Good day, and welcome to the Marks & Spencer analyst call. This meeting is being recorded. At this time, I'd like to hand the call over to Stuart Machin. Please go ahead, sir.
Well, I think I was going to let Archie say a few words, and then I'll introduce the call. Archie.
Yeah. Hi, everybody. It's Archie here. I'm here with Stuart and Alison, and just want to welcome you all to our analyst call. Nearly as exciting as the midterm election result. Stuart is going to give us a punchy introduction, and then we've got loads of time for questions.
Okay. Good morning, everyone. Thank you for joining us. As Archie said, I've got Alison in the room with me, Fraser, Helen, of course, so we can take questions and follow-up questions afterwards during the day. This was an important period as we bounced back from last year's cyber incident. You could say we hit the ground running, delivering sales and market share growth, and accelerating our transformation. In the first half, we served a record number of customers. Profit before tax was GBP 403.2 million, and that's more than double last year, and actually the second-highest PBT figure for half one in 15 years. We finished the half with a very strong balance sheet, and we're on a firm financial footing from which to invest. Let me touch on each part of the business.
In food, we're the U.K.'s fastest-growing grocer, consistently outperforming the market with double-digit volume growth in a flat market. Food sales were up 13.9%. Adjusted operating profit was GBP 288.6 million, with a margin of 5.6%. Customers have responded well to our value, quality, and innovation. Just to bring a few examples to life on value, we've invested GBP 50 million this half in lowering prices on family key lines, offering more now than 300 products in our Remarksable Value range. On quality, we constantly test and benchmark all of our products to ensure they're the best, and we've upgraded a further 400 products in this half, going back to our strategy, if in doubt, add quality back in. On innovation in food, we introduced more than 850 new food products in this half alone, and we also transformed whole categories.
All of this translates into bigger basket sizes as more families trust us with their weekly shop. In summary, our food business is delivering strong volume-led growth, market share gains, and we're on track towards our ambition of doubling the size of the business. Of course, we had our latest Worldpanel figures two weeks ago, which showed that our market share is now 4.3%. In fact, if you add Ocado, then it's 4.8%. Behind the scenes, we're delivering the transformation we laid out, reinvesting in bigger stores, more supply chain capacity, and better technology. In Fashion, Home & Beauty, sales were up 17.5% as we recovered from last year's disruption. Let me give you some market context first. Those of you who follow Worldpanel reporting will know that the market has been down for some time.
If you look at this week's report, the market is down 8% on a 12-week basis. So, you could say the clothing market in the U.K. is depressed and very challenging. Despite that, we made gains, and you will see from today's Worldpanel results that M&S remains the U.K.'s leading fashion business in market share terms. We continue to outperform the market, delivering a strong 0.7% point share growth versus two years ago. In fact, our market share of 11.2% is our highest since December 2013. So, the demand is there, and customers are with us. That said, we did have some missed opportunities. Availability wasn't where it needed to be, mainly because we're playing catch-up from the impact of manual ordering due to last year's disruption. We sold out too quickly of some products, and in some cases, didn't quite get the sizing right.
Also, we missed out on some core. As we say in food, and we also say in fashion, remember, the core does sell more. Online sales grew, and that's good progress to our ambition of 50% participation. We're now at 35%, and as you'll see from Worldpanel numbers today, we've taken 10% of our online market share for the first time. We're in the early days of transforming the cost base online, which means this is currently a more expensive channel to serve. So, we've made good progress on product, the demand is there, and we're growing our online participation, but we fell short of our potential. Our profit margin was 7.5%. This was down on 12% two years ago, as flat sales met higher costs in fulfillment, technology, and marketing. That's why our focus is modernizing the end-to-end backbone of the business.
We are making it simpler and lower cost to plan, buy, move, and sell our product. I will now touch on Ocado and International. In International, we are simplifying the business and growing with the right partners. On Monday, we announced our expansion in the UAE with our longstanding partner, AFG. We will open five new large format food stores in the next year, and the first one opens in Dubai Festival City next month. We think the model is scalable, with the potential to further grow with more new stores across the region. In Ocado Retail, things are improving, and we are now delivering a profit. There is strong customer growth, far better efficiency, and strong cash generation, with sales up 20.6%. M&S Food sales on Ocado are up 23%.
