B&M European Value Retail S.A.

Good morning and welcome to BNM European Retail's Q3 2026 trading update call. To ask a question during the session, you need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To answer your question, please press star 1 1 again. I will now hand over to management to introduce the call. Please go ahead.

Good morning, everyone, and thanks very much for joining this call to discuss our third quarter FY26 trading statement, which we released earlier this morning. My name is Gia Jay from CEL, and I'm in the room here with Helen Cowling, our interim CFO, and Andrew Orchard, our head of investor relations. And on the back of this trading update and the guidance change that we communicated today, we wanted to hold this call to give you some context and also opportunity for questions. So before we go into questions, I would like to start with some prepared remarks. And I would like to start with some backgrounds. On the date of the announcement, so we would normally announce October 3 numbers a bit earlier. This time was a bit later because we want to take sufficient time to both prepare our trading results properly and diligently, but also spend sufficient time to undertake a thorough evaluation of the outlook for our business. I would like to cover four elements today. First of all, I would like to give some color to our third quarter results. I would like to take you through our thinking of guidance for FY26, progress made, which I think is the most important part of today with the back to B&M basics, and then updates on the review of the freight issue and the review that was done by EY, which has report has been finalized and we're getting on with the implementations of their recommendations. So starting with the third quarter results, I think we indicated that in our release in November, but we had a slow start in the beginning of the cold quarter, negative low single-digit like-for-like numbers. And I think that was linked to quite high levels of uncertainty with customers. December was a turning point, and we saw a particularly good sell-through of seasonal. Not only seasonal sold well, but overall like-for-likes amounted for the month of December to 3% for being in the U.K., And interesting also, I think positive for us was the performance between general merchandise and FMCG was more or less equal. And the positive like-for-like sales momentum has continued into this month of January. Elsewhere in the group, France delivered a positive like-for-like growth, be it a bit lower than before. In a competitive market, they had to accomplish strong like-for-likes the year prior. But with new store openings, they still delivered, in my view, a solid year-on-year growth of 8.5%. Heron's performance was below expectations, and also the underlying profitability was not where it needed to be. Let's move to a guidance for FY26. If you would combine the actual results for Q3 year-to-date, combined with the outlook for Q4, then we had to make the decision to adjust and tighten our guidance range for FY26 adjusted EBITDA. We've adjusted and tightened it downwards from previously announced 470 to 520 to the new range of 440 to 475. So that's basically our new guidance range for the remainder of this financial year. There are three key drivers for the downgrade, and I would like to give also some color to why we believe we needed to do this. First of all, we have continued the investment in our FMCG pricing. I think we were very clear that as of August, we've made changes to the way we implement our pricing policies and strategies. And we've made, in August, adjustments to a number of KPIs, so key value items. And since then, we have continued to invest in price. And clearly, we want to make sure that we are there for our customers, that our customers will always find prices in line with our price policy, i.e. being significantly cheaper than the big grocers and we continue to do so also of course in the golden quarter. Second one is part of basically back to basics and it's an investment in strategic clearance and cleaning and adjusting our stocks. I think you all know that we spoke about our range personalization program. We really would like to focus our ranges. But to do so, clearly, we need to part ways with quite a bit of range. So we are preparing our stores for the rollout of this range rationalization. And on the back of this, we're increasing our clearance efforts significantly in the second half of this financial year, and especially in Q4. We've got a very strong focus now at the moment, if you go into our stores, on clearing seasonal and discontinued lines. Obviously, January is a really good month for this. And in addition to this, on the back of the availability trials we're currently running, we're also finding opportunities to adjust and clean our stock to make sure that we achieve the correct base and the right lines to drive the availability improvements we want to bring about. So that's the second driver of the downgrade. And the third one is the underperformance at Heron Foods. And just to frame your mind, so the business at Heron Foods was built on a clearance model. combined with a convenience offer. At the moment, this is a challenged business model, and in this financial year has resulted in, relatively for the business, a significant underperformance. Those are our expectations in the October outlook. We're conducting a review of the customer proposition, and we'll continue to assess this business going forward. I think it's important to point out that two of the three drivers I've outlined are linked to Back to Basics and that they are investment