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.