Over 90% of the M&S range is now available, and 31% of the customer shopping basket is M&S product, and 50% of the Ocado basket is made up of M&S fresh food. Just finishing on our transformation, we said we are calling this phase reinvesting for growth. We are probably the only U.K. retailer investing at this scale. We expect to reinvest GBP 750 million in stores, supply chain, and digital technology this year. Some examples in food, we are focused on building capacity for growth, investing in two new distribution centers. First of all, we have opened in Avonmouth, which is already serving our stores for Christmas, which will add vital capacity. Secondly, you would have seen from Alison's video, the construction of our largest ever food DC is underway and on track in Daventry.
We also completed 18 store investments in this half, including 12 new and/or extended food stores and five renewals. This is good progress, but only 41% of our stores are now in the new or renewed format. This program started in 2019, so it shows we have still got a significant opportunity as we renew more stores in the years ahead. In Fashion, Home & Beauty, our job is to realize our potential by resetting the end-to-end backbone of the business. We are opening a new fashion returns hub in Sheffield this month. We have also begun recruitment at our new online DC in Lichfield, which goes live in January. By the summer, this site will be fully automated, giving customers a faster order time for click and collect, and reducing the number of deliveries they receive, which are now split over multiple packages.
In fashion, our first R&D store was Pantheon in Oxford Street, which includes our future blueprint for Fashion, Home & Beauty. The store is trading 30% up on two years ago. In fact, fashion is nearly 50% up, including womenswear over 50% up. Last week, Pantheon was our number one store in the country, and probably will be our most profitable store, providing good returns. Finally, in technology, we are transforming for the long term. Right now, we are relaunching Sparks, investing in AI, and rolling out Microsoft Copilot to 11,000 colleagues. We are upgrading our colleague communication to our new Iris platform, and we are also updating our in-store communication capabilities, providing headsets and connectivity to give our colleagues more time with customers on the shop floor. Coming up, we are simplifying and modernizing our whole technology estate, and there is a significant job to do.
We have already removed over 100 legacy applications. We are undertaking a wider SAP decoupling, which is a significant piece of work, which will help our finance team. Our strong balance sheet means we can now keep investing for customers while delivering sustainable returns for shareholders. Despite the onslaught of taxation, regulation, and other headwinds, including employment regulation, EPR, and the most ridiculous DRS scheme that is coming our way next year, we are on track to deliver our cost-out targets. At M&S, we are disappointed in last week's budget because it did not really address the issues, and it was not a budget focused on growth. We cannot get too distracted. We have to remain focused on what is in our control, and we do enter the second half with good momentum. As such, we expect full-year adjusted profit before tax to be in line with current market expectations.
To close, we have a clear plan. We have a strong balance sheet. Our strategy is unchanged. Of course, I would like to thank all colleagues for their hard work, and a special thank you to all customers, because they have been unwavering in their support, and I am sure that includes all of you on the call today. Thank you. We are looking forward to delivering an unforgettable Christmas. By the way, Friday, we will be previewing our Christmas campaign with the full launch of Christmas after Remembrance Day. I will now hand over to Archie for questions.
Good. Thank you, Stuart. Let us crack on with questions. What we will do, if we may, is just have one question and a quick follow-up if you want, and then we will try and get through everybody. Let us start straight away with Richard Trainor, our famous alumni at Bernstein. Richard?
Hi. Good morning, all. I am just trying to understand more about the clothing margin. I understand the point about the channel shift, but the store margin also came down. How much of the clothing sales are at full price in the half, please?
Thank you, Richard. I will kick off, and Alison can chip in as well. I think the first thing, just to remind everyone the context in Fashion, Home & Beauty, on the sales, if you exclude furniture, we ended up flat versus two years ago. I will come on to margin, but just the broader context. If you look at the market share data that has just come out, we have retained our number one market share, and in fact, improved that even further at 11.2%. The store share is actually the highest it is been at 11.8%, and the online share is number two in the market, but the highest it has ever been at 10.3%. To answer your full price, 83% of sales, Richard, were full-price sales.
The reason I am slightly hesitant on that number for the future is that the market is heavily discounted at the moment.
