Good morning, everybody. It's Archie here, and I'm just going to say a few words before Steve Roe, introduces our results presentation. Owen Tong, our still new ish finance director, will go through the detail. And then Steve is going to talk about our Never the Same Again program for the future. Obviously, this has been a year like no other.
And frankly our results look pretty unrecognizable from last year and hopefully they look unrecognizable from next year too. For that reason, we provide a little more detail on the performance, the dynamics of categories and stores so you can understand how how the business is trading. But it's not really this year's results that I'm spending my time worrying about. I've no doubt that our teams in the stores and the trading teams will serve customers well and deliver for Christmas, and do a great job. And we already have a high performing food business, which is showing great further progress.
I have no doubt either that we'll come out of the year with probably significantly better liquidity than we originally thought we would and we set out amongst our scenarios. So that's not really the test. The test is whether we use the COVID crisis to reshape the business, to make decisions faster, and to emerge like a coal a coil spring for the future. And that's why we launched the Never the Same a Game program, NTSA, which Steve is going to talk about. So what does this mean?
It means that decisions that were previously marginal, we might have hesitated over, are no longer marginal. It means that decisions that might have required a consensus of the management team. M and S was always a consensus led business. No longer require that consensus. We're just going to make it happen.
And it means that adequate performance is no longer adequate. We can all see that because now we have to change for the future, and the economic pressures of COVID have forced us to make decisions that we might have otherwise hesitated over. I'll just give you some examples. So it's true you've all seen this year that we've sadly had to part company with a lot of colleagues, seven or 8,000 colleagues in the business, many of them long standing, many of them good friends. It's been a painful process.
But it's more than just reducing the workforce to reflect lower demand. It's about the new technology we've got in the stores. So using the new technology to work more flexibly, faster, more productively than ever before. And I really think we're going to come out of this with a better, more motivated, driven, more flexible workforce than M and S has ever had. MS2, so we've had a reasonably performing online business, but behind some of the competition.
MS2 is about inverting it, making us an online led business with retail in support and hopefully in synchronicity with online. And it really is a substantial change and hopefully change in pace. Ocado, We all know when we did the Ocado deal originally, there was widespread skepticism, including amongst many of our shareholders. Some of them weren't really believers in the Ocado model. Well, now we've launched it very successfully.
It's going well. The synergies are coming through, and it looks like an obvious decision for the future. The supply chain in clothing and home in particular, but also in food. No. And supply chain has never been exactly a strong point for M and S, if anything, a blind spot.
Now under Richard Price's leadership in clothing and home with Paul Babb here, we're really going to reshape the supply chain radically for the future. And then finally, shape of buying clothing and home, this almost impossibly wide range that we used to be buying. We've made good progress on that. I actually think if it weren't for COVID, that would be really apparent in our trading performance. But with Richard Price arriving and with the excellent leadership of, Jill Stanton, Wes Taylor, Laura, and Heidi in the businesses, we're going to see dramatic progress.
So these are the things now under a stronger than ever executive team that give me confidence about the future of M and S. And to believe in our future, you really have to believe that these programmes are going to make a difference and catapult us into the future. And that, to me, is the real importance of this presentation, and that is what Steve is going to talk about when we've gone through the results in a moment. Steve, over to you.
Thanks, Archie. Good morning, and welcome to the M and S half year results presentation. I hope you and your families are safe and well. If you're watching the presentation on Wednesday, November, there will be a Q and A session at 09:30 a. M.
For analysts and investors. The details can be found in this morning's release. This morning's presentation has two parts to it. Owen Tong, our new CFO, will take you through the results for the half year and our financial priorities going forward. I will then talk about how we're accelerating our transformation through the Never the Same Again program.
The results this morning cover exactly six months since The UK wide lockdown. In the first quarter, over half our clothing business was closed. We've faced extraordinary challenges in the period, and our colleagues and customers have too. And those challenges will continue with the national lockdown in Wales nearing its end and the lockdown in England about to begin. Unprecedented is a word almost certainly banded about too much at the moment, but it is the only way to describe the impact of COVID.
Our robust performance is on the back of a remarkable effort by my colleagues who continue to move heaven and earth to support each other, help the vulnerable, and deliver for our customers. I'm incredibly proud of them, and they have my heartfelt thanks. The work we have done over the past few years to modernize our food business and broaden its appeal has stood us in good stead during the crisis. Despite headwinds from the shape of store estate and associated categories, this work, coupled with a strong execution, has delivered like for like growth in food. Our transformational investment in Ocado retail has delivered an exceptional contribution to the bottom line with strong growth and margin improvement.
With stores closed, there's been a heavy impact from the crisis on Clothing and Home, but performance is improving, and the actions I outlined in May have enabled us to exit the period with a much stronger stock position than expected. .Com is in strong growth and is gaining market share of the online market as more customers shop mns.com for the first time, supported by our investment in logistics and the relaunch of Sparks. Critically, these actions mean we are underpinned by a strong cash position. Net debt has been reduced, and we have combined cash and undrawn facilities of 1,400,000,000 As well as delivering a robust performance in the face of the pandemic, we have made progress in embedding the faster, leaner, and more digitally minded ways of working that we adopted in the early days of the crisis. The actions we have taken as part of our Never the Same Again program are beginning to accelerate the transformation and set us up to win in a post COVID world.
In September, we successfully launched M and S Food on Ocado. This was a huge operational undertaking, executed brilliantly by the Food and Ocado teams. Importantly, the year one synergy benefits we expected at the time of the investment are on track. Over the past few years, you've heard me talk about the importance of technology and digital to changing the way we operate across the business. Our market leading partnership with Microsoft enabled more flexible working through the pandemic, and many of these changes have been made permanent through the restructuring announced in August.
We've stripped out management layers in our support center to reduce central costs, and we've streamlined our store operations and made them more productive. In our online business, while we are pleased to report strong growth and market share gains, we have been clear that we need to go further in a market increasingly driven by pure play retailers. That's why I'm building on the investments we have made in the past few years in data, digital and online capability to create a single team focused on step changing online growth called MS2. I will talk to you more about progress on our never the same again priority shortly. But now Owen will give you more financial detail on our performance.
Thanks, Steve, and good morning to everyone. I'm delighted to be here to present my first set of results as CFO. Obviously, as both Archie and Steve have said, this has truly been an unprecedented time for the world and indeed for our business. When I joined in early June, most of our clothing and home store business was closed due to the lockdown, an extraordinary situation when we think about it. And although the business has recovered well since those days, it is obviously clear the world is still not near to approaching normality.
The results in the half year period were, of course, materially impacted with group sales down nearly 16% and the group recording an adjusted loss before tax as a result. There was a lot going on in the period. And as you will see in the results release, there were a number of significant gains and losses relating to COVID within the adjusted results. In the second quarter, the business recovered from lockdown, albeit with a much changed category and channel mix. The performance on cash was strong, and critically, we generated cash and actually reduced debt over the period when at one stage, our scenario had predicted it could materially increase.
