Jd Sports Fashion Plc New

Morning everybody and welcome to the JD Sports half-year results. I'm delighted to say that it's a set of results where we're on track for the year as we stand here today. And I just really wanted to make a couple of introductory remarks before I hand over to the team. It's been a tough couple of years really in lots of ways. There's been a lot of challenges we're facing too. The markets have not been great. Consumer markets have been uncertain. I think we all know about the political challenges and economic background in our major markets and of course the cost base here in the UK in particular with the national insurance rises and various other things have been very challenging. We've also internally of course had governance challenges that we've had to sort of face into as well which have required investment and turnaround I really just wanted to start by commending the team, really. You know, the strategy is very much on track at the moment. You know, I think they've shown great resilience in the face of a lot of those challenges. And, of course, we're making great progress. The governance in particular, I think commend Dominic and his team for... the work they've done around the financial controls in the business, all led by Regis, of course, and of course the integration of things like the supply chain, the progress we've made on governance, the good work that we've done around the integration of the acquisitions we've made, and of course the great work we've done on our brands. If you need an example of that, go and see the Trafford Centre and see how that's moved JD on here in probably its most mature market. I think all of that is very commendable. So you're seeing here today some of the results of that hard work and with more to come. But I just wanted to say thank you to all of the team in JD for the hard work that's gone on. It's never easy when markets are difficult, but I think they're doing great stuff. So thank you very much and I'll hand over now to Regis.

Thank you, Andy, and thank you for your kind words. Good morning, everyone, and thank you very much for joining us. I'm Régis Schultz, CEO of JAD Group, and we are here joined by Dominique Platt, our CFO, and Mike Armstrong, our JAD Global Managing Director. I will start with our key message and highlight from the first half. I will then hand over to Dominique to go through the financial, and finally, I will take you through the key business update. As a reminder, at our April strategy update, we set out some clear priorities for the short and medium term. First, to deliver the vision to be the leading sport fashion powerhouse. Second, to build the infrastructure and the governance you will expect from a company of our size and for a world leader. And third, to focus on cash generation and shareholder return. So I'm pleased to say that our first half result reflect our priority and demonstrate our operating and financial discipline against what was a tough trading environment. We are building a track record of focus and consistent execution against our strategic objective. As a result, we are gaining market share in North America, in Europe, and building on the very significant opportunity we see in both regions to develop JD brand and leverage our complementary concept businesses. To finish our key message, we said we will provide you an update on the U.S. tariff impact. Dominique will go into more details on this, but you will be pleased to know that we see limited impact in the current reporting year. Let me now hand over to Dominique to run through the first half financial result with you. Thank you.

Morning, everybody, and thank you, Regis and Andy. So let's start with our summary financials for the group here on slide six. At constant FX rates, total sales were 20% higher year on year, reflecting a full half of sales from Hibbert and Korea, who were acquired in July and November, respectively, last year. Stripping these businesses out, organic sales growth was 2.7%, comprising 2.5% lower like-for-like sales and 5.2% growth from net new space. Against a tough backdrop in all our markets, we maintained our trading disciplines. Gross margin was 48%, 60 basis points behind the prior year, excluding Hibbert and Korea, which are slightly lower margin businesses. Gross margin was 40 basis points lower year on year. This was driven by controlled price investments, particularly in our online offer to increase customer engagement and conversion. Turning to operating profit, as a reminder, earlier this year we updated our definition of operating profit to include IFRS 16 lease interest, as we believe including all property-related costs gives a truer picture of the operating margin of each part of the business. On this basis, operating profit of £369 million was 6.3% lower at constant FX rates. Excluding Hibberton Korea, operating costs were 4.7% higher at constant FX rates, and this was driven entirely by new stores. Through structural cost reductions and flexing the staffing levels and discretionary spend, we managed to fully offset the impact of higher labour rates and technology costs, as well as non-cash mark-to-market charge of £14 million in H1. More on that later. Overall, the group's operating margin was 6.2%, 170 basis