We are bucking that trend, and we need to be quite cautious about full price and reductions or promotions as we work the second half. At the moment, our exit rate into half two is pretty good. We have got quite good momentum in October, and the weather is on our side. In-store sales, I should probably say target operating margin remains at 10%. We are not changing that. Store sales were down about 5%. High street sales versus two years ago was the biggest decrease because high street sales were down by about 14%, I think. Yes, Fraser says yes, 14% on two years ago. So our high street stores have been more challenged. Let me just bring to life margin. So, if we start at gross profit, we did have a lower gross profit. That was driven by labor and raw materials.
It was also driven by a bit of stock write-off and stock loss, and also investment in value. That was where we decided not to go promotional, but to invest in pricing. Kidswear was one classic example. Womenswear was another example. If you then take the gross margin, and I will let Alison break it down in a minute and hand over to her on stores and online margin. If you look at gross margin and the breakdown to net, the inflationary costs were quite significant, and we did not offset those in Fashion, Home & Beauty to the same extent we did in Food. So retail, from the gross to net, added 80 basis points difference if you compare to two years ago. Logistics was an increase of 91 basis points.
The D&T cost, because of our investment in things like planning platform, was an increase of about 78 basis points. Also central costs, which meant we did increase our marketing, and we did not offset that with cost out. That then brings you basically down from two years ago to where we are today at the half, around 7.5%. So summary is, a lot of it is inflationary, and most of our cost-out program is weighted to the second half. Alison, split of stores and online or any other?
Yeah, I mean, you've told the story very well, Stuart. There is quite a reasonable difference between the store margin and the online margin. The split of the 7.5%, Richard, the store's margin was about 8.4%. The online margin was six. Online was impacted much more by the shift to online, the increased volume processing associated with online sales, higher returns, and a higher brand mix. Retail in the stores margin was really the big driver, which is largely pay inflation. Over two years, we've had about GBP 45 million of pay inflation across both retail and logistics. Those were the two big moves that impacted stores margin. The logistics element was what impacted the online margin more.
Okay. Thank you, Richard. Shall we go to Izabel Dobreva? Sorry, Richard? I think we need to move on. We're just not going to get through. Izabel?
Hello. Good morning. Thank you for taking my questions. My first one is on the food business. The margin performance was really very robust in the first half, and I was wondering, is there scope to see acceleration in the margin performance on a two-year view as we go into the second half, considering that the drag from EPR is not going to be there? Or was there any kind of timing element of the savings in the first half food margin? That's the first question. Then on the second question
Yeah, Izabel, we'll take that. Izabel, we're going to take that and come back to you.
Izabel, quickly on food then. We expect it to be roughly the same. As you said, in H1, it is about 5.6. We need to keep this flexible. The food market, despite our outperformance and our strong numbers, the market is flat. If you look at the latest consumer, as you see from the latest GfK, that is the biggest decline we have seen since 2016. We have to be very mindful that customers are feeling quite concerned about cost pressures. We are doing well, but that is also because we are reinvesting in value, GBP 50 million in the first half. Although EPR was in April, the other cost headwinds are still pretty significant, and that is still flowing through to our suppliers to us.
Even business rates, by the way, I got asked a question earlier about business rates because it was believed there would be some easing. In fact, even after this budget, our business rates have gone up GBP 10 million. There is not much easing on costs. We will not be changing the guidance. We need to keep flexible to drive volume, invest in quality, invest in value, and keep driving the business forward for the long term.
Thanks. Izabel?
Thank you. The other question I had was on the like-for-like outlook for Fashion, Home & Beauty. Do you think that we should expect re-acceleration to your stacks into positive territory as we go into the second half? I am just conscious of the stats you gave on recovered availability and the marketing efforts, which should be paying off, which in theory should bode quite well for your like-for-like outlook into the second half. Is that the right way to think about it?
I think it is. I mean, in a nutshell, you are right. The costs were more weighted to the first half, so we expect to see margin improvement in the second half. Availability is better. We are now back on track. We are actually better than two years ago across all of our businesses in Fashion, Home & Beauty. So, that is good news. Therefore, with that better availability, we should be seeing an increase. October exit rate is pretty encouraging for FH&B as well.
Yeah. The only thing I would add, Izabel, is that we do expect the channel shift to remain broadly similar to the first half, which brings with it those increased logistics costs that I talked about earlier. So, top-line recovery, but still higher logistics costs associated with online sales. You should expect to see a margin recovery in the second half. As Stuart said, the discretionary cost of marketing won't recur. So, the half year, the second half step-up versus the second half two years ago will be much less than it was in the first half.
Okay. Thanks, Alison. Thanks, Izabel. We are going to go to Richard Chamberlain, and then we will come to Clive Black. Richard?
Yeah. Thanks, Archie. Morning, everybody. One on each side of the business for me, if that is okay. So, on the Food side, could you just talk or give us an update on how the new space pipeline looks in terms of stores and talk about how the paybacks are trending for different types of locations, retail parks versus high streets and so on? That is my first one. Thank you.
Okay. Thank you, Richard. The good news on our food stores, first on payback, is we are trading well, and our returns are averaging below five years. The mix does vary. We have a couple of stores on two-year payback, a few stores on four-year payback. But I think what it is proving is our renewal stores, it has been running now for 6.5 years. We are on track, but we keep updating the blueprint just around the edges, so we keep modernizing it. Some of our new space, we have 10 more stores in H2 to renew or open, three pretty small stores to open in the next couple of months before Christmas. Our Homebase conversions are trading above expectations. That is our bigger store formats like Poole and Godalming. These stores in food are above 20,000 sq ft.
Poole, one example, is trading 35% above our business case, and that was a Homebase conversion. Godalming is trading 20%, I think, above our business case. So, very strong paybacks. Our pipeline is building. I think if we go into next year, we will be looking at around 20 new stores. But do not forget, we have also got some legacy locations that we still need to rotate and some closures in the pipeline, but hopefully rotate with new space. So, summary is, we are on track in food with renewal and new stores. We are on track with what we laid out in our plan at Capital Markets Day over previous years, and our paybacks are slightly better than we planned.
Okay, great. Thanks, Stuart. My other one is on the fashion side. It looks like you are getting some good traction with the younger age segments online, but how can you better engage the older age groups, do you think, on the digital side? Because I guess that presumably that is where still the core of M&S's spend is.
Yes. I mean, I think the summary is we do not really have a customer numbers problem, so that is good news, across the broad range of customer demographics. But there is no doubt, when you look at the numbers, where the growth has come from is under 35s. Now, if you go back a few years, we would be saying we would love to see that. Our under 35 share has doubled to about 8%. So, that is good news. I think all we have to do is keep focused on the core. As I said, when you look at our market share numbers, it does highlight that our under 35 age range has grown, and that has grown on two years ago. It is share of about eight-point-something percent, but that is about 3%-4% up on two years ago.
Our share of customers in the middle-age bracket, 30 - 55, has grown slightly on two years ago, and our share of 55+ customers is broadly flat. I think that runs around 13% share. I think this all comes down to remembering the core is more, whether it is the denim, the knit top. That is why autumn is always better than summer for us, because it is more core product. We have learned a few things on sizing, because actually one of our issues when we placed our manual orders, which impacted our summer performance, is we are still out selling on small sizes, and we have to be really onto that as we enter next spring/summer as well.
Okay. Thank you.
Thanks, Archie.
Clive Black. Clive, what I want to know is whether you have written to David Potts to congratulate him on succeeding me after 25 years.
Yeah, I did say that the remarkably wonderful Archie Norman will be a hard act to follow, and no doubt he took notice of that. A question, if I may, and congratulations on your food business, by the way. That is stellar. On logistics. Two elements. Firstly, is your food growth so strong that you are going to have to recalibrate the amount of capacity you need across the network, once Daventry's in place? Secondly, what is the cumulative benefit of Castle Donington, Lichfield, and Sheffield coming on stream for the online business? Thank you.
Well, let me take that, and also Alison can chip in afterwards. I think, firstly at the CMD, we've got a couple of hours on this, Clive, and myself, Alison, and then John and his team will be talking through all the end-to-end transformation in FH&B, and we will bring to life, really, your questions and answers in that session. The first thing on food is what Daventry gives us in 2029, is the ability on fresh and ambient for the growth plan that we've mapped out five years beyond that. Of course, with Avonmouth, that's given us about 30% more capacity as well, and with both of those sites, a lower cost to serve. I think what's been very good about the food plan, in my first few months as CEO, we acquired Gist.
Then we got efficiencies out of Gist, and that was the plan for the first three to four years, and then lay out what the 20-year network is likely to be based on our growth plans. Everything we've mapped out is really how it's playing out. Daventry will be a big thing for us. The first time we've ever built a DC like that in our lifetime. So, this is good news, and it does provide that future growth for beyond five years, lower cost. In FH&B, I mean, the most important thing is we need to get efficiencies out of our current sites. That's very hard with all the inflationary headwinds coming our way. But what Sheffield will do, first of all, it will reduce the cost of returns quite substantially.
Now, you have to remember, especially with our brands business, which is early days, our returns have gone up over the one year and the two years, and Sheffield will help manage that. It will also get returns back to our customers quicker than it does now. Lichfield will be important because it will be, firstly, manual in January, going fully automated by the summer. It will improve our next-day delivery for customers, for online deliveries, and our proposition will improve, and our click and collect will improve as well. It gives us the ability to our journey of 50% online, and at a margin rate that will be double digits, not single, over time, because of the lower cost to serve.
I think in summary, although the Fashion, Home & Beauty will be slower because we are being very measured, Lichfield being the big one, return center really helping the economics and lower cost of returns, all of that is driving that backbone of transformation in fashion.
Thank you very much. Just a quick follow-up. Where does Castle Donington then fit in, Stuart?
Castle Donington basically, Castle Donington will still be here for the next 10 years. The big thing about Castle Donington, it will still be very important for click and collect, and also very important to work alongside Lichfield. Basically, it will give us more capacity to serve our customers with less split parcels. Castle Donington remains, but hopefully more efficient.
Thank you very much. Appreciate that.
Thanks, Clive. Thanks. Let's go to Monique Pollard at Citi, and then we'll go to Adam Cochrane at Deutsche. Monique?
Wonderful. Hello. Morning. The first question, Stuart, was just on the value perception in food. At last year's Capital Markets Day, you talked about that being one thing you weren't happy with. Seeing the data in today's presentation, clearly that has moved on materially. Just wondering if you think more still needs to be done on value for food, or whether you're happy with where you are now?
Well, I think that's a very good question, Monique. Look, are we happy with where we are on value perception because it's getting stronger, we're moving in the right direction? Yes. Value is, of course, about price, but it's also about quality. The reason I like the flexibility when we give margin guidance is what the food team do very well is, we were in a session yesterday for two hours with Alex and Kathryn, where we were going through ranges for next year on quality and price. Our value perception is the best it's been, but I wouldn't say we should rest on our laurels, because if you look at all the customer sentiment, it's all worried about costs and cost of living. In the first half, we invested GBP 50 million in Remarksable.
I think Alex and the team have done a really great job on this, because when we launched Remarksable, we actually launched it five years ago, and the plan was to be within GBP 0.05 or 5% of the nearest competitor. But now, when we look at the products, it's gone from 100 to 150, now to 300 key everyday items where we're matching the biggest competitor at the same price. So, whether that was the free-range eggs at, I think, now GBP 1.40, frozen peas, or a pint of milk, we're now very strong versus the competition. Also, the team put down organic. I mean, we never sold much organic, by the way, but we took the prices down on 90 organic products. Our value perception on organic went up immediately. That shows you customers are sensitive to price, and our sales on organic went up by 25%.
We have 300 products in Remarksable. I think we are in very good shape. It is always a balance on quality and price, but we will always keep the flexibility to invest.
That is clear. Thank you.
Okay.
The follow-up question was just on the marketing spend. I understand that the marketing spend was much more H1 weighted this year. Should we see those marketing investments as a one-off, or will they be recurring for future years?
I am not going to say either yet, to be honest, because over the year, our marketing spend will be pretty flat on what it has always been. But I do want to give John and the team some flexibility to work out where we really need to spend our marketing, particularly in driving our online business, and that is work we are still working through. But it is right to say it was more weighted to the first half than it is in the second.
Okay.
Thank you.
Thanks, Monique. Shall we go to Adam? Adam Cochrane.