This sets us up well for further disruption, which we now, of course, expect. Although the crisis has been challenging for the business, I believe we have coped and are coping well. More importantly, I truly believe it provides us with a once in a lifetime opportunity to reset the business and recover more strongly when we emerge, which Steve will talk more about later. I will now take you through the results in a little more detail. I'll start with our Food performance.
Sales were broadly level overall, but that doesn't tell the full story. The Food business also faced a number of headwinds, most notably the closure of its hospitality business for a large part of the period and also its exposure to travel and office locations and the related high dependence on convenience and food to go. Therefore, the like for like performance excluding hospitality demonstrates a strong underlying performance and one you can see was consistently delivered across the period. Underlying sales were driven by increased basket size as we saw shoppers complete more of their weekly shop with M and S, in line with our strategy. Operating profit increased 19% and margin was therefore up on the year as a result.
There was a lot going on here. Firstly, we saw an adverse gross margin mix impact of about 140 basis points, driven by the lower hospitality and convenience sales. This was more than offset by lower costs, including more efficient staffing and marketing costs and indeed the benefit of business rates relief. Turning now to the contribution from Ocado Retail. Steve will talk more about the momentous changeover to M and S supply we executed on September 1.
Our return from Ocado Retail itself was strong in the period. As already reported by Ocado Group, revenue performed strongly for the six months to August, with the increase reflecting the strong channel shift to online grocery in the period. Growth in demand remained strong in the second quarter despite order size beginning to normalize from COVID related peaks. The exceptional items line in the table relates to the ongoing insurance receipts regarding the business interruption due to the Andover fire. Overall, Ocado Retail generated a substantial contribution to group results, driven by this top line growth as well as excellent CFC and delivery efficiencies.
If there was a lot going on in Food, there was, of course, even more going on in Clothing and Home. Firstly, as I've mentioned, the revenue decline reflects the effects of lockdown in Q1 on store sales and a gradual improvement in Q2. Although trade remains constrained by the weighting of sales towards formal categories and city center and high street stores. Online sales performed strongly, particularly in the second quarter, supported by strong demand for casual categories, kids wear and home and lower returns rates. Encouragingly, we grew online market share towards the end of the period.
Overall, Clothing and Home had an operating loss of CHF108 million. At a headline view, while online profitability increased sharply, this was insufficient to offset the decline in store sales. Looking at it in slightly more detail, you will, of course, see that gross profit was down significantly as a result of the reduced sales, with the margin rate reflecting strong progress made in Q2 clearing surplus stock and the consequent higher weighting of discounted sales. As I will outline later, better than expected sell through of seasonal stock has resulted in a reduced inventory position at half year, which is reported as a credit to adjusting items. Operating costs reduced in all areas, with effective management and staff costs supported by the furlough scheme, good cost control elsewhere and indeed the benefits of business rates relief.
Lower distribution costs to store were largely offset by higher fulfillment costs online to service growth, although some of this was recovered in higher delivery income. Taking that in the round for the group, as discussed, strong growth in Food and the contribution from Ocado Retail was more than offset by the decline in Clothing and Home. Let me take a moment on our international business. This part of our business was, of course, affected in a similar way to our UK business, with various markets impacted in different ways and at different times from local lockdowns. The result in the period reflects this, in particular, lower sales in own markets such as India, which had strict lockdown measures.
Franchise profits were much more resilient, however, and online grew strongly. M and S Bank contribution declined, principally
due to
the increased bad debt provision as well as reduced income from both credit and travel money. Lower net interest was driven by an increased pension credit, reflecting the pension surplus at the start of the year. Overall, the group then delivered a 17,400,000.0 adjusted loss before tax. Adjusting items are detailed in the release. They include the release of a stock provision following better than anticipated sell through of Clothing and Home stock.
In addition, we have booked a charge for the organizational restructuring announced in August as part of the agenda to reduce costs and change ways of working. We anticipate annualized cash savings of at least CHF 115,000,000 from the restructuring. Steve will pick this up in more detail. This left a total loss before tax of CHF 87,600,000.0. As I transition on to cash flow, let me first take a moment on CapEx.
CapEx levels were obviously lower in the period, reflecting a slowdown in investment, particularly in the first part of the period. You can see where the money has been spent with a focus in technology and online making up nearly half of our investments in the period. Looking at the full cash flow now. You may recall at the start of the year, we had anticipated drawings against our credit facilities of around CHF $650,000,000 at the half year. But in fact, we generated cash in the period and net debt fell, which I believe is a credit to the business.
This firstly was a result of better than expected EBITDA, the drivers of which I've already discussed. There are a number of other important points to note. Firstly, we had a strong working capital performance in the period due to all the various cash activities announced by the group at the year end, with the result largely reflecting an extension in supplier terms. It is worth noting the cash flow contains both CapEx booked in the half in addition to year end accruals paid in the period. There are, of course, other ups and downs, but overall, a financial net debt reduction of CHF65 million in the period is strong in the context of the trading backdrop.
It is worth noting that our lease obligations also reduced. We are doing a lot of work on our leases and further color on the breakdown of our lease obligations is included as an appendix slide in the pack. As a result of half year cash generation, we have CHF 1,400,000,000.0 of cash and undrawn facilities at the half year, which, as I have said before, puts us in a strong position for the second half and how we position ourselves to emerge more strongly from the crisis. Our balance of maturities on our debt is also well spread, with the first maturity not until December 2021. Since half year end, we have traded along similar trends to what we saw at the end of quarter two.
Obviously, however, there's still a degree of uncertainty in the world as we enter another period of national lockdown in England. We are well set up for the second lockdown with much more experience as to how to trade a lockdown, a stronger online business, a better stock position and a stronger trading run-in. That being said, we do expect our store sales in Clothing and Home to decline further in the period of national lockdown, albeit offset by online trading and reduced costs. Our focus still is on trading as effectively as we can up to Christmas despite the disruption, and the plans we have put in place should help us deliver for our customers. Of course, we are also anticipating the final chapter on Brexit at the end of the year.
Again, we are well set up for what Brexit might bring, but recognize there is still uncertainty on how it will be implemented and particularly how it impacts our European businesses. However, I feel good about a number of things. I feel good about our cash performance and position as discussed. I feel good about how our business has demonstrated it can react and adapt as the situation changes. And I feel good that we are making real change to our business, which is setting us up well to exit the pandemic in better shape from both a strategic and cost perspective.
As we recover and drive the transformation, we will do so with greater discipline on capital, cash and returns with an ambition of recovering balance sheet metrics consistent with investment grade in the medium term.
I will now hand you
back to Steve, who's going to talk about progress on the transformation program and our plans for the remainder of the year.