points lower versus the prior year at constant FX rates. Profit before tax and adjusting items was £351 million, 11.8% lower at constant FX rates, and in line with our profit phasing guidance. Included in this is a 22 million increase in net finance expense, excluding lease interest, which was driven by lower cash balances and debt financing related to acquisitions. Our adjusted earnings per share were 8.5% lower year-on-year at constant FX rates. For completeness, the statutory PBT was £138 million, 9.5% higher year on year. This reflects lower adjusting items or exceptional items as we all used to know them. These are essentially limited to non-cash revaluation of our Genesis put option together with the amortization of acquired intangibles. The Board has declared an interim dividend of 0.33 pence per share, consistent with the prior year. In line with our dividend policy, this represents one third of the final dividend for FY25. And last, but certainly not least, we delivered a 5% increase in operating cash flow to £546 million, demonstrating yet again the highly cash generative nature of our business. Turning now to our revenue bridge from last half year to this. The left-hand side rebases H125 for FX headwinds of two percentage points, as well as some small disposals from last year. As I mentioned earlier, like-for-like sales were 2.5% lower, and new stores contributed 5.2 percentage points to sales. This includes annualisations from stores opened last year, and also the fact that we opened four flagship stores in the period, including the Trafford Centre in Manchester, which is strongly outperforming against its plan. So overall, organic sales growth was 2.7% at constant FX rates. We believe this is faster than the growth of our addressable markets, driven by market share gains in North America and Europe. Finally, Hibbert and Correa added £869 million of sales for overall sales growth of 20%. As you can see from this slide, the JD Group is a very well-balanced and diversified global business. 71% of our sales come from North America and Europe, our key growth markets. Following the Hibbert acquisition, North America is our largest market, representing 39% of group sales. Our channel and category mix varies by region, which provides us with opportunities for growth. For example, our largest region for online sales penetration is the UK at around 25%, with our other regions overall in the mid-teens. We're building a fully flexible omnichannel proposition in all our regions, offering customers a seamless service for purchasing, delivery and return, whether they choose to use our stores or online channels, or, as we are increasingly seeing, a combination of the two. Within our omnichannel proposition, organic store sales grew by 3.6%, reflecting continued resilience of our full-price business model and our store opening program. Online sales were 1.6% lower, with good growth in North America and Europe, offset by a weaker online performance in the UK. While UK store sales were positive year on year, the UK online market as a whole was slightly more promotional during the period, especially in the second quarter, driven by short-term discounting to clear inventory. To maintain our competitiveness, we made some controlled investments in our prices and have seen an improvement in customer engagement online in recent weeks. Turning to category, our agile and multi-brand model really comes into play across our combined footwear and apparel proposition. When we exclude Hibbert and Correa, which are more footwear-centric fascias, apparel participation increased to 31%, with footwear decreasing to 58% of sales. In footwear, we continue to see a fundamental shift in the global footwear product cycle, given the transition between newer franchises and some significant end-of-cycle product lines. Notwithstanding this, we saw strong growth across brands more in the middle of the cycle, which reflects the strength of our multi-brand model. The early signals of new product franchises, in terms of both launches and pipeline, are encouraging, albeit they are a small part of sales today. Overall, organic footwear sales were 1% lower year on year. The apparel product cycle is very different compared to footwear. Our apparel proposition is in excellent shape, supported by innovation and our own brands, and we believe there is significant scope to leverage this for growth, particularly in North America, where our apparel mix is low compared to other regions. Despite tough comparatives from replica shirt sales in the UK and Europe due to the Euro 24 football tournament last year, organic apparel sales were 6% higher year on year. Our other category, which includes outdoor living equipment and gym memberships, maintained its share at 4% of sales mix. Turning now to our geographic regions. As a reminder, we have two different lenses on how we look at the JD Group. First, as you know, segmentation by fascia. JD, our complementary concepts, our sporting goods and outdoor fascias. This is our primary lens because it aligns to our strategy. And most importantly, it's how our customers and brand partners engage with the JD Group. The geographic split that you see on this slide helps to focus internally on creating the most efficient operating model to support our range of fascias in each region, and in the process, maximizing the returns we make on our investments. So starting with sales by region. As reported in our trading update in August, like-for-like sales in H1 were resilient in Europe, supported by our JD and sporting goods fascias. We were encouraged by improved like-for-like trends quarter on quarter in both North America and Asia Pacific. In the UK, we see organic sales as a better KPI than LFL, given the ongoing evolution of our store footprint with bigger and better stores. Rajesh will cover this in his slides later. UK organic sales were 1.7% lower in H1, affected by tough prior year comparatives due to the Euro 24 football tournament. Turning to margins, the group operating margin of 6.2% reflects the H2-weighted nature of our annual sales. By region, the North American margin was 340 basis points lower year on year. This was influenced by two significant but short-term factors. First, the ongoing wind-down of the finish line fascia. During the first half, finish line invested in price within its online offering to maintain competitiveness. It also closed 15 stores and transferred a further 22 to JD in the period. Those conversions continue to see significant uplifts in performance and profitability as the JD concept continues to resonate with North American customers. The remaining 220 finish line stores will be wound down over time, but will weigh on the North American margin in the short term. And second, the impact of Hibbert year on year. Last year, having completed the Hibbert acquisition on the 25th of July, the business recorded a spectacular first week due to back-to-school demand, making a significant proportion of its annual profit under our ownership in that seven-day window. Aside from these factors, as I mentioned earlier, Hibbert is a slightly lower margin business than the other North American fascias. The integration of the business is progressing well, and it's a key component in our multi-year program to create an integrated platform for the nationwide growth of all our fascias in North America, with an efficient supply chain and back office. We're on track to deliver annualized cost synergies of $25 million, with half to two-thirds of this, so about £10 to £12 million, expected in H2O. In Europe, we saw a decline in the operating margin of 40 basis points. The main factor to call out here were our controlled price investments, particularly in the online offer, which saw good results in terms of customer traffic and conversion. As our supply chain investments in Europe come to an end in FY27, we'll see the operating margin in this region start to step forward towards the higher single-digit levels we have elsewhere. To remind you of our broader medium-term guidance for the group, we expect to see over £20 million of cost benefits related to technology and supply chain double-running costs across FY27 and FY28. And finally, the UK margin was lowered by 130 basis points. This reflects the tough trading conditions as highlighted, as well as higher technology, labour and costs related to new stores. We have and continue to make strong progress on our plans to enhance sales productivity and cost efficiency in the UK. And Regis will touch on that more later. So onto the group profit bridge. Starting from the left-hand side, lower like-for-like sales at a constant gross margin contributed 33 million pounds to the decline. And that's net of 27 million pounds of attributable variable OPEX savings. We then have a further £25 million from the like for like gross margin rate reduction. The next bar shows a £10 million net OPEX increase, which includes a higher salary and national insurance rates, as well as technology investments that we flagged back in May. It's a net number because we've also included structural OPEX reductions in the year. Alongside the higher mark-to-market charge of £13 million, we offset these increases in full with our variable cost reductions, as you can see with the arrows on this slide. For the year as a whole, as we stated in our FY25 results in May, we expect incremental OPEX of over £50 million, including higher labour and national insurance costs and tech spend. And we're on track with our guidance of partly offsetting this through £30 million of structural cost reductions and US integration synergies of around £10 to £12 million. I would also highlight that we expect part of the mark-to-market charge to unwind in the second half. The contribution from new stores and annualisations was £24 million in H1. Hibbert and Correa added £32 million. And finally, we saw a £22 million increase in net finance expense, excluding lease interest. As I mentioned earlier, this was largely due to the interest on debt component of our acquisition financing, which anniversaries in the second half. On this slide, we set out our summary cash flows for the period. Depreciation and amortization was 467 million pounds, up 120 million pounds from the prior year. This increase was driven primarily by Hibbert and Correa, together with the impact of new stores and our supply chain investments. Lease repayments were 230 million pounds. As a result, the group's operating cash flow was 546 million pounds, up 5% versus the prior year. The change in working capital resulted in a net outflow of £312 million. This was due to an increase in inventory of £314 million, reflecting the rebuild of stock following the seasonally low year-end balance sheet position. Gross capital expenditure in the period was £216 million, down £29 million on the prior year, reflecting the tapering off of our supply chain investment phase. Tax, interest and other cash payments were £86 million, leading to an overall free cash flow of minus £68 million, and that's an improvement of £35 million on last year. To reiterate, given the seasonality of our business, we expect to generate significant free cash flow in the second half. Dividend payments related to last year's final dividend were £34 million, and our first share buyback programme of £100 million completed in July. Overall, we saw a reduction in net cash of £177 million, leading to net debt before lease liabilities on the balance sheet of £125 million. Turning to slide 12, and to reiterate the continued strength of our balance sheet and cash generation. We continue to manage our inventory effectively and in a disciplined manner. Net inventory increased by 14% year on year. This mainly reflects the acquisition of career, but also proactive stock management ahead of our distribution center transitions and city gear store conversions. Regis will provide more detail on this later. Overall, we're well positioned on inventory heading into our peak trading period. turning now to net debt. With cash of £502 million and borrowings of £627 million, our net debt at period end was £125 million before lease liabilities. We expect to move to a net cash position by the end of the financial year. Factoring in IFRS 16 lease liabilities, our net debt was just over £3 billion, representing net leverage of 1.7 times. Taking into account the Genesis buyout option in FY30 and FY31, pro forma net leverage remains around investment grade levels. In July this year, we completed a comprehensive debt refinancing. So including our new undrawn RCFs, our total liquidity at period end was just under £1.4 billion. Finally, on shareholder returns. In April, we updated on our strategy and our capital allocation priorities. And with this, a commitment to enhance shareholder returns. In accordance with these priorities and reflecting our expectation of strong free cash flow generation, we announced a second 100 million share buyback program in August. We expect the program to commence in the coming days. And at current share price levels, we believe buybacks represent a compelling return on equity for shareholders. And finally, for completeness, the Board has also declared an interim dividend of 0.33 pence per share. So now let me take a moment to address the impact of US tariffs on our business, which we said we'd provide an update on today. The overall message here is that we see limited financial impact in FY26, though unsurprisingly, uncertainty remains going forward. First, a reminder of our direct exposure. This is the impact on our sourcing of own brands and licensed products, as well as store fixtures and fittings. Our own brand accounts for less than 10% of our U.S. sales, and we've already taken effective steps to diversify the sourcing base. As a result, the direct impact to JD of higher U.S. tariffs is not material, estimated at less than $10 million on an annualized basis. Turning now to our indirect exposure, we've spent several months closely monitoring the actions our brand partners are taking to mitigate tariff impacts and any shifts in US consumer behavior. From a brand partner perspective, with a significant proportion of their sourcing concentrated in Southeast Asia, we're seeing them taking proactive steps across the supply chain to mitigate cost pressures and maintain competitive pricing. And where retail price increases have occurred, they've generally been targeted, with a broadly neutral reaction from customers so far. So based on what we've seen to date, we therefore anticipated limited financial impact from US tariffs in the current financial year. This is supported in part by inventory purchased prior to the implementation of tariffs. Looking beyond FY26, uncertainty remains over broader tariff, as well as over US consumer sentiment, as you might expect. We will of course provide updates as and when the landscape evolves further. So finally, on our outlook and guidance, we expect our full year profit before tax and adjusting items to be in line with current market expectations. Our H1 results demonstrate our operating and financial discipline against a tough market backdrop. You can expect more of the same in H2 with continued effective management of our costs and cash. We remain cautious on the trading environment, reflecting continued pressures on consumer finances, elevated unemployment risk, and the ongoing footwear product cycle transition. As a reminder, as we settle into our new reporting pattern, there's no update on current trading today, and we'll report our Q3 numbers on the 20th of November. Finally, as I highlighted on the previous slide, we anticipate the financial impact from U.S. tariffs to be limited in this financial year. So with my review concluded, let me hand back to Régis who will provide the business update.

Thank you Dominique. Let's move now to the business updates. First, a quick reminder of our investment case. JD Group operates on a large and global scale with footprint in over 50 countries. Our market, sport, fashion will continue to grow over time, benefiting from ongoing casualization and active lifestyle trends. JD Group is a leading player in all key geographies we operate and is targeting further market share gain, in particular in North America and Europe, where we see significant organic growth opportunities. JD Group has a strong and agile multi-brand model, allowing us to propose the best product to our customer and to navigate trends, brand heat seamlessly. JD Group is an omni-channel retailer. leveraging the best of the online and offline world for our customers. JD Group is building the infrastructure and the governance needed for a Group of our size and scale. In the last three years, we have invested significantly in our supply chain, in our technology, as well as strengthening our system control and talent. We will therefore unlock operational efficiency across the Group. This puts us in a position to deliver profit growth ahead of sales over the medium term. JD Group is a highly cash-generative business with a powerful balance sheet. With disciplined capital allocation, we have headroom to invest for growth while delivering an enhanced return to our shareholder that translates into a £200 million share buy-back programme for this year. Everything we do, everything JD does starts with the consumer, the JD customer, the young customer, the 16, 24 years old customer. JD's greatest strength is our ability to see the world through the mindset of our customers. Our close relationship with our young customers gives us a strong partnership with the brands we sell. This unique brand partnership provides us the ability to offer the latest and the greatest product to our customers. Our concept, the JD Theater, is modern, vibrant, multi-brand, premium, mixing sport, fashion, and music. We leverage the magic within our store to bring our proposition to life in an environment that elevates our brand partners' stories and delight our customers. Before you ask me the question, How is our customer feeling right now? I would say that the current level of uncertainty is impacting customer confidence across our different markets. But more importantly for us, as we have said previously, unemployment is a key factor for our young customers. And we are starting to see early negative signs on it, especially Europe, UK. Something for us to monitor in the coming months. Meanwhile, when we are delivering new, exciting products, we see our customers coming into our store. Talking about products, let's turn to a very familiar side, which demonstrates the power of our multi-brand model and our agility to navigate trends and brand heat. Looking at the mix of ourselves, in footwear on the left, on the left for you, yes, and apparel on the right. First, you will see that we are not building a range per brands. We are doing it by style, by category to focus on customer need. If you take footwear, we have four key categories. It's a simplified version of what we do internally. You have running, performance and retro, basketball, skate, we have included terrace in this, classic or tennis and other. And you can see the movement between the categories. For example, retro basketball went from 20% of our sales in financial year 2020 to almost 40% of our sales two years ago. before slipping back in the last 18 months. On the other hand, running has moved back above the 50% mark where it was in FY20, especially with the development of performance running with Horn, Oka, Salomon, Adidas Evo and the new Nike running product, Bomero 18 and Pegasus. Thanks to our agility, to our flexible merchandising, to our buying excellence, we are navigating, anticipating the product cycle, the change of trend and the evolution of brand it. And this is critical in the current challenging product cycle. As we always say, we will win with a winner. Turning to apparel, you can see how we have pivoted our offer towards performance apparel and street fashion. Performance apparel, mostly exclusive products designed by us, designed for us with the brand, show our agility to capture and create growth by extending our reach and leveraging our brand relationship with a big player and with emerging brands. This has been done very quickly as we have more than doubled ourselves in performance every year in the last three years and grew over five times over the last five years. Our growth in street fashion is another example of our agility to extend to new category by developing our own brands to respond to customer trend. As you have seen from Dominique in our H1 results, our focus on apparel gives us a unique competitive advantage and our investment in space, resources and talent is clearly paying off. Our apparel strategy is a key differentiator, a key competitive advantage in every market we operate and it brings to life our unique lifestyle proposition. Next slide. It's not working. In the first half of our financial year, we have made strong progress against our key mid- and long-term priority. In North America, our focus is to develop the JD brand, to leverage our complementary fascia, and to deliver the back-office synergy following the acquisition of EBIT. In Europe, we are leveraging our multifaceted strategy to gain profitable market share, with JD to address the young customer, