Good morning, everyone, and welcome to the JD interim results. I do feel slightly overdressed here this morning. I must remember to give a call and work out what the dress code is next time, but, well, it's been an incredibly busy first half, and I have to tell you that the pace at JD is quite extraordinary. As chairman, of course, I stand above this, and sort of my pace is a bit less, but it's interesting to see. We've continued to make really great progress, and the plans that were outlined at the Capital Markets Day. It is hard to think that the Capital Markets Day was only in February this year, and the pace that we've been going at since is extraordinary.
We've continued to build the infrastructure within the business, and the foundations have been further strengthened, I think. Régis has continued to build out his top team with a new CFO, new CTO, we've got a new group legal counsel. The governance program we've got in place has been forging ahead. Pete might be able to talk to you a little about that. He's been very central to that. We've added three new NEDs to the board to add some deep PLC experience to a very good board. We've continued with things like disposing of the fashion brands. We've announced our plan to acquire the minority interests in Iberia, Germany and Central Europe. You know, subject to competition clearance, we've announced the acquisition of Courir in France.
So, I mean, in terms of things we've got on the tick list for the last six months, it's certainly been a very, very busy time, and I commend the management for their incredible efforts. I think we've also watched with interest how the stock has been buffeted a bit by results at other retailers. You know, we've seen the concerns that have come from the performance of people like Foot Locker and DICK'S and so on in the U.S. I kind of remember this at Tesco and where JS results always used to sort of have an impact on Tesco. Yet over time, the Tesco business became double the size of Sainsbury's here in the U.K. alone, let alone all the other things we were doing with international.
While certain market conditions affect everyone, we were also on our own path in a way. You know, we were also shaping our own destiny. I hope over time, that JD will start to be seen in that way, you know, as the sheer number of opportunities we're pursuing, the growth aspirations we laid down in that Capital Markets Day become more tangible. You know, we are in and of the market, of course, but we're also on our own path, and that's important, I think, to remember. Anyway, I'll hand over to Régis now, who will take you through the numbers. I do want to thank him, and thank you, Régis, and the team for the extraordinary efforts in this first half. I'll let him take you through now some of the numbers that underpin that.
Yes. Thank you very much, Andy, and thank you for your kind word. Can you hear me? Is it okay?
Yeah.
Good morning to everyone here in the room and for the one who are watching us on the webcast, and thank you for attending our interim results presentation today. Today, I will do a double act. I will do the financial and the strategy update. Dominic is joining us on the fourth of October, so not long time, but he's joining us on the fourth of October, taking over from Neil. Despite Andy, I've been a CFO not long time ago, two or three years ago, no?
And me the same, I've been a CFO too, but we feel more comfortable to have Pete Fox with us, to answer your tricky and picky question at the end of the presentation. So let's go to the presentation and share with you the numbers. So in the first half, I think you have seen that we have delivered on our strategy, and our triple-double objective. As you remember, we say double-digit growth. We are delivering 12% organic growth. Double-digit market share. We are gaining share in every market we operate, including UK, which is our more mature market, and double-digit profit, and, as you have seen, we are on track to deliver more than GBP 1 billion profit for the full year, in line with our guidance.
We have done particularly well in North America, and we had over scrutiny around North America, but we have done particularly well. I think the numbers is telling. Premium organic sales has been growing by 15%, and our profit grew by 12%, which I think it's a, it's a first-class performance. As we said, during, as we said, we are delivering the full-year profit before tax and adjusted item guidance of 35% in the first half of the GBP 1 billion 40 that we want to deliver so for the full year.
This is down GBP 10 million compared to last year, but as you remember, we are going back to the normal first half, second half split. Last year, the first half, our margin rate was, was artificially high because of the fact that we had no clearance and no stock in the market at the end of the quarter. We are on track to deliver more than—to open more than 200 store, new JD store worldwide, in line with our plan. We opened 83 stores in the first half. Finally, we have a strong balance sheet. We have a strong cash position with $1.3 billion of net cash on our balance sheet, will give us the ability to increase our dividend, to go, to go back to the cover that we have before the pandemic.
So the next slide give you a more detailed understanding of our growth by region. So this is our total business growth. So you can see that, and you have, you know, the total growth, 8%.... this includes the divestment that we have done at the end of last year, which, we have a very small exchange rate impact, which means that the, the, we're going from 8% to 7%. And in terms of constant currency, you have a 12% organic growth. So the difference between organic growth and like-for-like is a new space that we add in the market, relocation and store expansion. This is 4% for the first half. This will increase in second half, because we open a lot of store in the first half and even more store in the second half.