Thank you, Owen. In May, we laid out how we had brought forward elements of the transformation plan to accelerate our transformation in a world that would, in many ways, never be the same again. As a reminder, they're the following: driving faster food growth with Ocado Retail, capturing value and lowering cost in the food supply chain, simplifying the range and shifting to trusted value in clothing and home, turbocharging growth on mands.com, and capitalizing on the seismic shift in the property market to create a store estate fit for the new world. In the past months, we've made decisive steps forward against our never the same again priorities to ensure we emerge from the crisis stronger and more resilient. Let me take you through each one in more detail.
Firstly, and importantly, driving faster food growth at M and S. Prior to the crisis, we'd made good progress broadening the appeal of M and S food, expanding our range, making our innovation more relevant, reducing promotions and moving to trusted value meant we were well positioned to capitalize on the seismic shift in shopping habits which continue today. We've made further investment in price through expanding the remarkable value range, and value perception is now at a two year high. During the first half, performance was particularly strong in categories we've expanded such as grocery and meat, fish and poultry. And despite headwinds in hospitality and convenience, this meant underlying like for like growth was strong as customers saw they could do more of their weekly shop with M and S for the first time.
In addition, over 750 new lines have been developed across categories we've historically underserved such as organic, with many now available on both Ocado and in M and S stores. We've also taken the best elements of the five test and learn renewal stores we opened last year and implemented them in new openings such as Maidstone and Notting Hill. Our renewal stores, which trial new innovations as well as showcase more of the full M and S range, continue to perform well. September marked an important strategic milestone for the business as we executed the successful launch of M and S products on Ocado with fantastic leadership from Stuart. The M and S and Ocado teams have done a phenomenal job, and we're working together with a real one business mentality.
For the first time, the full M and S range is now available online and means Ocado can offer more choice and better value than the previous supplier. In order to execute the switchover, the teams have substantially stepped up M and S product development in key areas such as grocery, remarkable value and home care. As I said earlier, many of these lines are also now available in store and have been well received. In addition, we've made selected clothing and home lines available to customers through the platform and the initial customer response there is encouraging. Performance to date has been strong with M and S consistently over 25% of product sales.
Some of the highest participation rates since launch have been in the categories with broad appeal we are focused on growing as a food business. Importantly for M and S, the resulting synergies are on track and anticipated to be over GBP 15,000,000 in the current year. Clearly, the last six months have been exceptional for Ocado Retail, with the business delivering 48% sales growth in the first half. Since we made the investment in Ocado last year, there's been a step up in online sales participation and the market growth rate as the trend to online shopping has accelerated through the pandemic. This is clearly encouraging and confirms the opportunity for growth we identified at the time of the investment last year.
Ocado has substantial pools of available demand ready to tap into from existing customers looking for delivery slots to M and S customers who are able to shop the full food range online for the first time. To ensure we can meet this, we are bringing forward investment in capacity. We are starting with 40% pound capacity growth in 2021 with three new CFCs coming on stream. More plans for rapid expansion are under development. As I outlined at year end, there is a major opportunity to capture value in food supply chain through product and logistics cost base and because availability often constrains sales.
Capturing this means two things: one, leveraging volume to work with the supply base and lower costs and two, reduce the distribution costs associated with servicing the network. During the first half, we worked with suppliers to remove over GBP 30,000,000 of costs through improved terms, leveraging volumes and finding lower cost ways of operating and building on the £100,000,000 we eliminated last year. And last year, we began our Vanguard program, named after the store where it was first trialed. It's designed to optimize processes in the supply chain to deliver productivity benefits in store. The program was initially rolled out to 90 stores from the Barnsley Depot, with sales better than control stores.
Over the summer, we've extended this further and are now in 159 stores. The results continue to be encouraging, and we plan to implement vanguard principles across the whole estate by next summer. To help tackle availability, which was previously an issue, particularly in ambient categories, we've opened a depot in Milton Keynes with our partners XBO. This will help to ensure we have a smoother stock flow and a better position for peak trading and beyond. At the year end, I outlined the unprecedented actions we are taking to manage stock in Clothing and Home.
Those actions have helped to ensure that the Clothing and Home business has emerged from full lockdown ahead of planning sales and stock position. This is a robust performance, given the headwinds it has faced from the shape of the estate and channel and category mix. For this reason, we have been able to release some of the provision we took at year end and are hibernating far less stock than originally planned. In May, I also talked about the opportunity these stock actions gave us to go faster and harder on the work already underway to simplify our product range, develop a more agile and efficient supply chain, and offer everyday trusted value. Our ambition has been to make three years progress in one.
And with the arrival of Richard Price as the MD in July, we now have the right team in place to deliver that. Already, have simplified our ranges. We have increased the depth of buy in hero categories such as denim and knitwear and made a further 20% reduction in option count for this season. As part of our move to everyday trusted value and increasing personalization, we have removed one of the blanket friends and family offers this autumn. And going forward, we'll make further steps to reduce costs and improve stock flow through reengineering the end to end supply chain under a single team led by Paul Babs, our new supply chain director.
I was clear in May that turbocharging growth at m and s dot com was the priority for the business, and this remains the case. Over the first half, our online performance was strong with growth in clothing, home and food on the M and S site. Strong traffic growth, improved conversion and lower returns more than offset lower in store orders. As a result, the latest market share data shows M and S increasing share at the fastest rate in The UK market, rising to the number two position. This growth would not have been possible without the tremendous effort of our teams, particularly at the Castle Donington distribution center, who reacted rapidly to implement hygiene and distancing protocols at the start of the crisis and have been phenomenal throughout.
We were able to use the investment in capacity made last year to dispatch nearly 50% more singles in the period to offset the impact of socially distanced working practices. Online growth was supported by the successful relaunch of the Sparks loyalty program, which has driven 1,500,000 app downloads. Over the past few years, we have invested in developing our data and digital capabilities to enable growth in our online business. This investment, coupled with the improvements at Castle Donington, has meant we have been able to respond to the step change in online demand during the pandemic. However, given this step change, we must go further to compete more effectively and sustain the growth we've seen.
We are therefore bringing all of our online digital and data capabilities together as one team within clothing and home to embed the pure play mentality and ways of working we began to adopt during lockdown. All of this is under the banner of m s two. I am clear that our advantage in having a seamless bricks and clicks customer offer, and developing this team is about embedding a way of working to accelerate growth in our Clothing and Home business, not just to improve our website. It will work separately but in parallel with our stores business and is very much a part of Clothing and Home rather than a separate business unit. MS two will though have greater flexibility on product, presentation and pricing, and up weighted focus on social marketing.
