway to get up to 1,200 stores in the U.K.
On Heron, clearly, their performance was not where it needs to be. They have actually launched a very similar plan to B&M U.K. They probably were a bit ahead of B&M U.K. They actually have started to review their categories as well. They are applying a very rigorous process of review and category, looking where the range gaps are, and then basically updating the range. They have done this now for a number of core categories: chilled, sweets, health and beauty, soft drinks. Actually, we have seen every category they have touched, we saw the core performance improve.
They have also started to apply the same pricing insight as B&M U.K. with the line pricing. They have launched an updated pricing for their business. The reason I'm saying they're a bit ahead of us is because that business is a bit smaller and that they could easier, I think, get to a state where they actually feel that they've got sufficient ranges improved and also their prices adapted. They have combined it with an in-store campaign on communicating better value. The other element that Heron used to be very strong at was the, "When it's gone, it's gone." Basically, mainly in fresh food and frozen. They've lost a bit of that strength, and they're now bringing it back. They're dedicated to buyers and the team who are full-time working on getting the best deals for Heron. That's working well.
I would say it's early days, but I think the Heron team are doing all the right things, and we see some initial green shoots, but it's still early days.
Morning, Warwick Okines from BNP Paribas. Two questions, please. The first is that you talked to the point that the transactions are not a problem. It's the average basket size and that people are putting fewer items in the basket. Is that much more skewed towards FMCG, or have you also lost items per basket in GM?
It's mainly in ASP, actually. It's predominantly an ASP underperformance in GM, where basically still from a volume perspective, it's okay, but from an ASP perspective, you would like to see it in a different way. It's a slight indeed for volume development in FMCG. It's a combination of the two.
Got it. Thank you. Secondly, on gross margins, the first half trading gross margin was down quite sharply. Can you talk about the puts and takes for the second half and where that should be landing for H2?
Yeah. I mean, I think you need to look across both sides of the business in B&M U.K. If we look at general merchandise, I think firstly, we've seen the gross margins lower for a period of time, and clearly, we're starting to comp against those as we go through the second half of this year. We've also taken actions to make sure we've got our margins in the right place. On the FMCG side, we talked about the fact that in the latter part of the first half, we took price action on the KBI lines.
Of course, that is going to feed through into the second half of the year. Ultimately, what also affects the overall picture is the mix between the two sides of the business as well. I think it'll be important to see and understand how that trend develops across the balance of the year before we sort of guide on margins. As you know, Warwick, we do not typically guide on overall margins. I think the final thing I'd say, in terms of the overall trends, is we do see some tailwinds from favorable FX rates. If anything, freight rates are moving slightly in the business's favor. It is small, but it is all beneficial.
FX in the first half of the year, as we touched on before, was a drag that we know mathematically will reverse in the early part of the second half as well. I think there are a few tailwinds coming through. Again, there is that annualization on FMCG that does provide a degree of the balance to that picture.
If I may add some color. If you would look at margins, the way we report margin, of course, is one number. Actually, there are three elements underlying, and I think all three are important to call out because that's really our focus. One is the bottom margin or full price margin, which basically is the number that our buyers negotiate with our suppliers. That's actually the starting point of our way of working.
There are two discretionary elements, which are promotions, where you basically offer more value for customers, a 2, 4, 3, 4. Clearly, you have discretion to amplify that or to reduce that. The third element is clearance. How effective were you in buying, setting your range plan, committing to volumes? What was your sell-through? Clearly, if you do a good job, the clearance element is a small number. If you have not done a good job, it is a bigger number. I believe we can actually improve in all three elements because I think there are opportunities to be more efficient in all three. I think margin management is probably a bit more comprehensive going forward than the way it was managed in the past.
Thank you. Morning. It is Mandy Tso from Citi. I had one more question on the SKU range. If I remember correctly, before you said some time ago, you said that because people had been buying sort of the cheaper product, you wanted to introduce sort of good, better, best optionality in the range. Is that what led to the inflation in SKUs, or is it something completely different?
I think what you're referring to, but I wasn't there, but I think that was the general merchandise home ranges mainly, where we introduced a Simply range, which was the lower price point, but it's mainly in general merchandise. That was indeed in addition to the existing range. If you look at the performance of general merchandise, actually, that's still performing solidly. The range proliferation and the undermining of our value is mainly in FMCG, where the issue is.
I think that said, I think if you look at our general merchandise ranges, I think there's an opportunity to really implement good, better, best across the estates. I think we're quite good in good, quite good in better. I think if you look at the tiering, I think there's chances to do also in GM a more solid job there. That is why we have actually said that the implementation of the range improvements is not just 12 months, it is 18 months, because it takes about 18 months to do all the buying cycles in general merchandise, including all the seasonal ones.
That is also in scope. Just one more. When you talk about customer insights, what kind of insights do you have at the moment? Presumably, it will take some time to build up a database. Do you know how far people are traveling in from, what ages they are, etc.?
Yeah. We are using—please feel free to answer on mic—we're using a third-party data provider who is specialized in real estate and location strategies. They have a large database of customer demographics in terms of age, backgrounds, type of role, income. Clearly, we also have all the information on the local competition that basically is informing us to where opportunities are. I think what we've added now with the latest update of our third-party data is the banking data of those customers, because you would normally, traditionally, if you would plan a store, you would more or less have just a simple mathematical range in terms of driving time from stores. Actually, when there's a motorway or a channel or a railroad track, the actual catchment is very different.
With those credit card data, with hotspots, you can actually zone in on where the true catchment is. It actually informs you that there might be a store location available, which on the map appears to be quite close to the other store, but effectively, there is a completely separate catchment. I think that is what we actually shared today. That extra level of insight, we are now applying to new store locations.
I think what I could build on Tjeerd's points there, I mean, I think it is not just about the data that you have within the business. It is also about what you are doing to tailor your response to the data that you have, ultimately. If you looked at the way that we would normally operate, it would sort of be a single format across the estate.
We'd be looking at sort of a buyer-led range proposition based on what they saw selling rather than tailoring it to customer groups and so on. I think really what we're talking about here today is the Back to B&M Basics plan, having a degree more tailoring for customer groups based on the insight being provided. There is good data out there already within the business, as Tjeerd said, on the real estate side. Also, we do have credit card data. We do have detailed transaction data within our own systems that we keep. Ultimately, you are able to sort of see quite detailed insight based on the questions you want to ask and the decisions you want to make based on that data. There is plenty to be done.
That's a good point, actually. If you do a range rationalization program like we're doing, one of the key risks that you face is you take out a wrong item where customers are quite loyal to. If you don't have a loyalty card, you actually can't see how customers actually shop. Ultimately, what you're able to do is you don't know who the customer is, but you could link the credit or debit card to the basket. If you assume people are using that card consistently, which most people do, you still see a pattern. You can see in the basket over time if they've actually shopped multiple brands of the same category. You can actually see if there's a high level of substitution available. That insight we're now using to design the best range.
Even in the absence of a loyalty scheme, you can actually get good, meaningful customer insights. And we're now actually applying it for selecting the items that will actually leave our range. Good. I think we've spent quite a while together, and I think we're very, very lively amount of questions. So looking at the hour, I would like to propose to conclude. Again, this was my first scheduled announcement at B&M, and I do hope that it mainly remains a scheduled announcement. But clearly, I've got a little crystal ball. We are getting back on track at B&M. Golden Quarter is still there out for us. And I would like to ask all of you, as clearly followers of B&M, please also visit our stores and look at our beautiful Christmas ranges.
If you still have some money left after the budget announcement, please spend some at B&M. Thank you very much. Thank you.