As you can see, from both like-for-like and organic perspective, the sales growth have been good in all region. If you look at APAC, it is leading the way with a 24% growth in term of organic, 15% in term of like-for-like, followed by Europe. Europe, we already a big business, and this business is growing very fast with a double double. 19% growth in term of organic, 12% in term of like-for-like. North America, plus f- almost the same as Europe, plus 14% organic, plus 8% like-for-like. In U.K., which this is, this is our total U.K., as you have se- as you will see in for JD, we do better than that, but it's a plus 5% and plus 4% like-for-like.
If you go to our P&L, and I think we can look at our P&L in more details. Revenue line, GBP 4.8 billion for the first half. Just to echo what Andy was saying, GBP 4.8 billion, this is more than our total year 2018 turnover. It's not long time ago. That was five years ago. That was our full year turnover. This is now our first half turnover. Give you a magnitude of the growth that we have delivered and what we are going to deliver for the future. Margin, 48%. Last year was 48.5%.
I think if we want to compare like-for-like, we should say 48.8%, because there is a 330 basis points, which is linked to the fact that we reclass the delivery income part of revenue versus part of netting the cost. So there is 88.0 point below last year, which is completely in line with our expectation and the fact that last year we had no clearance at the end. We had no stock, especially in the U.S.. So we are very comfortable for 48%. A 48% is 1.5 point, 1 point more than pre-pandemic level of margin for the first half. And if you look at our history, we always have a better margin in second half than first half. That has been consistent through the years, except during the pandemic one. So that's, that's for the margin.
We have, in this margin, an increased shrinkage, because that has been one of the questions asked, but this is really very small for us. We see an increase, but from a very low base. As you will see in our store, the stock, which is the most valuable stock, which is around footwear, is not on the sales floor. The ability for the consumer to walk away with a pair of sneakers, they can have one shoe, which is a demo shoe, but it's not going to impact us very, very much. It doesn't look cool when you wear it. We have less issue around that. The increased shrinkage is 6 basis points of margin in the first half, which is not really significant.
In terms of our cost, up 10%, which, and that is 8.5% if you take like-for-like, if you take into account the reclassification of the delivery cost. That reflect the investment that Andy was mentioning. We have invest a lot, in the first half, and, invest in our people first. As you know, in October last year, we decided to increase the sales assistant salary almost by 30%, by removing the under age policy. That is GBP 45 million investment in total for our staff, for our staff. That is, reflecting in our, in our P&L. Second investment has been around acquisition, you know, the cost of doing the acquisition, of Courir, Conbipel, Gap, that is around a, a, a GBP 10 million deal, for the first half of one-off that we have in our P&L.
We have a successful effort to improve governance and strategy, which we have, of course, some cost around that, and infrastructure and IT. We are dual running of DCs, so we still have... And that is really protecting us from a big bang. So in UK, as you know, we have opened Derby, which is our new warehouse, completely automated for e-com, but that is still doing in Kingsway. We still have doing both in parallel, so we have the two costs. Same in Europe, we have Heerlen, which is our warehouse in the Netherlands. We are starting to implement all the automation and all the stuff. At the same moment, we are not using it, so we don't get the benefit, so we have the double running cost of that, and that is significant for the first half.
On system, we have done a lot of investment, around GBP 10 million, around security, because we had. We wanted to make sure that we have the right level of security, so that's a GBP 10 million investment in cybersecurity. We have the cost of our new HR platform program and a new digital program. So all that has been done at the same time that we have developed the business. If we look at PBT, I think that you see that it's down by GBP 10 million. At the same moment, if you look at PBT before tax and the. It's +26%, reflecting the fact that we have less than negligible impact of adjusted item for the year. And you can see the dividend per share. So this is a big test for pronunciation for a French guy.
So we move from 13 to 30, hopefully not the other way. But, that's, that's, Pete trying to have this test for my pronunciation skills, so thank you for that... trying to pass it. If you look in more details, and this is our premium sport fashion business, which is driving revenue growth. So this is the way we segment our activity. As you will see, premium sport fashion, which is mainly JD, represents 75% of our turnover, 85% of our profit, and all the growth in the first half. This is where we are investing, this is where we are focusing, and this is where the growth is coming and the profit is coming. You can see we are not far away from a double-digit profit.
It's down year on year, reflecting the investment that we have done in terms of our costs, and at the same moment, the gross margin reduction. In other retail fascias, we see some organic growth, but total growth is down because of the divestment of non-core business that we have done at the end of last year. Other business, you can see that the same, that include our gym business, which is doing very well. It's still going down in terms of sales because of the divestment, but at the same moment, profitability is going up, thanks to the gym business. Our outdoor business has been flat in terms of sales, reflecting a growth in terms of store sales and a decrease in terms of online sales.