It will also lead on our work to build a portfolio of curated brand partnerships, which we started recently with the launch of Nobody's Child. The work we are doing on our end to end supply chain is fully integrated with this so that however, wherever, and whenever our customers want to shop with us, the experience is seamless and convenient. By harnessing all of these parts of the business under one team led by Richard Price and Katie Bickerstaff, I am confident we can set a realistic ambition of over 40% of sales online in three years' time. The shape of chain performance across both businesses since lockdown first eased has highlighted the imperative to rotate the estate and modernize our store operations. In the food business, the top performing stores were simply foods with good access and parking, while retail parks outperformed in clothing and home.
The importance of rotating the estate is demonstrated by the profitability metrics of the stores we've closed and those we've opened in the past eighteen months, which you can see on the slide. The cash generated creates a virtuous circle to allow further investment. The property team is refocusing its efforts on reducing costs and managing both our asset base and our liabilities. For instance, in the first half, we re geared leases on 11 stores for an average of five point five years extension and achieved a 34% reduction in rent. Modernizing our estate is not just about the physical stores, It's also about the efficiency and productivity of our operations.
A core part of this has been the rolling out of in store technology through our partnership with Microsoft, as well as embedding the more flexible and productive ways of working we established during lockdown. Bringing this together has created a substantial opportunity for cost savings and greater productivity with an annualized saving of GBP 115,000,000 as a result. Of course, these necessary changes have a human impact have resulted in a reduction of roles across the organization. Whilst we deliver these changes through voluntary departures and early retirement, I would like to take a moment to thank all of our colleagues for their professionalism and dedication. Before I sum up, I want to spend a moment on how we're set up to trade this Christmas.
Clearly, it's going to be a peak like no other, so we're using all the learnings from how we adapted trade through the spring and summer to make sure we do everything we can to keep Christmas special for customers and colleagues. The health and well-being of our colleagues is and always has been priority number one, from the social distancing and hygiene measures in our stores and backstage to supporting colleagues who need to isolate on full pay. In addition, we've invested in an online well-being app, Unmined, in recognition of the impacts of the pandemic on mental health as well as physical health. We are building on the work we've already done to give our customers the confidence to shop with us. This includes dedicated hosts to explain the measures in place and count customers in store via an app connected across all entrances.
In addition, we will operate extended December trading hours to ensure additional capacity. We're supplementing these measures with new digital tools to make shopping even easier, such as our Book and Shop app. Online distribution capacity has been increased to meet peak demand through expanding the team at Donington, ensuring our Mezzanine Floor is fully operational and introducing two new auto bagging machines, they're nicknamed Penny and Percy, which can pack over 2,000 items an hour. In light of the restrictions coming into force tomorrow, we are supplementing the increase in online capacity with additional steps to upway our click and collect offer and increase our store picking capacity. Finally, we've protected the magic and sparkle customers expect from our products at Christmas as well as making sure we've got the right range for however customers can celebrate.
To summarize, the results this morning reflect a period like no other for the business, covering exactly six months since The UK wide lockdown. Despite this, we've delivered a robust performance, and I'm incredibly proud of all my colleagues. We also made decisive steps forward in our Never the Same Again program to accelerate our transformation. We successfully delivered M and S products onto Ocado and are investing to fuel its future growth. Our restructuring, supported by our investment in store technology, will deliver a more productive store operation next year and beyond.
We are building on the growth on mands.com we delivered in half one by bringing together our data, digital and online operations under one team as MS2 to turbocharge online growth. And all of this is being led by a tighter, stronger leadership team who are already making a difference. We are well prepared to deal with the restrictions that are in place for tomorrow as well as any other changes that may come to pass and deliver for our customers. Fundamentally, my goal is delivering the long term transformation of the business. Through the decisive steps we are taking, we will deliver a renewed and stronger business in a world which will never be the same again.
Thank you, and stay safe.
Good morning, everybody. It's, Archie here. I'm here on the call with, Steve Rowe and, Owen Tong, our relatively new finance director. I hope that you've all had a chance to see the webcast of the results. I think we've tried to make the statement and the webcast pretty comprehensive this time so people can understand the dynamics of how the business is changing during the COVID period.
The most important thing for us is probably not the financial results. I mean, they are important, of course, but what really matters to us is not so much the p and l, but the state in which the business is going to emerge next year. And I think you will have got the impression that we're coming through the crisis in pretty robust shape, and we're very, very excited about the changes that we've been able to make, which mean that we should be prepared to emerge much stronger business, as and when the COVID issue recedes. Obviously, we take questions on any issue at all. Steve and Owen are happy to handle them.
If you don't mind, when you ask a question, please, could you introduce yourself? I know it all works technologically, but for the rest of the audience, they'd like to know who you are, where you're from. And it'd be great if you could, stick to maybe just a couple of questions because, otherwise, we'll find the short term memory challenged and won't be able to answer everything. Two questions at a time. We can always come back.
We've got plenty of time. We'll go through, any issues anybody wants to discuss. So, if everybody's set, shall we start off with, Jeff Lowry? Jeff, do you want to kick off?
Yes. Good morning, M and
S team. Two questions, in the spirit of Archie's comments. First one, can you talk a little bit about your bit more about your inventory position in Clothing and Home? Could you perhaps quantify it in pound million terms at the end of the first half? And can you talk about its composition in terms of spring merchandise being overwintered versus new season stuff?
And secondly, on the food side of the business, can you talk about what's happened to your average basket value? And joined up with that, what's happened to the profitability profile across the integrated stores versus the stand alone Simply Foods, please?
Okay. I think there were three questions, Jeff, but well done. Steve, do you want to kick off on Clothing Home inventory position? And maybe Owen can chip in with some numbers.
Yeah. Thanks, Argy. Morning, Jeff. So the first thing to say, I think the the the inventory position that we have today compared to that which we forecast at the start of lockdown is significantly better. We talked about the principle of having to cancel or move about £1,800,000,000 worth of closing stocks, and do that through a process of some cancellation, some hibernation, and then reductions.
I can tell you we traded ahead of our scenarios. The the work the team did was first class in terms of working with the supply base to build in more flexibility. And we've actually been in a position where at the end of the spring summer, less than half the amount that we thought we would have to hibernate has been hibernated. It's about a hundred million in pounds numbers, And this is all what I would call core and seasonal core merchandise. There is no excess terminal stock floating around the business, so I'm really pleased with that.
In terms of how we structured the bias of this autumn, I said earlier that the work that we've been doing in terms of restructuring the ranges, accelerated. In women's wear, for example, there are now 30% less lines than there were two years ago, and that's meant that we have bought deeper into those fantastic value wardrobe staples that we've got. And you'll see that really in our ranges now. But we also made a decision not to chase down more winter merchandise, And we planned that we would bring forward in key areas such as knitwear, denim, etcetera, the, spring merchandise earlier should we need it as we run into Christmas peak. So I'm anticipating a a little bit more, reduce than I would have liked at Christmas because of this current lockdown.
But, again, a reminder, 60% of what we sell is is core and seasonal core, and I think the number won't trouble the scores, I think, would be the right way to say it.
I mean, just to add the the number to that, actually so, I mean, of the 663,000,000 of stock that we sorry, inventory position that we had at the end of the half. Just over 400,000,000 of that was related to Clothing and Home, which is more than a hundred million less than, last year, at the same time, which reflects what, Steve has just said. So, you know, we're going into this lockdown not not not with the same level of concern we had in relation to stock than we had previously.
So I
think that that covers the stock stock position. Arthur, do want us to move on to the shape of the chain?
Perhaps I'll cover it. I think Jeff's question is about food stores relative performance of full line and stand alone and average basket size.
Yep. So so, I think you can see from our statement that the shift in the estate has really all been about food and the performance of, you know, Sindhi Foods retail parks, driven by the food business has has been strong. Anything that was associated with the travel location, you know, the the the the railways and, of course, the airports has been, poor in the period through lack of traffic. And as we go into lockdown, we we had to close some of those back down again. The the average basket, though, as as as you can imagine, it has
been up really pretty significantly. And that it's reduced a little bit through the through the half as you can imagine, but but it still held up really significantly all the way through the, through the half. It's over twenty twenty pounds in terms of average basket size. And, obviously, that stands in good stead going again, going into, the the second period of lockdown, because effectively, we don't have to readjust where where we're trading well into that lockdown period.
Understood. Just on the the store, the the comment on food was really more, how much of your profit comes in food now out of the integrated stores versus the stand alone Simply Foods?
Okay.
Look. Jeff, I mean, traditionally, it's been a bit about half and half. I think at the moment, it's it's it's more weighted to food, obviously, because in the first half of the year, you know, 40% of our of our clothing footprint was shut down. So we're we're slightly abnormal at the moment. I would expect it to move back towards more normalized levels, but with an over more of a weighting to food as we come out of COVID, and particularly as we're driving MS two, the the the digital business, we think we'll probably now be about 40% rather than the third that I talked about before.
And and the other
thing I would add to that is it's not necessarily about, Simply Food versus full line. It's actually where the the the type of location as well. So, like, retail park, full line stores are, you know, for example, trading trading very well. So, it it's also to do with the location of the of the of the store.
Yeah. But, Jeff, I don't I don't think we have a precise answer to that question at the moment. But the the as we've said before, in in normal times, I think it'll be true again that, the majority of the food profit still comes out of full line stores. And that's not surprising because those are the largest stores.
Understood. That's great.
Thank Okay.
Thanks, Jeff. Shall we go on to the great Clive Black?
Oh, the very great Archer Norman. Thank you very much. Couple of questions, please. First of all, could you give us a feel for the state of play for your real estate strategy? In your presentation this morning, you touched on that a few times, guys.
I was just wondering if you could characterize where M and S is today and what you think the priorities are on the retail strategy? And secondly, just in terms of MS2 in today's news, what will be a good outcome? What would be the KPIs as a measure of MS2's performance, please? Thank you.
Thanks, Clive. Steve, do you want to start on real estate?
Yes. Thank you, Archie. Thanks, Clive. The first thing is we have had an ongoing program to reshape the estate, and that is some closure but also some churn. And during the course of this period, we've opened new stores in places like Mason, which have performed particularly well, and we will continue to do that.
What we can see from the from the change in the shape of caused by lockdown is that's the right direction. And and what the path we're taking is absolutely right. We'll continue to do that. We think that this will be accelerated by changes to travel, particularly changes to working habits, and we will we will see some change to our city centers. But we also see that our Simply Foods and retail parks that we've been building, are still strong, particularly as we, of course, with car park access, and we see the opportunity to continue to increase, our food footprint.
I think that, importantly, and we'll come on to MS two. What we see now is that probably about 40% of our business in the future is likely to be online, and that's why MS two is absolutely, you know, pivotal to what we're doing in the next stage of transformation.
Can I just just just add just a little bit to to the retail? I mean, I I spent a lot of time on this since I've since I've joined, as you can imagine. And and just to kinda just add a couple of points to it. One is, obviously, taking cost out of the system is obviously gonna be really important. And and a big component of that was the restructuring that we announced in August, which is gonna generate at least a hundred and 15,000,000 of savings on an annualized basis.
So that that's that's obviously one, building block. And we think there are other building blocks of cost for us to continue to take out of store operations, which we're actively working on at the at the moment. And then secondly, as as Steve mentioned, because we're we're we're forecasting a channel a channel shift, obviously, we're going to be accelerating our our store rotation program. And the way we're thinking about this acceleration of the store rotation program is to think of it in a in a self funding basis, which is to generate, funds through, store disposal and use those to fund, and to accelerate the the rotation of of both store closures and relocations.
Okay. Thanks. Steve, did you want to add anything on MS2? I think it's worth just responding to Clive's point about what would success look like.
Abs absolutely. I that's sorry. I was I was just on look. The the first thing is that, MS two is really a pivotal moment for the business. The work that we have undertaken over the last couple of years and more recently, whether it be the tech stack, increasing capacity at Donington, the work that Katie and Jeremy have done of relaunching Sparks and building the digital data engine means that right now is exactly the right time to capitalize on the strong performance that we had in the in in the first half online, where we're we're now number two in the market.
And MS two signals almost an inversion in the business about how we're thinking. It signals that we will move from being, you know, a store primary focus first, online second to an online business with a store portfolio. And we'll maximize the omnichannel opportunities. But we saw earlier in the in the crisis that we operated almost as a pure play. And this needs to inform our thinking about the ranging, the price structure, the promotions.
It needs to make sure we've got an end to end supply chain, which is appropriate for an omnichannel business. And within that, has the ability to provide great value products in volume, which is helped by our buying stats, but also, you know, that fast trading and near shore capability that you get from learning. And importantly, enables us to leverage the data that we've built. You know, 20,000,000 customers, several hundred attributes means we can all start to offer a much more personalized experience. And we think this is absolutely the right time.
We've the right team in place, with Richard and Katie driving it. And, this, I think, starts to underpin this, you know, more than 30% more like 40% online over the next few years.
Thank you very much for that, guys. Can I just refer relate back to the real estate question, with just one follow-up? Are you therefore saying that the estate in its current shape is broadly there in terms of, number of stores? We're not looking at another chapter of major store closures from Owen's point about disposals and recycling funds. Thank you.
Well, to answer that, I don't necessarily want to kind of quote exactly what we're modeling in terms of store openings and closures. I'll I'll just say there's a combination of both. But but but, I mean, the the rotation means exactly what that is. It means, closing certain stores and opening certain stores. So I think that's the
way to think of it.
Don't know. What we are too much
Sorry. Steve? Sorry.
What what I wanted to the point I was trying to make is that we said we were on a program to close circa a hundred stores, and some of those will be, recycled. Some of those will be full on, but the the vast majority will be to continue to drive the food business with larger Simply Food stores as a destination. So, yeah, there is still a a further contraction of clothing space that is required over the over the experience.