decisions we've taken based on the insights and the long-term health of the company. And we could have chosen also not to make those investments now, but I firmly believe that this is the right approach as we prepare the foundations for a return to sustainable life for agro for BNM UK and return to sustainable life for agro is our number one priority. I also would like to emphasize that the lower profit guidance for this year doesn't change our view that with sustainable like-for-like growth returning to BNM-UK, we continue to believe BNM-UK can return in the medium term to a low double-digit EBITDA margin business once we have established sustainable like-for-like growth. What we've always said, restoring like-for-like outcome would likely take between 12 to 18 months, and there's no change to that view. And also, I think it's important to note margin is an outcome. not a financial input, and how we manage the business. So let's move on. I would like to give you an update on back to B&M basics, because that ultimately is the key to unlocking the recovery of UK life-for-life growth. We're now moving from trial phase to rollout phase in both the range, or what we call this SKU rationalization, and availability work screens we outlined back in October. On availability, we've scaled up now to over 150 stores in the month of December. And about 150 items, we are having a very different process across those stores where we see good sales growth on the items where we've given greater focus and a different way of managing the availability. And we would like now to roll this out across the nation later this month and early next month, and then we'll cover 250 of our best-selling lines. And we believe that will really help those lines and ultimately Of course, also the broader categories and will lead, in our view, to support increasing sales. So that's your availability trial. So we scaled up, even in this calm quarter, to now 150 stores, and we're ready to roll out the focus on 250 best-selling lines to all of our stores in the next weeks. The next one, which is also very important and part of back to BNN basics is range rationalization. You might recall there were three FMCG category pilots. We started in the third quarter. We've got really good insights in the performance of those pilots. We are now adding four categories to this trial later this month, and that means in February there's about seven categories with the reduced range live in our estate. And the objective is to reduce range by about 25%, but ultimately deliver a sales uplift and simplification of the business. So once the results of the pilots are in, we will then start to push the button of the rollout to all categories, which means more focus ranges, and that will start in the first quarter of the new financial year. And then promotions, also an important part of Back to B&M Basics. In November, we've taken a new approach. We communicated that. Our especially front-of-store manager special area, we've taken a more flexible approach, trading a moment. At the back end of the quarter, we decided to dedicate this fully to Christmas ranges. And we've really seen that it has helped significantly to sell through these categories, but also, which I think is quite important, to really establish B&M at the destination store for the Christmas season. And I think we did trading of the front of store harder than we did in the past. In my view, it really helped drive the decent like-for-likes we saw in December. But then apart from trading, EY has completed their review, the review we announced in October of the freight issue that we encountered. And to recall, EY was commissioned by the board to examine the issue from an accounting and an IT perspective. And we're now implementing the report's recommendations on specific IT and financial operational processes raised in this report. The full-year financial impact of the issue remains unchanged and is in line with our announcement in October. So rounding up this update, I would like to summarize that from a trading standpoint, I think we delivered our golden quarter with a soft start but a solid finish. And early trading in Q4 shows positive like-for-like sales at BNM UK. We've identified opportunities to deepen investments in range reduction and availability on the back to BNM basics. And in combination with underperformance at Heron, we've adjusted our guidance range for FR26 to 440 to 4575 from the previous range of 470, 520. We're continuing to make good progress with back to BNM basics and very excitingly Q4 will see the rollout of the new availability working practices for our best sellers across the nation. and we're putting in place the foundations for the rollout of the FMCG range rationalizations ready to kick off in the new financial year. And finally, EY has delivered its review, and we're implementing their recommendations. But before I open to questions, I'd like to emphasize that a major business reset, and I think that's how you can call it DecoBean and Basics, like the one we're bringing about, inevitably bring with them choices. many of which provide opportunities for securing the outcomes you're aiming to achieve. And B&M Basics is no different. And we're approaching every one of those choices with the mindset of owners of a business we all feel very passionate about and which we believe has a bright future. And I firmly believe making investments in these opportunities now is the right thing to do and will help us achieve our goal of returning the like-for-like growth back to the UK within the timeframe we've outlined. And with this, I would like to open the floor to questions.

Reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Once again, please press star 1 1 to ask a question. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. This will take a few moments. Thank you. We are now going to proceed with our first question. And the first questions come from the line of Warwick Okunis from BNP Paribas. Please ask your question.

Thanks. Morning, Jed. Morning, Helen. Two questions, please. Firstly, could you just comment on Q4? You're planning to accelerate clearance in the quarter. What do you think this will add to like-for-like growth? And maybe as part of that, was Q3 sort of boosted by extraordinary clearance? And then my second question is whether you could just comment on, in a bit more precision, the sort of uplift in sales that you're seeing from the availability trials that you've been conducting so far. Thank you.

Yes, very good. So basically, if you focus on Q4, we actually have a significant focus and strategic focus on clearance in January on the back of seasonal ranges that we would like to clear. And January, of course, is the obvious month to sell your seasonal autumn winter ranges, but also to start selling all of the discontinued lines that we have accumulated in our store warehouses, and especially when they're seasonal, that's the right moment to sell. And at the back end of Q4, so somewhere in March, we will then start having a very strong focus on starting to sell in a clearance way, all of the ranges we already have decided no longer to need in our, say, range optimization program, which will start rolling out, let's say, in the first quarter of the finishing year. So basically, it's more or less a strong focus throughout the quarter. The beginning of the quarter, very much linked to clearing seasonal and discontinued lines that we took from our store warehouses, and the back end of Q4 is really starting to clear all of that ranges that we no longer need as a result of the review of the range rationalization. To put it in perspective, in Q3, obviously, you've got a normal clearance, the ongoing clearance that we have. But I can tell you, I think the contribution of clearance to the like-for-likes in Q3 were probably very small. The sales really was driven by many, many different categories and actually equally in FMCG and brown box and very much the seasonal categories of which majority of them we were selling full price. So that's basically Q4 for free clearance. In terms of uplifts of the availability trial. So I think it's important to note that we decided to, even though normally you would not want to change things and from an operational perspective throughout December, we did decide to scale up from the 11 trial stores to 153 stores in December because we really saw good encouraging results coming out of the first 11 stores. And we've seen also now in those 153 stores that the 250 best-selling lines that we have given significant focus, they've received more space in shelf, they're very diligent and stringent focus in stock record accuracy. We need the gaps when the supplier hasn't delivered the product to RDC, which is new for the company. We're looking at shelf capacity enhancement. We've actually seen that in those stores, the 153 stores, those items actually have seen double-digit sales increases. Obviously, some of it is, let's say, sales that probably would be driven in other brands if we wouldn't have done so. So it's not completely, let's say, accretive sales number. But it's very encouraging to see that, you know, the customers are, let's say, buying significantly more of it. And ultimately, what it actually does, it establishes BNN as a more reliable place, a more reliable store where you can buy the items you buy most and you know they're always there. And in the past, we were not always, let's say, best positioned in terms of availability. And the good thing is, you know, on the back of the 153 stores where we now have rolled out the availability trial, we're very confident to successfully roll out at the end of January reset to all of our 791 stores in the U.K. This is just a start, so it's 250 lines. There's thousands of lines in FMCG. So clearly the next step will be to enlarge the scope of products we have a different focus on. But I would say so far, good progress in this area.

That's very helpful. Thank you.

Thank you. Thank you. We are now going to proceed with our next question. And the next questions come from the line of Jonathan Pritchard from Appeal Hunt. Please ask your question.

Morning all. Two or three, if I may. Two or three. Just the continued better performance in FMCG, obviously clearance is very strong in January, but has FMCG continued to be a bit better in January? And has the pricing investment actually ushered in a change in pricing perception where FMCG is concerned? And then a couple of the quickies, just on Heron, just give us a level of granularity on the profitability issues. Is it purely operational gearing, the like-to-like was worse than you expected, or is there something more structural there, and continuing to use the word sort of structural, would it be fair just to say that on the margin investments in B&M, the price investment is slightly more structural, but it's more one-off when it comes to the clearance side. I think I might be starting to notice a little bit there, but just to confirm that for me.