In the period, we have some small one-off costs that have been taken, which means that we are a little bit below last year, but should be okay for the full year. Now, if we focus on the premium revenue growth in all regions, which is the one that is the most important for us and which we focus. So what you can see is that all regions are growing and are growing at a pace. And you can see the difference between the different regions. The same, U.K. is doing well, and I think that for a mature country, we are delivering 8% growth and 5% like-for-like.
You see Europe, in terms of EBIT, this reflects the investment that we have done because all the investment in infrastructure is through the U.K. P&L, because the PLC is in U.K.. That reflects the EBIT that is going down a little bit. Europe has been growing at 28%, 27% organic growth and 15% like-for-like. North America +15%, 9% like-for-like, and APAC 26% +15%. So you see a very nice picture for our growth, and you see the opening of new store in the region. In terms of cash, and you see the comparison between last year first half, so this is first half, first half comparison. We generate around GBP 200 million cash from the activity, up from GBP 67 million last year.
Our net cash strengthened by almost GBP 300 million, from GBP 1 billion last year to GBP 1.3 billion this year. And on CapEx, you see that we are increasing our CapEx, and I will go in more details around our CapEx expenditure for the first half. So this is our first half expenditure of CapEx for the last three years. So you see the increase of CapEx, mainly around store and infrastructure. But store has been taking 50% of our investment, which is in line with our guidance we give you during the CMD. So that's 50% of the, of our, of the CapEx going through store. A third is going through supply chain with mainly Europe, which is the airline project, and North America, which is a warehouse that we are building on the West Coast.
And systems and others is the investment on cybersecurity and the investment in terms of our HR platform. So that was a quick run through our financials. There is an Appendix 2, which will be on the website by now, and which has a number of detailed financial slides to help you with the model. Now, before we move to the strategy updates, there is a short video I wanted to share with you.
Walk anywhere, eyes them lock on my fresh sneakers straight to the south park. Pretty girl them smell, make a long get weak when I give me loose chalk. Any boy try to take my style right now, better bring it right back. Got me look good in anything from the latest fashion or toolbox from a thrift shop. You hear that? Become a style so different. You see my style so different. Yo, watch how my style so different. Anywhere me go, yo, I'm just straight killing it. Become a style so different. You see my style so different. Yo, watch how my style so different. Anywhere me go, yo, I'm just straight killing it! Anywhere me go, anywhere me go, killing it. Killing it. Anywhere me go, anywhere me go. Money on my mind, all I hear is ching, ching, ching. Some boy can't afford one chicken wing.
Roll the top class girl, no basic thing. Confidence in myself from the words we sing. Yo, become a style that's properly, 'cause I'm a compliment, the physical anatomy. When you see me on the street every day looking fresh, well, I swear that the thing is a strategy. But it's just my style so different. You see my style so different. Yo, watch how my style is so different. Anywhere me go, yo, I'm just straight killing it. Become a style so different. You see my style so different. Yo, watch how my style so different. Anywhere me go, yo, I'm just straight killing it! Anywhere me go, yo, I'm just straight killing it.
... do a better job than I do, but, let's try to compete with the video. So the strategy as we cover in February of this year is to be, and we are the leading global sport fashion powerhouse and retailer in the world. And with four pillar: JD brand first, JD complementary concept, JD beyond physical retail, and JD best for people, partner, and community. So we had this ambitious program to open more than 200 store, and we are delivering on it. So we will open more than 100 store in the US, more than 100 store in Europe, and 25 store across the rest of the world. And in US, we are opening in some of the best mall in the US.
We have now opened in Aventura Mall, which is the number three mall in the U.S. by traffic, in American Dream in New Jersey, which is the number two mall in terms of traffic. That has been part of the opening that we had. In Europe, a big push in Italy, thanks to the Conbipel acquisition. We opened 21 stores, and we continue to look at acquiring those fashion stores from distressed retailers in order to accelerate our expansion in Europe and access to locations near the fashion retailers, like we have done with Gap stores in France, that we will open at the beginning of next year. In the rest of the world, we are continuing our successful store expansion in Australia, New Zealand, and Southeast Asia. We will see some pictures of Australia.
You know, our model is a winning one, and, you know, the overall return remain unchanged. We are all the project that we approve are below 3 years payback. It's around on average 2 years. And, at the same times, if I look at the first half, we are delivering 30% more than the sales that we have in our result. So we are continue to have the same discipline and accelerating the, our development. If I look at some of the store we open, we don't forget our home country, UK. We open our 400th store in Derby. It's our 100th store in a retail park that was opened in July. We have opened, as I said before, in Aventura Mall in Miami.
Pitt Street has been our biggest opening ever in terms of sales for the first year, for the first day. Colombo, Lisbon, we opened for the first time a big store in Portugal. Colombo is the number one mall, and Colombo is part of our top 10 store in Europe, including the U.K., as we speak. Great success. You can see that look and feel and the quality of the execution, it looks the same. There is a little bit of localization in terms of some product, but it looks the same.