So, yeah, that that's actually a fair point, Steve. I mean, the the projections do predict more foreclosure full line stores and opening of Simply Boots.
I think the other thing, like, we can all see is is that, COVID has accelerated changes in high streets and city centers that were happening anyway. And quite a number of our competitors have have closed stores or even gone out for business, so that's changed the shape of the high streets that were hanging on before and now looking in difficulty. There's some shopping centers we all know that's in in pretty poor shape. So we we shouldn't be blind to that. It does mean that we have to respond in an athletic way.
And I I don't think it's a numbers question so much as as Owen said, you know, if anything, this means, and it's obvious to everybody, that we need to accelerate the program. There will also be great opportunities to open new stores, and the demand for good retail real estate is low. And so there's opportunities for us in this. And part of the thing is that where we can find a great new store we've actually, we've had two really good store openings in the last few months, full line stores. Where we find the options for a new store, that makes it much easier to relocate or close the old stores, sometimes consolidating two or three into one.
Thank you very much, guys. Conscious of time.
Okay. Thanks, Clive. And so shall we go on to Simon, Simon Bowler from Numis?
Hi. Thanks, and good morning all. A couple of questions for myself. First is on the MS2 piece. You spoke specifically in the presentation around giving that team flexibility around products, pricing and presentation.
And I just wanted to understand what in in practice that meant. You know, is this team gonna be running a separate buy or pricing separately to to how the the stores look and feel? So if you could just kind of touch on that. And and then the second question was just, again, on the store estate and just just wondering to what extent your own stores could form part of ongoing store closures and how much progress you've made in thinking about alternative use of the the space that you own within the business.
Okay. Steve, do you want to do MS two? And then, I guess, Owen, you want to respond on the store issue.
Yes. Thank you, Austin. I said MS two is pivotal in the business. It really is, and I it does have to invert our thinking. In terms of range and the buying process, the the MS two will inform the buying groups about what they need, you know, where they need to focus, where they need to buy it, any amendments they need to buy from the from the current position.
But the key thing is we'll be thinking about online first rather than as a subsection of, I don't know, Marble Archie's catalog. It does mean there'll be different ranges, but that's appropriate. There's a difference in specialist ranges perhaps online, but also make sure the product is appropriate for distribution through curious. And that may mean at certain times different prices and different promotions. But the key thing is this is underpinned by data, which I I mentioned earlier, and is informed by customer trends, which we can see much more quickly online.
And the ability to analyze and react is also much quicker. So so I think that the you know, you will see those differences manifest. But the key thing is it's still bought within the business. And I think that's why we said it's a it's an integrated division within clothing and home, but we're operating it separately to make sure that the focus of the business and that change of emphasis that's so important is clear to everyone within the organization.
Yeah. Simon, let let me have a go on the the the store question because I I I just I think there might be two aspects to the question. Let me have a and let me see if see if this works. I mean, you're right in terms of our owned stores. Is there an opportunity to utilize the the store in relation to value to to to generate value to help fund some parts of our store rotation?
I I yes. That is the that that is the answer that I was that I was, that I was explaining earlier. So that's one aspect. I mean, the second aspect of it is is store space itself and whether we're gonna look to actually, utilize our store space slightly slightly differently. And I think that is another feature of what we're going to be doing over the next, period of time.
The first aspect of that is is moving some clothing homes store store space into into food, which is what we will be be looking at in in selected stores. So I I hope that answers your question, Simon. I I I just wanna make sure I got to your point. Yeah. I I guess I
at this time, was was thinking around yeah. I think a a couple of your peers have kind of pulled out examples of, you know, turning space into office space in certain locations or different commercial use, etcetera, and and giving you for a lot of the stores where you own the the real estate, whether that was an opportunity.
Yeah. And I think and I think that's that's what is embedded in what I'm saying in relation to a a self funded store rotation program.
Yeah. And, Simon, the the the we've got, you know, we everybody knows. We've got multiple stores in very different locations, different sizes, etcetera. And over a period of time, that needs to be addressed to get into more consistent portfolio. But, yeah, we're we're we're not announcing today that we're going into the residential housing business, put it that way.
There are development opportunities. You know, there are opportunities to bring in concessions to rationalize the space, but it it's there's not a not a single solution. It's case by case. So just on the MS two thing from a sort of helicopter view, what I'd add is that I think that what I've seen not just here but around the world is almost all retail businesses struggle to adapt to the real changes that online creates. And, of course, in The UK, we probably have the most advanced clothing and home online business probably anywhere or thereabouts.
And we have very strong pure plays to compete with. So the position is more stark. What what you find is is that traditional retailers obviously run the business on a retail rhythm, on a stores based rhythm. So promotions are set up in a fairly slow way because they're very costly to set up in stores. The range cycle when new range comes in is set up along seasonal launches that require visual displays in stores.
The exact range you carry is dictated by what you can sell in sufficient volume in multiple locations around the country. What we're saying is when you look at it, the difficulty is that you're up against pure plays who don't have those inhibitions and we've got to compete with them. So the purpose of MS two is to enable us to compete like a, in a sense, like a pure play. And that means that there will be differences with how we trade online. I I don't know what those are.
I mean, Steve will have a have a view on on what is allowable and what creates too much tension. But the purpose of MS two is to set up the organization so it can surface those tensions and start to create those differences and explore how we trade. From a data and customer point of view, we'll remain omnichannel, and they won't know about MS two. We'll have a single seamless relationship supported by the data and sparks program that Katie and the team have led, which we think is really going to be, you know, market leading in The UK or as good as anybody has. That's the philosophy behind it.
I think it is from externally, it doesn't look like a big change. Internally, it's quite significant.
Okay. Great. Thanks. That's really helpful color.
Okay. Thanks, Simon. Shall we go on to Anne Anne Critchlow from Societe Generale?
Thank you. My question is about food price inflation and what you saw during the first half, but also more generally, your current thinking is about price positioning in food against the market.
Steve? Yes. Thank you, Anne. In in terms of our food business, we haven't necessarily seen the train same trends as the rest of the market. If you remember, Anne, we've been on a program under Stuart, really to deliver trusted value throughout the M and S food business, and the team have done a great job, frankly.
And our, value credentials have improved substantially over the last year, but, again, more recently, because we've been already lowering prices and taking off the sort of difficult promotions that we had in place. And so we we were continuing that strategy, and therefore, inflation has been minimal for us. But in the marketplace, we know that others have had inflation where they take where where they've removed their promotions. We we concentrate on our values, frankly. And as you've seen from the work we did with Ocado, as we've launched there, it's become clearer to our customers and others about just how good our value is.
And the remarkable ranges that the team introduced down have been phenomenal, I mean, and are really getting great uptake on Ocado two.