Yeah, very good. So three very good questions. So I'll start with the first one. So clearance, I would say, at this stage has a smaller impact on FMCG. We do clear some FMCG in January, but the larger impact of clearance in FMCG will come in March. If you would look at the signal that we had an elevated FMCG price investment, and it's mainly to do with the fact that we had a... We follow those prices in the market, and we've seen in December there was quite a significant enhancement of competitive activity on seasonal food lines. And we just participated in that fight, and we wanted to give our customers best prices while the rest of the market was offering also great values. So we saw elevated, let's say, pricing impact in December on the back of, let's say, a seasonal fight on, let's say, quality street tins and the like. So we continue to invest. Price perception ultimately builds up over time. Anecdotally, I hear that especially stores where we face our most important domestic competitor, which is concept, which is quite similar to ours, that customers are acknowledging the fact that we have better prices and we see some of the FMCG sales in those stores trending upwards, but I would say it's a slow burn. So I wouldn't say it is all linked to the fact that we decided to be more competitive in December. On Heron, I think you know that Heron actually is built, originally built on a clearance model. So a significant part of its sales historically has been the ability to acquire stock lots of food suppliers, perishable and non-perishable, with short shelf life, where the producer had issues with forecasting their demand properly, and they had overstocks. They couldn't sell it with their regular customers. And then we had the opportunity within 24 hours to acquire significant stock lots at great discounts for us, but also at great discounts ultimately for our customer. And the interesting element of the clearance model was it wasn't just a great deal for the consumer. Also, it was accretive to our, let's say, gross profit margins on the back of this clearance model. And many of our suppliers, you know, in the UK and globally have invested in better forecasting tools so that the clearance models, the supply of clearance products, unfortunately, is reducing. So we don't have access to the same levels and quantities of clearance that we saw historically. So we've become more or less now a convenient discount for low prices, convenience. It means a higher cost to run a shop without the clearance element helping our profitability. That's been actually the main and most important driver reducing profitability in Heron. And obviously, you know, it's something we're very unhappy with. We are doing a proper review of the customer proposition. And, of course, we continue to assess the assets. And then final question, price investment being structural, your words, and clearance being more one-off. I would go, I would look at pricing also a bit more in a dynamic way. Obviously, we've taken the decision in August to reduce pricing or say be more competitive in FMCG with the consequence that we reduced prices because we needed to, because we were, in my view, not best placed competitively. That has led indeed to an investment in gross profit margins in FMCG. And I don't expect competitiveness in FMCG in the UK will weaken or soften. So this might be a prolonged investment. Yes, that's the right thing to do for the business. But I also would like to share that I think I've already, let's say, shared a few previously that I would like them to repeat today. I believe that 18 months ago, 12 months ago, the decision was taken at BNN to reduce pricing and reduce margin rates in our non-food ranges, our brown box ranges. I think that was not a strategic decision that was taken in the right direction. I believe that ultimately, because we develop all our ranges ourselves, we've got unique price points, we've got a great sourcing platform in Asia. In my view, there's an opportunity for us to improve our margin rates in brown box and non-foods. which means we could actually absorb over time, in my view, the investments we're now making in FMCG. Unfortunately, as you know, most of our brown box is pre-priced, and most of the brown box is seasonal, so it will take several buying seasons to fix this, but that's the way I would ask you to look at, you know, pricing more strategically and long-term at BNN, so don't assume that our pricing now is permanently depressed on the back of our investments in FMCG. It will take probably 12 months, 18 months in brown box to get to a more solid, healthy margin rate, given the nature of buys. But I think dynamically, we are still aiming to improve our rates in brown box. And the clearance, yes, 100%, especially the way we are now clearing. If you walk into our stores, you would see we're using manager special space for clearance. We've got to reduce the clear area. There's a very strong focus. Every single store has scanned every single item in the warehouse to make sure that everything that's discontinued is out for sale for customers. We are applying significant, let's say, price reductions to really clean our warehouses. That is, I would say, you could argue, in the end, a one-off because we're not intending to do a strategic program like we do now every year. And this is really then the foundation for clean ranges. easier to execute in our supply chain, easier to execute in our stores, and easier to shop for customers.