Good morning. Thanks, guys. Just a quick one on the Food side. You mentioned quickly that the main sort of basket, main shop basket is starting to pick up. Would you just be able to elaborate on that a little bit? I know it is an area that we have been trying to see improvements for the last couple of years, but it has taken slightly longer, maybe, than you hoped to see that average basket size increase. And what do you think has changed in terms of driving that?
Do you want to go, Alison, on that?
Sure. Hi, Adam. Yes, we have had some positive movement on basket size. If I look at the uplift in baskets over GBP 30 in value, for example, it is up about 35%, whereas the baskets under GBP 30 in value are up about 18%. That is all very positive. We still got work to do, obviously. Our average basket size is still about GBP 16 and six items, so there is a way to go yet, but it is going in the right direction.
Yes, Adam. I mean, look, we are trying to grow volume. That is always the priority, and you will see that in all the latest Worldpanel. The overall basket size is around 3.5% up. In some categories, it is growing quite well. Produce is actually the standout. That is where we are seeing some good performance. Of course, in our new stores, I mentioned Homebase earlier, but the basket size in those bigger stores is very encouraging.
As a follow-up, do you think you get new customers coming into the M&S Food as you put a new store in a catchment area, and then over time, those customers start to spend more money? Do you think that it will continue to build as these customers discover more and more of the M&S value product, et cetera?
Well, I think that is what we are seeing in the new stores. We normally get a lot of attention in the first week, and then it sort of dies off a bit, and then more and more customers return by week three and four. That is definitely the plan. I think it also comes down to the work the team are doing on range. If there are any range gaps in those stores, we are quite quick to range or plug the gap, if you like. We are also very in tune with what customers are asking for, which is why you have seen some improvements like pet food, like meat, like household in some of these stores as well, just to make sure if you want to do a full shop, you can, especially in these bigger shops. It is definitely appealing to families more.
You see that in my local store on a weekend, and you definitely see it in our bigger Food stores, like Godalming, like Poole, and these conversions we have done recently.
Okay. Thank you. Okay. Time is cracking on, so we are going to go to Georgina Johanan, and then Geoff Lowery, and then Frederick Wild. If we could just keep it as clipped as we can to get through as many as we can, that would be great.
That means Stuart, answer quickly.
No, no, no. Anyway, let us crack on. Georgina.
Hi. Can you hear me?
Yep.
Hi. Thanks for taking my question. I guess just stepping back a little bit, I just want to make sure I understand. Prior to the cyberattack in the Fashion, Home & Beauty business, you were obviously tracking comfortably ahead of that 10% already. I think most of us at the time thought that any initiatives around warehousing and automation would then comfortably drive you even higher in closing that gap to competitors. Are we now saying that because of inflationary pressures and some other factors, actually, the work around Lichfield and automation is going to support you in once again reaching that 10% margin? With that in mind, thinking about fiscal 2028, specifically the base you're coming from, presumably some fixed cost drag that's going to come in from Lichfield initially.
Can you actually achieve a 10% margin next year in that business, please?
Georgina, thank you. Let me summarize it this way. The first thing is our guidance around the 10% change. I think the 10% margin gives us flexibility. I always say it's approximately, whether it's slightly under or slightly above, we shouldn't be held to hostage on the percent, but our aim is always, same as Food, to drive the cash. The other point where you're quite right, if you just step back to look at what's happened last year, the first thing is the manual ordering did have an impact on sales in some of our key fashion categories because our availability and stock allocation wasn't as good as it should have been during the summer. That meant cash sales were a bit behind where we wanted, and that also therefore meant gross margin and cash margin was behind where we wanted.
Then when you take that a step further and you look at the costs, the costs were more weighted to the first half. Then when you look at the inflationary costs, in Food, we started to offset them better than we did in Fashion, Home & Beauty. Some of those costs were retail. Our retail costs were worse by about 80 basis points. Some of our costs were logistics, driven by the online improvement and 35% participation, and the fact we had higher returns. That was a 91 basis points deterioration. D&T, of course, because in the incident we had, all of that D&T investment and development stopped, and we restarted, for example, the planning platform. That means the investment in D&T also had a drag on the Fashion, Home & Beauty business, and that's why the op profit percent had an impact of about 78 basis points.
And then, of course, we had a question earlier about marketing, and marketing and other central costs were higher. What I would say, and I should call it out, we've just had the new brand metrics through, and it goes back to that marketing investment. Our brand metrics continue to rise, and our gap has widened even further, whether it's positive buzz or whether it's style. We're at our highest-ever score on style, a clear number one ahead of any competitor now. Our value perception is the best it's been in fashion since 2012, and we had a 2 percentage points increase versus last year. We're ahead of quite wide most retailers now. Our quality perception is also the best it's ever been since 2012, and that's the results that literally came through yesterday.
So we would hope that some of that benefit on style, quality, value plays out at the rest of this half, and there won't need to be that reoccurrence of marketing spend. So summary is sales, availability, shift to online, how we get better lower cost to serve, lower cost as we open Lichfield and et cetera, and get efficiencies in Donington, and how we control our costs. Whilst, by the way, remembering that we've got to invest in this business to fix the backbone, and there's lots to do in the next five years.
Okay. Thank you, Georgina. Now, I think time's marching on, so we're just going to go to rapid fire if we can and see where we get to. Geoff Lowery.
Morning. Just one. What does the compression in your store's margin and what you've told us about the step change in the cost base around labor mean for your future store count?
Gosh. Well, our store count doesn't change, Geoff. I'm trying to think of rapid fire answers, but our store count doesn't change at the moment, about 180 full-line stores. We do have to get better efficiency in our stores because one of the big problems when you look at retail costs for fashion is that our actual retail costs were backed by over 200 basis points. That's quite an opportunity for us. We've got to get stock better into stores, better visibility into stores. We've got to get stores retail-ready with product. To be frank, John running our business and Thinus running our retail business have got quite a big job to do to get our stores more efficient, and it starts with stock flow.
Planning platform will help that, better supply chain will help that, and I think that gives us a chance of improving the store cost to serve as well.
Okay. Good question, Geoff. Frederick Wild.
Good morning, everyone. Thank you for taking my question.
Hi, Fred.
Could I just ask, the October trading in fashion is pretty encouraging. I assume that means it is low single-digit positive on a two-year stack. Can I just check how you expect that to evolve over the remainder of this year? You are comfortable with market expectations for PBT this year. What does that assume in terms of what the consumer is going to do over Christmas?
Okay, we got it. Thanks.
Thank you. Well, look, yes, October has performed better, but let's be honest, we've got better availability. Our availability is up on two years ago and definitely better than last year. We've got good core product, and the weather has turned. The minute the weather turned, our performance started to get better. Our exit rate is on track. It's very hard, however, for me to give you a prediction for the rest of the year. I think we're in good shape with stock and availability, but you have to remember, as I said, the consumer sentiment is getting worse. As I said, the GfK points to some very big concerns. That dropped 11 points. I mean, that's the biggest decline since July 2016. We know our customers are still worried about cost of living, and you've only got to look at the Worldpanel market share.
GBP 1 billion of sales out of the market in six months versus two years ago. That's pretty significant. We think we're well set up. We need flexibility to invest in value if we need to. I don't really have a crystal ball for Christmas, but we're hoping and we're planning for a good one.
Right. Look, apologies to people who've been waiting a long time and haven't got in, but I think we're going to call time. Just take one last question because, Yashraj, you've been waiting very patiently, so from the beginning.
Morning. Thank you so much. Thank you so much for taking my question. I just have one on the food margin, please. You've guided to higher food margin versus two years ago. Let's say, if you do finish this year at 5.6%, is that the right starting point when we think about next year? Or do you think, given all the higher depreciation from the investments you've taken, the investment in value and quality and potentially inflationary pressures, maybe a 5.4% is a better starting point? Of course, if we get a better outcome, we take it. How are you thinking about food margins next year?
Well, I will talk about that at the Capital Markets Day, so I am going to hold that for next week. Just to say, we are going to keep ourself with some flexibility to invest in quality and value. We don't see it getting too worse than where we currently are. I will talk about that next week at the Capital Markets Day.
Super. Thank you so much.
Okay. Thank you, Yashraj. Sorry to those who haven't got in. We are around all day, obviously, all of us, to answer any questions. Thank you for your patience, and thank you for joining the call.
Thank you, everyone.
Thanks, everyone.
Thank you.
Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.