K. Great. Thank you.
Do do you want to I mean, we don't is there any figures we have on food price inflation we want to share?
It it was, I mean, very low, AFC movement in in in in the in the h one.
Yeah. I I would just like to
Yeah. Just reflects what Steve just said.
Can I just say, I mean, food price inflation is always I mean, it's not quite as much a science that people pretend it is? But and, of course, it depends on what's happening with your mix, and what individually you're doing on pricing. But I I just just to add to that, I because I think it might have been understated. I do want to say, chairman, is that I do think the food performance has been very strong. I mean, it's quite hard to tell with COVID because we've had the closures of the a lot of the franchise stores, obviously, the travel stores, airports, etcetera.
And, the the catering business, the cafes, are being closed for large periods, and that comes within the food numbers. In addition to that, our food business is much more weighted towards food to go, prepared meals, etcetera, and less towards eating at home. So it's not ideally placed for a for COVID lockdown time lockdown type situation. But despite all that, if you strip all that out, I think I'm roughly right in saying the underlying like for like growth in food has been over 8% during the period, which is a pretty good result. And then on top of that, we've got the Ocado launch, which has gone very well.
So it so lost in the fog of all the results. So I I I don't think anybody should be under any illusion. We've we've had a pretty strong period for food.
Thank you.
Just to build on that,
I mean, the the 8% is absolutely is absolutely right. And, I think what I've been impressed with in the team's ability is how they use the strategic direction become more relevant to a a family customer. Clearly, it was the right one, but they're able to pivot much more quickly out of those categories you mentioned and fill the void, you know, with frozen, with groceries, with a a broader range of protein and and produce. And we've seen customers pick that up and and, again, broaden the basket that they've been shopping. So, yeah, that that you're you're absolutely right.
The number of the core food business has been remarkably strong and ahead of the overall market in terms of store performance.
Okay. Look, we've got a a few more questions to come. I'd like to get through another four or so, so we need to crack on a bit. But thanks for that, Anne. Jeff Ruddle from Morgan Stanley.
Yes. Hi, everybody. Yes. Jeff Ruddle, Morgan Stanley. Could I just ask a little bit more about Ocado?
Is there any reason it shouldn't be as profitable in H2 as it was in H1? And then just thinking into next year, obviously, the business is capacity constrained at the moment. There's another 40% capacity coming on next year. I mean, obviously, it's too simplistic. But is it theoretically possible that you could make 40% more profit from that business next year as the capacity comes online?
Or the sort of lower levels of efficiency as the new capacity comes online reduce profitability? Steve?
Do you want to take
the profitability? Well, I think I'll take the profitability. Maybe you
can talk about capacity, Steve. So I mean, on the profitability point, look, it could be that the second half is as strong as the of of the first half. And a lot of the conditions in the first half were were were, you know, were everything was in in in in our favor in that regard, you know. So obviously, very high order orders, very high units per basket, all feeding, a very strong shape of the week in that there was a constant delivery pattern through the week, which met which drove both CFC efficiencies and, delivery efficiencies. And, obviously, we had the the the the one off kind of the one off the, exceptional item of the, insurance, which actually all of those all of those could repeat in the second half, including the insurance, receivable because it's a business continuity receivable.
And so so I think it's fair to say, Jeff, it could. I mean, it it it it it all depends a little bit like we're we're we're all kind of looking crystal ball gazing into what exact conditions are going to be like post Christmas, and whether they actually replicate in in such a kind of perfect whatever the opposite of perfect storm is way. But, but it but but but it's but certainly, we do expect continued strong performance of Ocado Retail.
In terms of capacity, first of all, we've been delighted by the reaction of customers, both existing Ocado customers and some of the new ones that have gone into our product. It is overweight within the basket compared to our original estimates, and we are selling a much broader range of merchandise in a different shape to that, which we traditionally don't install, I. More of a of a broader basket. So we're very pleased now. Because of the unique situation with COVID, there there's not a square inch of capacity, frankly, at the moment.
And that, you know, it's that is a double edged sword. We can only bring a limited number of customers on now, but what it shows you is demand for M and S Food Online is strong. And as soon as we do release the capacity, we think we'll have very quick uptake and fulfillment. Now that capacity, really starts to come on in the second half of next year from around September onwards as Perth Street, Bristol, and Andover, start to come back. And as you said, it's about 40% additional capacity.
But, you know, capacity, again, is is a sum of number of customers times number of shots times number of size of basket. And and, you yeah, we're we're looking at that quite carefully as we come out of this Christmas period.
That's great. Thank you.
Okay. Thanks, Jeff. Richard Chamberlain from RBC. Richard, do you want to fire away?
Yes. Thanks, Archie. Richard at Chamber of RBC. So a couple for me, please. On the on the lower marketing activity, which I think was a contributor to lower sort of central costs this obviously seems to shift to more digital marketing.
You know, how much of that do you think is sustainable or or how much do think will will come back in either the second half or next year? And that's the first one. Then and then back on Ocado, obviously, the synergies are starting to come through now on gross margin. Has that led you to change your thinking at all about how much of those synergies you can retain going forward without passing them on to customers in terms of a more competitive offer, etcetera? That's my two questions.
Thanks.
Steve? Yes. Thanks, Audrey. In terms of the marketing, we we worked very quickly at the start of the lockdown to to pull down all of our cost base in the right shape to to get through the the start of the crisis. But as Archie said earlier, you know, we what we were we were a business that turned into a pure play clothing practically overnight, and and we quickly pivoted our marketing spend to reflect that.
The team have really started to accelerate the spend we've got online. We've upweighted paid search and other digital channels, in clothing and home and food, and you'll see that continue. You know, what you what you you can have a there's a great food advertising what the fantastic Christmas program we've got in terms of products, but we're not gonna do the big multimillion pound Christmas advert. We don't think it's the right thing to do. And therefore, there is a a lower spend all year, a much more targeted spend using digital channels that Katie and Jeremy are focused on.
So so I think, as we look at next year, will some of that above the line spend come back? Of course. You know, we we still got more than half that business, in stores, but it will be a different shape, and we'll continue to push on the digital market. The one thing that's good about digital marketing, by the way, is that there's a famous adage when you say to marketers, how effective your marketing will start. Half the spend is brilliant, half the spend is not, and they never know which half is which.
The one thing you can be clear on digital spend is that you get a very, very quick analysis of your return on investment really quick, and it's really transparent. So you you can max out in an optimal way without taking very much risk. Yeah. Okay. Maybe I'll I'll go
with the Ocado synergies. It's Owen here. So I I think it's probably a little bit too early say, actually, because, I mean, obviously, look, we're we're very pleased with the cutover in relation to, the our participation in in the Agata basket. So I think that's that's obviously a a kick, and that's great. But it'll all it'll all come down in relation to synergies.
It'll all come down to the actual mix effect, in particular, as to whether we we we think we can drive more synergies out of it. So I think it's still a little bit too early to say, but, obviously, it's it's better to have a higher participation as a starting point.
Sure. Okay. Thanks for that.
Okay. Thank you, Richard. We're gonna take two final questions. Shall we go to Demetrius Dmitryo from Schroders?
Thank you. I'm gonna be quick. So my first question is is around the statement in in your press release about releasing some some cash from from the your freehold freehold estate. So, yeah, I I think part of it has has been answered. I just wanted to understand if even to what extent some of that cash is potentially used for towards net debt reduction.
And the more general question is about how how do you prioritize debt reduction in general and perhaps an aspiration to to return to investment grade in in the near or medium term. Yeah. Okay.
Sounds like one for you, Owen.
Yeah. I mean, that's not quite right. Look, I mean, I think we made it we we we made a statement in in in the outlook statement around how we're thinking about, our focus on cash and cash generation over the next, number of years. And, you know, it's obviously a balancing act that we have to to to look at here because we've got to look to fund both the transformation and to strengthen the balance sheet. And I and I have said in the outlook statement that we are seeking to return to a balance sheet which has investment grade metrics in medium term.
So that, by definition, means that we are going to look at both. We're going to be we're we're going to try and, deliver both. So the the the the, you know, release of funds out of, out of our, freehold estate to help fund the rotation, That's partly to to to that's partly, serving driving the transformation because we part of the transformation is we have to rotate our estate. We have to improve our estate. That's part of the transformation.
But, I mean, I I think it's fair to say from my perspective, the the the medium term picture is to try and drive back to investment grade metrics.
Thank you. Okay. Thank you. Thanks. Okay.
So, let's go last but never least to Tony Charette from Panmere Gordon.
Thank you very much. Didn't expect to get on this one. My question is about MS two and its implications. First of all, I'm surprised you haven't sort of given it a separate manager. Strikes me, Richard and Katie, you've got plenty on their plates, as well as this.
So, I wonder why, whether it would not have more force if it had its own sort of champion. And secondly, following on from that, presumably, it will have implications for the range that you sell in clothing and home and also whether you sell sort of ranges that are more sort of fast fashion responsive to channels of short term market movements, which will in turn lead to, you know, needing to organize the buying, rhythms differently. So I I sort of wonder, you know, whether, you know, we are going to need to see a wider reorganization back this up. Thanks.
Yeah. Okay. Very good question. Steve, do you want to hear that one?
Certainly, Archie. Yeah. Great questions, Tony. And there are, of course, implications. What I would say is that Richard and Katie as the as the, directors responsible for Clothing and Home and our digital development, respectively, of course, lead this.
But, our ecom business is run by Steven Langford, who joined us in the summer, and really does have clear focus. The the key point here is we we are inverting how we do things, and that does have implications to how we buy and how we market and also on the end to end supply chain. Now, fast fashion is not is not something that I would particularly describe what we're doing. But do I think we we will have a different supply chain that reacts in a different way? Yes.
I do. Is that work that's going on in the product engine rooms at the moment? Yes. It is. And you can see it already.
I mean, we we launched one of the first curated brands online, nobody's child, and the reactions of that from customers has been phenomenal. But part of the learning from that, the reason we're so keen on that is that also comes with a UK near shore supply base and very fast response times. And so as well as us developing some of that faster response and learn, which will be key, we can also ask our partners to to do that too, that's that's how we'll look at it. But it will mean changes, and these are good changes. You know, we've we've done a lot of work on Donnington, the tech stack, moving to the cloud search.
Still more to do. More to do. But underpinned by the work on digital, I I think there's a real this will transform what we're doing online.
Historically, though, your buying departments have been pretty strong politically, and, you know, I just just wonder how you're gonna make sure that, you know, you can drive your strategy down into the buying departments.
And I think that that's one of the reasons it is important that Richard you know, the ownership here is with Richard within clothing. This is a division within clothing and home. For for those who've been around before, you know, we have had this as a completely separate entity, and most of us would observe that it didn't work. It is a it's you know, it we have to invent our thinking. We have to transform how the business thinks about online.
I think we started to see that with the performance. But, it does have to we do have to remember one of our big strengths is the fact we are an omnichannel business, but we've got to change the thinking, digital first, online first in how we buy, how we supply, how we market, and how we think about customers and our proposition. And I think that, you know, this is the first part of our structure, it won't be the last, by the way, in terms of how we should think about buying. But this is the right thing to do. It's the right time to do it.
I think, Tony, your question is what that one of balance, and this is a big, big shift. And and I you you you shouldn't make any mistake. I mean, Richard and Katie are going to drive this very hard. Steve Langford is running it. Jeremy P brings in the data side.
So it it's a pretty powerful shift for the organization. And, I mean, Steve's Steve's entirely right to say, look. At the end of the day, it it is complicated. It's necessarily complicated. You have to rely on the on the product engine, which is generated by the the buying and merchandising teams.
Their knowledge of products and sourcing and volumes and what sells and pricing, it is always going to be the driver for the business. It's core of M and S. But what this does do is create a a demand force at the online end. So, you know, Steve says, I mean, is it likely that the online business will be saying we need more fast and we don't mean fast fashion, but but more fast sourcing near near sourcing as Steve has said. Yes, it is.
And that is quite likely. That will be good for the whole business because we'll learn more about it and move faster.
Thank you.
Okay. Thanks, Tony, and thanks, everybody. I think we'll draw a hold there, but just because, we're closing this session doesn't mean we're not open to questions during the day. Owen and, Fraser and, of course, Steve and I, if necessary, are very happy to field any questions people want to come through. I think it's been, you know, a good set of results.
It sounds strange to say good in this context, but compared to where it might have been fantastically better, the business is in pretty robust shape. I I know Steve and I were talking yesterday. The store managers and the teams, although we are going to lockdown now, there's a little bit of a obviously, everybody feels a little bit glum about that. Actually, the the news from the stores is that we're in much better shape than we were first time around, and I think we'll there's every prospect we'll trade as well as we possibly can through Christmas. Steve, anything you want to any last word from you?
No. I think I think that's absolutely the key thing for us is in the short term, we do have to trade Christmas. We are, as you say, Archie, much better set up both operationally. And I think in terms of product shape to give the customers what they need, it will be a different Christmas. On my mind, of course, is as we roll out of that, we do have Brexit to attend.
And, again, I think, we as we discussed at the Board, Archie, we we are very well prepared with what we can see in front of us. And then as soon as we're clear about how we come out of COVID, I think that the buying teams driven by MS two, are in much better shape to, really supply the merchandise that is appropriate for a world that's frankly never the same again.
Alright. Terrific. Well, thank you, everybody. Thanks for your time. Thanks for your questions, and, do do please get in touch with anything else you want to discuss.
We're all available, and, have a great day. Bye.
Thank you.