Thank you. We are now going to proceed with our next question. And our next questions come from the line of Richard Chamberlain from RBC. Please ask your question.

Thanks a lot. Morning, team. Good morning. A couple from me, please. In terms of the skew rationalization, can you talk about how you're sort of intending to manage that and sort of edit the range but not reduce perceived choice for customers? I guess there's a sort of balancing act there. And then the second one, I guess looking ahead to this spring, post the heavier period for clearance, what sort of changes will customers be noticing now in stores across the estate in terms of more compelling price messaging, better availability, better price communication, all of those sort of executional or operational improvements? I was wondering if you can sort of talk to any obvious changes that B&M customers will start to notice as from this spring.

Thanks a lot. Yeah, good, good. So on the first one, so there's three categories in about 23 stores where we have, just before we did the actual announcement, went live with about a 35% reduced queue count in pasta and rice, in crisps and snacks, and in wine. We've learned a lot there, and indeed the goal is significantly reduced due count, but ultimately more sales, because I strongly believe that we've become very blurred with our offer. And, indeed, a way to do so is take out redundant choice, not unique choice. So customer offer actually is still providing all of the needs, but in a much simpler way to shop for customers. And ultimately being a true discounter, because complexity comes with cost, and cost is something we don't want to have. We're adding four new categories to this mix at the end of the month, so in January, end of January, in February, seven categories. We've learned a lot. I can tell you, there's three categories. And the aim is that starting in April, we will then roll out, let's say, about 200 subcategories across the estate where we aim to be done somewhere in mid-summer. And then we have some seasonal categories and often which will then update. So by the end of the year, basically we're done with this part of the program. And yeah, I think I'm pleased we did the trial. We learned a lot and we were making good progress also with the next four. And we've used, just to be clear, we've used transaction data in combination with payment card identifiers, so either debit or credit. So we could actually track customer behavior And we would know if customers would be very loyal to a certain item or customers would basically have very low loyalty. And those indicators will be used to reduce range or to keep lines in our range. In terms of what our customers are going to see in our stores, in the end, this is not a sprint, but it will take time to build. What we are doing though, so the availability trial, which will go into full rollout this spring, will become visible in our stores. So the 250 best-selling items, you will notice the customer, they will have significantly more space and they have sufficient shelf capacity. They will also be marked with different shelf communication, different color coding of price tags, but also more shelf talkers because those 250 items are not just our best-selling items. They're also the items where we are sharpest on price. So that will help us building that very strong price message on those items. We've also started, let's say, on our socials and a bit on paid advertising, our everyday value campaign. So we're showcasing every single day you can buy great value at B&M. And, of course, obviously the most important one is as of this month, we're launching all of our new spring summer ranges. They're now flowing into our stores. And I can tell you that it will be, in my view, quite a strong reception this year because I think historically we had to cut in those lines, not on the back of a very strong clearance program. This time stores are clean, warehouses are clean, so I expect really the spring-summer ranges to shine. So I would say those are the changes customers will see spring-summer, and then, you know, over the federal climate period, then we'll see the full implementation of the range westernization, so more focused ranges.

and very helpful. Thank you.

Thank you. We are now going to proceed with our next question, and the questions come from the line of Karen Elias from Barclays. Please ask your question.

Hi. Thank you for the presentation, and thanks for taking my questions. I had two, please. Actually, you've mentioned the end of the review. Just wondering if there are any particular implications that we should think about in terms of CAPEX that you can share or anything on the um, you know, into the financials impact that we should be aware of. And then secondly, obviously, you know, it's great to see the likes of likes turning positive and obviously the, as availability improves, but just thinking about, you know, clearly what sort of leverage are you comfortable with and how should we think about the path of earnings and leverage in particular? Thank you.

Yeah. Great. Um, um, so on the UI, uh, review, um, Clearly, we've commissioned them to focus on the accounting controls and the IT change. They came back with a significant number of recommendations, a good number of recommendations, rather. And there were four areas where basically the recommendations were focused on. Area one was formalizing and documenting policies and procedures to a larger extent than done historically at BNM. Standardizing our IT change. We had a really solid IT change process for projects, but less, let's say, standardized approach for business as usual changes. A stronger cross-functional business partnering. You know, unfortunately, I think it's a curse of many companies, but also B&M is quite siloed and something we would like to break down, but we can't do this overnight. But having a stronger cross-functional business partnering would have helped here, and we are doing that now significantly better. and then improving segregation of duties. Those are the four, say, main improvement themes. And as you can hear, it doesn't require a significant capex investment. It doesn't require, you know, adding significant amounts of people to our business. It is more formalizing and changing the way we work and being more intelligent in terms of how we operate. So that's on the EY. And I would say a significant amount of recommendations have already been implemented, and we are concluding all of that and some other recommendations in the remainder of the months ahead. So on life-for-life turning positive, I would like to just put it in perspective. I think it's important to note how pleasing it is that December and also going into January we saw positive life-for-lives. In my view, and I'll be very clear, the real hard yards and the real customer impact from back to being in basics isn't yet visible in our stores. And we've always said sustainable lifestyle growth requires 12 to 18 months. I just want to make sure that everybody realized that. In terms of leverage, I think we updated our capital allocation policy in November, and we feel really still comfortable with that. And we basically said that, you know, we would like to stay within one to 1.5 times leverage. We were 1.6 on the half. Clearly, you know, you can't always plan leverage to the finest detail. But, you know, we aim to remain within this range, and there's no change in this policy.

That's very helpful. Thank you. Thank you. We are now going to proceed with our next question. And the questions come from the line of Ben Hunt from Panmure Liberum. Please ask your question.

Oh, hi there. I just wanted to provide sort of an update with the actual sort of price competitiveness. Around the time of the strategy, I think you said that you were going to reduce lines on an average of about 2% on 35% of the KVIs. Where is that now trending today following what looks like further price investment in the FNCG? That's a question I'm wondering.

Yeah, Ben, good morning. Yeah, so I would say pricing is cumulative and continuous. Clearly, we've made a step in August, and we've continued, and every single week, we track about 400 lines, and we compare ourselves line by line, so higher, equal, lower, with the full grocers, and we see consistently that are, let's say, target price index of 15% cheaper after rollback, after Nectar, after Clubcard, we're achieving to the largest extent, and we're not achieving that. It's mainly because there was a new set of rollbacks, Nectar discounts, Clubcard discounts, where we're adjusting. What we did see, though, in December, we've added and which is the right thing to do, we added the core seasonal ranges to this price basket. That price basket is dynamic, it's not static, so you always look at if you've got the right range covered in your basket. And we've added in this basket all of the seasonal sweet, let's say, items. I mentioned quality street tins, but there's all the roses as well, but there's a significant, let's say, amount of seasonal products. that those items were used by the four main grocers and to an extent also by the German discounters as a price fight where we decided to also reflect more compelling pricing in our ranges. That focus on price and that fight has, of course, been concluded with the start of the new year because those ranges are no longer relevant for customers. So we've seen in January a bit more easing of that price investment to levels where we were before December. So, Ben, I'm not disclosing today, you know, the cumulative investment. It's the right thing to do for the business. We feel good about the investments we've made and we continue to do so. And I think in the end, strategically, we have an opportunity uniquely so with our non-food ranges to make sure that we compensate investments in FMCG all the time with better rates in brown box and that's the aim and the focus of our buying teams.

Okay, great. And then secondly, I'm a little bit confused on the performance of the general merchandise gross margin. I think the previous management has indicated that by the second half of this year, financial year, the ASB cuts that they had made would have annualized and therefore the gross margin would have started to trend upward. And yet that doesn't seem to be following your narrative of the big box or the down box rather.

Yeah.

Rate cuts. So if you could just clarify what's going on there.

Yeah, yeah. So I think it's important to know that clearly margin rates is always, let's say, a combination of your underlying, let's say, buys that you make in the Far East, so let's say full price margin rate. Second element is then your clearance, let's say reductions, which reduces that rate. And the third element is then promotions that are basically, let's say, conscious decision to reduce prices to clear more stock. And then there's a fourth element, which is basically shrinkage or stock losses. That combination will lead to a growth focus number. We've seen indeed that underlying the brown box margin rate is slowly, slowly improving. That said, you know, the real, you know, improvements are still to come. And obviously, we are trying to look at opportunities to improve cross-profit rates. But you can imagine that, you know, when we are taking a strategic decision to focus on reducing discontinued lines and seasonal lines, that the element of clearance in the margin rate of brown box is diluting its rate and not accretive. But it's underlying that the margin brown box rate is indeed step-by-step improving.

Great. That's brilliant. Just one final one. There's not much commentary on store openings or prospects of anything you can add on that one.

Yeah, there's no change. That's why we didn't disclose, but we should talk about it. So we're still, you know, on track to open between 40 and 45 gross new stores this year. So it's still very much in the pipeline.

Perfect. Great. Thanks.

Thank you.

Thank you. We are now going to proceed with our next question. And the next questions come from the line of Adam Koffring from Deutsche Bank. Please ask your question.

Good morning, guys. A couple of questions, if I can. Previously, when you outlined the EBITDA guidance, you said that the main difference between the upper and the lower end was going to be like-for-like sales performance. I can understand that Heron has changed, and I can maybe understand that you're doing a bit more price investment. In terms of the impact of clearance on the margin, you knew that you were going to reduce the the SKU count, when did you think that that clearance impact was going to hit the profitability? Or is the clearance just costing you more than you thought it was going to do when you gave the guidance previously? And then on that tone, you talked about the clearance accelerating in March. Will all of it be done in this fiscal year? Or as we look into April of the next fiscal year, will there still be some of the clearance ongoing then? Or would you expect the majority of it to be done in Q4, in March? And then finally, my question is, you're doing so many things at the same time with regard to availability, SKU count pricing. How are you able to really work out which of these initiatives is delivering the the sales uplift that you're seeing, and so where to spend more time and effort on which of the areas are having the biggest benefits? Thanks.

Yeah, good questions. So I think from a guidance perspective, clearly, like-for-like sales are still a very sizable impact and will have a sizable impact on the outcome and the outcome of the results for the financial year. So there's no change in that understanding. And you could say, with a minor 0.6% like-for-like for the quarter, we probably came out slightly below the midpoint of what we initially said. But it's fair to say that, and it's progressive insight, I think the quality of our stock and especially the amount of items that need to be discontinued was significantly larger than we anticipated. So that's why we took the decision to to make this clearance investment and they were clearly not in the outlook and then they cannot underestimate even though it's a smaller business. Heron Foods especially in the final quarter had quite a sizable impact on the business and in the end, you know, these are the right things to do for this company. You know, there's only one month of January for 12 months. This is the month to clear autumn-winter stock. This is the month to clear discontinued lines that are seasonal. You could, of course, decide to keep it in your warehouse, wait another year, and then potentially bring up margin rates, but that's not what I would like to do. I see this business, and I would like to act this business in its best interest, and its best interest is to act as an owner and to make sure we do the right things long-term. So that's why we decided to take those investments in conjunction with the Heron underperformance. You're right, we're looking at many elements of the customer proposition on your second question. But I wouldn't say we're doing many things at the same time. It's four key work streams of which two we are trialing properly in a, let's say, isolated group of stores. And two, we've implemented because we felt they were the right things to do. Pricing promotions, I would say, has been implemented and we're continuing to improve and strengthen. But on availability and on range rationalization, we are not, let's say, executing things without proper planning. We can actually measure the impact quite a bit of both availability and the range rationalization trials. Just to be very clear, we are aiming to reduce range between 25 and 35% and still see a low single-digit sales uplift coming out of those range rationalization trials. And with the availability trials we've seen on those 250 lines, a double-digit sales uplift in those lines. So we will be able to actually track the contribution of those projects to our overall sales development over time. That's the way we work. And I think this all test and learn approach It's quite new to B&M, but it's a way, in my view, to run this business in a better way. We've got 791 stores, soon 800 stores. So we've got 791 opportunities to learn and improve and get the estate in better shape.

I was more thinking about... ...cutting price on certain lines, and then you are changing the SKU cap It was all how you – I get your point about you're doing the two trials in different stores, but I presume the pricing element is done across all of your store estates.

Yeah, yeah, yeah, it is. And we're not cutting prices for the sake of cutting prices. We're cutting prices to make sure we keep a 15% distance to the four grocers. We're making sure that we are never more expensive than the operator in this market who is most similar to us. And that is an ongoing commitment to our customers. And if the market heats up and people become more competitive and invest more in price, we will invest more in price. And if the market is less competitive, it might be days for our margin rate. But we will always do the right thing for pricing for our customers because we're a discount operator and the premise, the essential premise to our customers is it's always great value at B&M.

And just on the first question about the clearance that you're doing in March, Do you expect that all to be completed in March or will only carry on?

That's a good question. So I would say if you look at the quarter, the start of this quarter is very much influenced by clearance of seasonal and discontinued lines out of our warehouses so that they have built up over time. March is the start of clearance of the range rationalization. There will be an element of clearance of the range rationalization also going into the new financial year because the implementation of the rollout will take several months going into summer. All right. Thank you. Thank you.

Thank you. We are now going to proceed with our next question. And the next questions come from the line of David Hughes from Shaw Capital. Please ask your question.

Hi there. Thanks for taking my question. I just wanted to dig into kind of stock levels and working capital. So first of all, with this additional clearance that you're doing and kind of the ongoing program of SKU count, are you expecting to see any benefit from the working capital and stock levels of that and any improvement in inventory holds? And then similarly on stock levels, I just wanted some clarity on a comment in the trading statement. You say that early results from the trials are helping improve the quality of your stock records. What do you mean by that and what were the kind of challenges that you had with the stock record beforehand? Thanks very much.

Yeah, that's a good question, David. Good morning. So first of all, with less SKUs, you could say there will be less stock needed in the business, but you could also say we also want to make sure we have stock available for customers. So I think on balance, I'm not so sure it will be, let's say, a significant reduction in working capital. I think that said, I think it's something we need to look into as a business in terms of how we can improve and how we can work in a more efficient way. But the focus is now on range and price and promo and availability. In terms of the stock records, yeah, it's mainly linked to a different way of working. So in the past, we had the tendency, especially in the food areas, whenever there was a gap to phase over the gap, remove the price ticket, and ultimately that led to the significantly below market standard availability. Any retailer would investigate when a shelf is empty, why, and the first point of call is to get your stock record in your system, count the stock of that item in your store, and as a preference, you adjust the stock record. That discipline wasn't always there because actually people really don't focus that much on interrogating gaps. because gaps were faced over. We are now having a very disciplined process of every single store on those 250 lines, checking every gap. And as a consequence, it leads to more frequent adjustments of stock records, because the accuracy of stock records is driver of variability. That's the only thing we wanted to share, which is, and I can tell you in my career in retail, that's retail basics. But unfortunately, it's something we haven't done disciplined in B&M, yeah?

Great. Thank you very much. Thank you.

Thank you. This concludes the question and answer session. I will now hand back to management for closing remarks.

Yeah, thanks very much for your time, and thanks very much for your attention. I think, you know, this concludes, you know, we concluded the Golden Quarter, I would say, with solid life for likes, but there's much more to go after, and that's the journey that we're on. Thank you very much.

Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you and have a good rest of your day.