I think we show up the same way, we deliver the same quality all across the world, and that, I think, part of our success and the ability really to understand global trend and to deliver that to the consumer in a consistent way. In terms of brand first, as mentioned by Andy, we have done the acquisition of the minority shareholders that we had in Europe. So we are now in a position to simplify the group and to make it, and to be more relevant to our strategy to put JD first with in Iberia and Netherlands, with the acquisition of ISRG, the acquisition of the remaining 40% in MIG in Eastern Europe, and the acquisition of minority interest in Malaysia, Thailand, and Singapore that give us most flexibility to accelerate in Thailand.
We are open, we have signed our first franchise agreement with GMG for the Middle East. As we said during the CMD, we are looking at an asset-light model to develop in Africa, Middle East, and Southeast Asia. We are very close to agreement in South Africa and some part of Southeast Asia that we will, I think, update you as we speak. We are on track to open more than 200 stores across the globe, and we conquer a new market with a no asset, or asset-light model with franchise in the rest.
JD complementary concept, as we said during the CMD, we made this commitment to rationalize and focus our portfolio, and I think we are well on the way around that, and at the same moment, to continue to develop concept that we can leverage across the globe, that we can use our infrastructure and that can be complementary to JD. So the first one has been the acquisition of Courir to really respond to this customer, to this female customer. This female market is underserved in our industry, and we believe that with Courir, we have the right offer and the right concept to respond to her.
And that will give us the ability to leverage across the world with size?, that we have, the brand that we have in Eastern Europe and with Finish Line Macy's in the U.S. So we have the infrastructure to leverage and to make it a more global brand. So where we are in the process, we had the approval from the work council. We are in the pre-notification phase with the European Commission. We are actively answering, cooperating with them to answer the question around market definition, and we believe that this should be a phase one filing, and we'll update you as and when appropriate, but it's likely to be beginning of next year, end of this year at best.
We had a strong performance of our complementary brand in North America, DTLR on the east part, Shoe Palace on the west part. They've done a great performance. They contribute to our strong US performance. So we are winning with JD, but we are winning not only with JD, we are winning with JD and DTLR and Shoe Palace, and we see the potential of this community brand in the US and the potential to consolidate this proposition across the US. So we are looking at the synergies, the ability to consolidate and to deliver a strong proposition around this community brand, and that is in line with JD development. We have rationalized our Pinnacle offer. You know, we have this very important for JD to have this offer with size? and Footpatrol that give us the ability to understand the trend.
So Footpatrol and size? are trading very well. We merge all the street brand around JD, and that is doing well. And we continue the divestment in the first half with some of the small business that we are going out of. Beyond physical retail, I think it's about three things: the infrastructure in term of supply chain, the IT, and the loyalty. How we communicate, how we create an ecosystem for our customer. First things, our loyalty program, we commit to do that at the CMD. It's live in Manchester. I'm really happy that we are live in Manchester, so we have 10 stores on the trial. So this is going well. So this trial will end in October, where we will, if everything goes well, we will be live for the UK.
I think the trial has been really great for us to understand how we create this, you know, really this ecosystem. This is super app for the young adult. And that's really the vision we have, is to really use the power of attractions that we have to propose a more lifestyle experience to our customer. But the first step is to build this loyalty app, which is done, to reward the customer with a very simple and competing proposition, which is a 1% cashback, and to grow from that, the Customer Lifetime Value, to increase our Share of Wallet and to deepen our customer relationship via partnership. So we are really happy about the first element of engagement with the consumer.
I think we see, in fact, an uptake, which is higher than the one we were forecasting, and we're looking forward to roll out in the UK later in this quarter, and in Europe next year. Investment in our technology, as I mentioned, the first thing was to put the house in order, and the first priority was our cyber improvement program, to make sure that we have done the first phase, which is to really look at and go after our immediate weakness in our security architecture and reinforce our first line of defense. So that has been done. We have to spend a lot of money, as I said before, to do that. We are now in the second phase, which is to become that as business as usual.
We have a new CISO, which will start in October, a great person that will be able to go to the next phase, which is around being best of class in term of security. We continue to explore omni-channel. We relaunch Click and Collect. We are doing a test in France as we speak, to make sure that we have this offer for our customer as we have been developing our online presence more as a pure player than as an omni-channel experience. At the same time, we are re-platforming our e-commerce. We sign with commercetools for Europe, so we will have the same solution for US and Europe. Two instance, but the same solution. We are at 50% completion in US of the re-platforming with commercetools, and we start the journey in Europe.
That, at the same moment, is not a big bang, is, we are taking some bricks out of what we do currently to replace it with commercetools, which is a better tool for, for the future. Supply chain expansion, we have a clear vision where we want to be. One warehouse for UK because of Brexit. You know, our, all our supply chain was based from UK in the past and that no more is the case. It create more cost and, and more complexity today. So we will have one warehouse in UK for B2B and one warehouse for D2C, B2C, with Derby, which is, running. We are at 20% facility. We moved to 24 hours a day and 7 days a week, two weeks ago, and we are ramping up, and, doing well.
I think that we have the double running cost for the time being between Kingsway and Derby. For Europe, Heerlen is our future facility. The same, we already have a facility in Netherlands that is not big enough in order to handle the volume, but we are still running that. For the moment, we are doing partly from this facility and partly from Kingsway for Europe. Tomorrow, Heerlen. To Heerlen, we are just... as we speak, we are finalizing the equipment. We will have the first order delivered to Heerlen in October, in December, and after that, we will start to ramp up. The same, it is not a big bang. We still have Kingsway and the other facility that is able to cover the need if we need.
So that means that we prefer to have the double cost than to have the risk of a big bang. So that's a part of the European P&L, and that is a major driver of the future profitability of Europe. And we have in U.S., Morgan Hill, which is on the West Coast. For the moment, our supply chain is East Coast driven, with Indianapolis being the major warehouse that we are using. Having a West Coast warehouse would give us the ability to stop to do something which is stupid, that the goods is arriving in L.A., go to Indianapolis and go back to the West Coast, which doesn't really make sense. It creates cost, but that's the same. We are looking at 2025 to be full capacity with Morgan Hill.
That is for physic, for our investment in technology. In terms of our people, partner, and community, the first thing is that our commitment to our people, yes, we have invested a lot, and you have seen that in the PNL for the U.K. We see the cost of increasing the sale of our sales associate, but I think it was a worth investment. Our turnover is down 50%, divided by two, thanks to that. We have done the right things for our people, and I think the right thing for the society by investing GBP 45 million. This will annualize in October this year. We have a new CFO, as mentioned by Andy. We have now a global leadership team that is full.
Full is not sure it's the right word, but all positions are there with a new CFO, which is Dominic Platt, that will join on fourth of October, a new CTO that will join us mid-October, too. We are building a new HR global platform that give us the ability to more leverage our people across the world. I went too fast. Best for partner, I believe, I strongly believe that we are Nike number one partner in the world. So that's new because it was not the case one year ago. So we are the key global partner for Nike in their development. We are the larger global partner for Adidas, for Originals and for the Terrace, and that is give us a big competitive advantage on the market.
We are developing partnership with a fast-growing brand, which is On, ASICS, New Balance, HOKA in Europe, will be the first one. You will see that HOKA be in ten of our store in the U.K. already. Commitment to our community. We invest in our community. The biggest investment we are doing is to give job to our people. Our people are the same as our customer, and I think that they recognize that, and they're... That create a f- the, the attraction for the concept and for, for us. We have a, y- we are, we have a foundation that is part, that is, really about changing life of the young people, giving them opportunity to do the best that they can do in life, and that is where, where we, we are investing. We improve our sustainability.
I think we continue to be committed to our sustainability agenda. We believe in it. We believe long term. We are A-minus for the climate change organization, which is several points ahead of all our retailers in that, and we have made a huge investment in terms of solar panels. All our energy comes from renewable sources in Europe and in the U.K. Just to come back to the beginning, I think that we have... It's a very solid and very good first half. Double-digit growth, double-digit market share, double-digit profit. I think we can see doing well on all the key elements of that. We're investing a lot of money, and I think that we feel proud of that, building the infrastructure for the future.
We continue to see the U.S. as a key market for us and doing well in the U.S., despite everything that has been said. I wouldn't do no more on the U.S. now. What you think? So let's go to the Q&A. So Pete Fox will be here if you have some very precise question. But we are recording this, and there are mics in the room, so please, yeah, please do that to get the mic, and we'll be happy to to answer your question. Yes, and I will stop to talk.
Thank you. Morning, Richard Chamberlain, RBC. Maybe I can just kick off with a couple of questions. You, Régis, you spoke about the dual running costs going on in the U.K. and so on, and then presumably overlapping into Europe. Can you sort of quantify how much those are and when we'd expect those to ease off? The second one is outdoor. I know it's a much smaller business, but, you know, how core is that to JD these days? Is there still significant synergy? I know it's obviously brought North Face and so on in the past, but is there significant synergy now between outdoor and premium sports fashion? Should we think of outdoors as sort of non-core for JD? Thanks.
Yeah. So I think outdoor is part of, as you say, it does create a lot of value for us in term of getting some outdoor brand, and I think that is part of what we have. And it's not strategic, but it's not out of scope. So I think that for us, it's something that we continue to develop. We can see that some some things we can do better in term of rationalizing our portfolio of brands, and I think that we are looking at that and expanding our offer for the consumer. So we are really, we think it's a good business, and, and it's a business we want to be in, and... But that's, that's where we are.
In terms of one-off, it's always complicated to say what is recurring and not recurring, but I would say if you take the first half, there is GBP 40 million of cost, which are some recurring, some not, and some one-off, some not. So that's the magnitude of what it is. To give a precise timing, it's not possible. What we don't want is to take the risk. So I think that what you need to understand is that you have the risk to go quick and to say, "I close the warehouse, I build a new one." That's not what we're doing. We are too big to do that, and we don't believe it's the right things to do.
So we prefer to get GBP 10 million, GBP 15 million more cost for 6 months or 12 months and having the security of doing that in a proper manner. That's the type of magnitude. But I think that the biggest one is a cost benefit of having a warehouse in Europe, which will make the profitability of Europe much more in line with the US one, compared to what it is today. And today, it's quite far away, and I think that it impact even negatively because we have a lot of opening the Compiègne one, which is a lot of pre-opening costs, because we pay the rent for the Gap store and the Compiègne store for nothing, no activity. So that will improve a lot, Europe.
European profitability should be in line with the US one. There is no reason, perhaps 1 or 2 point difference because of staff cost, but there is no reason why Europe lag behind like it is today.
Hi there, David Bardin from Bank of America. Just a couple of questions from my side. It's been about a year since you launched the Digital Connect partnership with Nike. Could you perhaps just give us your observations on how this has helped the business? Secondly, just going back to the non-core business disposals, could you tell us, give us an update as to what value of businesses have been disposed already, and how much more is there potentially to come? Thank you.
On the non-core, Pete is a specialist of non-core.
Yeah. So, I mean, clearly not a significant part of the group. But, roughly about GBP 450 million of turnover, that's come out year on year as a result of divested businesses. There are still some businesses that will be divested. And, you'll see those in our interim statement as held for sale. But again, in the scheme of the overall group, kind of not huge.
Concerning Connected, I think the major benefit of Connected for us is to work more closely with Nike in terms of system, putting the system together, understand how we can leverage value together, how we can understand customers. So it has been a great journey, working with Nike, really putting the two companies in a very close relationship and sharing a lot of information and way of looking at things. So that's been really the big benefit for the time being. This will accelerate with the loyalty program because that will give us another tool to understand what's happening in store. For the moment, we only have the ability to understand what's happening online. Tomorrow, with the loyalty program, we will have the ability to understand what's happening in store.
So great journey. It's a fantastic partnership. I think that we have a... You know, we learn to work together and to work in a very nice way and in a very profitable way for both companies.
Thank you. Morning, Kate Calvert from Investec. Question on Shoe Palace and DTLR. Could you give some more color around the main drivers of performance? 'Cause I would have thought that their demographics might be slightly more impacted by the economy. And then the second question is on your 200+ store openings. Could you say how many of those are gonna be conversions from Finish Line? And are there gonna be any franchise openings, do you think you might get one of those in before the end of the year?
Yeah. Conversion, I don't have in the top of mind.
About 60 out of the, of the 100-
Of the U.S., yes.
We'd expect to be conversions.
No franchise in it. DTLR, Shoe Palace, I think that's, you know, what is driving that is really benefiting from, you know, the synergy with the group. And I think that, you know, if you look at Shoe Palace, most of the... A significant part of the growth come from the conversion, and we have implement, you know, our NL device, the way we process with the consumer. We, we share this, the, the information. They, they were very Nike-dependent. They are now getting a better share of New Balance of On. So I think that they, they are by working with us, and, and this is where we believe that there is opportunity in complementary brand.
We are leveraging what they are, which are a great retailer, great understanding of their customer base, and we give them some process that we have, which are really, you know, we are monitoring the time it takes for you to get the shoes when you are in front of the display and you say: "I want these shoes." We are monitoring that, and we are putting a lot of process behind the scene in order to get these shoes the quickest as possible. And that's something which makes a big difference in conversion rate. It's something as simple as that, but sometimes retail is simple, and when you start to complexify, you start to lose your way. And that's one of the thing.
We give the NL technology to them for the assessment, to say: "Oh, I don't have this pair, but I have this pair. I have this pair in other store." We have seen an increased conversion in both case. I think that, plus, they are working together. You know, DTLR is a great retailer in term of apparel, less so in term of shoe, footwear, and the opposite for Shoe Palace. I think it's really the benefit of, you know, working in environment where they get the trend, and trend not only in the U.S., so they get a little bit larger view around the world. I think that it's helping them to see what's happening, and better process and more synergy between the two, the two brands.
Hi there, Jonathan Pritchard at Peel Hunt. Two, if I may. On apparel in the States, I think it's now in the 20s as part of the mix. How do you sort of kick on again from there to get towards the sort of Europe straight U.K. level? I know that obviously with badge flips, that will increase the percentage, but how do you continue to move that apparel percentage forward? Secondly, how many discussions or how top of mind have share buybacks been?
Okay. Share buyback, I think it's not top of mind, and I think it's something that we will ask Dominic to review when he joins, with a strategy around what we do with our cash. I think that is definitely the last thing on the list. I think the first, we always say, is about investment in our stores, second is about acquisition, and after that, if we have time, we will do something around dividend and share buyback. I think that there is no program, and there is no discussion around that for the time being. I made a mistake last time, so I will not make it again, to start to discuss about that, and you start to be very excited.
So I will not make it again. After that, the board will be cross with me, so I will not do it again. On the first one, on the apparel, you're right, we are increasing. Still far away from where we want to be. I think that, as you mentioned, it's 50% of our mix in UK, 40% in Europe, and it's 25% in the US. And I think we're partly, you're right, is a batch fleet, and partly is having better product and better range. I think it's building our expertise. We have someone as the lead buyer from apparel in UK, moved to Indianapolis to continue to share our expertise, to share our knowledge, our way of doing things. So it's about learning.
You know, it's a learning curve, and we didn't get... In UK, we start 100% footwear, and we are now 50/50, so it's just a question of time. The good thing is that by having the expertise across the world, you know, in Australia we are 50/50, so we are able to move people with the expertise. We are able to leapfrog the time it will take if it's a normal development. So we have-- The good thing is that contrary to our main competitor, we have the space. So it's not a question of space, now it's a question of having the right product, the right expertise to deliver the growth. I think she's in charge.
Elena Dani from Shore Capital. Three from me, if it's okay. So there is an impressive 20% uplift in sales when you convert a store to the JD Fashion. Could you remind us of the key drivers of that? Secondly, with acquisition of the rest of the Iberian business, what are you looking to do differently compared to what you were already doing in the region, on top of more conversions to JD, presumably? There is a mentioned statement of selected growth opportunities in the UK. Could you maybe provide some color on what those are? Thank you.
So conversion, yeah, we still see 20, even more than that. I think the main driver for me is it's a new store, a new proposition, you get more excitement. I think the other thing is around, you know, so that's brand things. The fact that the mix is different, we have more apparel than the... And we're creating more traffic. So, but I think the main element is the modernity of the concept and the quality of the execution. I think that's where we see the benefit. In terms of the minority, I think that first, I think it simplifies the group. I think it was complicated, and I, I'm not sure we really have been able to implement our strategy by 50/50 because there is someone else who have a different view around the strategy.
So it give us the ability to accelerate JD development, and that's really what, what we are looking, is how we leverage those business where we have start to develop JD, but I don't think we put all our resources and our, and our resources and the, and our priority around developing JD. Because they had another business, and they, they tried to do a little bit of the two. What we will have a clear view, which is JD first. You know, if I take Portugal, for example, we know that we are on the space f- and Colombo has been a great wake-up call for us, where, you know, our store in, in Portugal is about 150 square meters. They're really tiny. They're doing well.
But you know, we know that the best proposition for JD is a 400-500 square meter, and for the moment, we have not found those stores. I think there is a way to accelerate that by leveraging what we have. So I think this is about really leveraging and making sure that JD first strategy is implemented in those areas. On UK, I think that UK is growing. You know, you see the numbers, and it's... And I think that we are expanding the store size. And every time we do that, sales per square foot go up. So we still have this really fantastic challenge, which is where is the maximum? So we are trying to get there, and we are still not there.
Hopefully in Trafford, where we will open a 100 shop window, and I don't remember the size of the store, but it's a mammoth store. We'll see perhaps as to starting to see a return on space diminishing, but for the moment, we have not seen that.
Good morning. Warwick Okines from BNP Paribas, and two questions about the U.S., please. The first is just could you give us a bit more insight into how you've traded what's obviously been a very promotional industry in the U.S.? Tactically, how have you approached the U.S.? And secondly, perhaps for Pete, could you tell us what weeks cover you have of inventory in the U.S. and how that compares with your European business?
You start?
Sure. So I mean, overall, in the U.S., our stocks are higher on year-on-year, at the end of July. And that really reflects the kind of the anomaly, if you like, of the prior year, where we were kind of understocked, kind of running up to July. So stock cover has increased. It is elevated relative to the U.K., but not by a significant extent.
... And I suppose the thing to bear in mind with the U.S. when we're talking about kind of 100 new doors for the second half, for the year as a whole, a lot of which is weighted towards the second half, obviously, we've got stock that's in the business, kind of ready for those new stores.
Yeah, and I think that in the US, what happened, as you have seen, we say it is June. It has been not a great month, which is a month where all our competitor went on discount, and we just didn't have the stock, and we follow what happened in the market. You know, we are certainly the best retailer out there in term of the difference between intake margin and gross margin because we don't discount. That's not what we do, and we tend to be clean at the end of the season. That's what happened in the US in June.
That's why we have a blip of sales in June, and when the new season come and start in July, you have seen some of our competitors saying July was difficult. July was a very good month for us because we have new stock and it was a full price month. Yes, we will be always better when it's not around promotion, and we are not a promotional retailer. At the same moment, if we need to follow, we will follow. That's not something we will not do. For the time being, our stock position is a good... It's in a good, it's where we want to be.
In fact, you know, I spend a lot of energy to get enough Air Force 1 in our store, so I've been monitoring store by store and to make sure, because we were losing sales, especially in June. We had no Air Force 1 Triple White in our store, which, you know, it's a bread and butter line. So we have been clear, and I think we get the commitment from Nike to make sure that we will never be out of stock for Air Force 1 Triple White and Triple Black in our store, and that's something where we are monitoring that week by week. So I would say in the U.S., I'm more stressed about not having enough stocks than having too much stock.
You know, because the way it happened in the market is that they look at us, and they don't see how much growth we are delivering, so they see the rest not doing well, so they, they just, manufacturer just, be, a little bit surprised to get so much orders. So they say, "Oh, that's perhaps too much." So we keep running out of, of stock, of stock for the time being, which is a good problem to have.
Just a couple of quick follow-ups. Last year was all about footwear, while apparel was pretty weak. Have you seen any distinctive trends this year between the two sides of your business? Obviously, on minorities, you've now bought out virtually all of the minorities, with the principal exception being that of the Mershos. Is there any likelihood that you'll come to an agreement there, or should we just wait for that, for those call options to roll through as scheduled?
Yeah, it's a good question. I think I don't remember last year being really dreadful in apparel. Apparel is more volatile because, you know, the weather has an impact, whereas in footwear, it doesn't. The good thing about having footwear and apparel, when it was a summer... Summer in the U.K. was in June and September. There was no summer in between. When we had this fantastic weather, we did very well in footwear, and we sold short and T-shirt and not a big piece. I think that for me, apparel will always have more story than footwear, which is a steady business with no impact of the weather or no significant impact, and the same for outdoor. You know, Lee, who is running our outdoor business, I'm calling him Mr.
Meteo because he's always coming at the trading call and saying, "It was weather." Okay, can you give me something else than the weather? If you need the weather, he's the guy, he's the guy for you. I think footwear has been doing better this year, a little bit better than apparel, but mainly because of this peak and all that stuff. In total, our mix is not moving significantly. Concerning the minority shareholder, you're right, the last one and the big one is the U.S. one. I think that the Mersho are adamant that they want to continue in the way we are doing things. I think that we are not in a hurry.
I think we have an agreement that is in place and that as you say, which is 2025, and in four tranche. I think that that's the likely outcome of that.
I think that's true. I mean, we, we're very close to the Mershos. We've, we've got a very good relationship with them. You know, Régis has expanded George's kind of remit by giving him the community brands to run, so he's got DTLR and so on. I think he's very happy in terms of the day-to-day life, and, you know, it's a very good relationship at the moment. It, you know, the shareholder agreements contain plenty of clauses to play out over time if they're needed, but at the moment, it's a very happy coexistence, really.
Is there any reason why you wouldn't buy them out?
No, but I think having them in and positive and operating Shoe Palace and help, you know, is good. As you've seen with Iberia, which has lasted 12 years, happy relationship, these things have a life. At the moment, the life with the Mershos is a very happy coexistence. At some point, they may wanna go out, at some point, we may wanna buy them out, but at the moment, it's a very steady state.
Hi, Alison Lygo from Numis. Could I just ask a quick question on kind of CapEx and sort of balance of the year in terms of investments? So GBP 210 million or so in the first half versus the guidance of GBP 500 million-GBP 600 million for the full year. Take that store kind of openings are more weighted towards the second half. Is that still kind of level of CapEx guidance you're expecting, or is there a chance it might be kind of bottom end of the range or sort of below? I guess within that is the question in terms of how you're feeling about that kind of store opening pipeline.
We are on track. I think that we will open 200+ stores, so I think that is nothing that says that it will be different. And we will spend the money.
It's one of the great mysteries of life, why every retailer, new space is always back-ended. I've never really understood it.
In our case, I think it's because we accelerate a little bit after the CMD, so hopefully... You know, financially, frankly, it would be much better to do first half than second half. So financially, is a wrong decision, but we are in for the midterm and short, long term. But financially, there's all reason to postpone and to open more in the first quarter than in the last quarter.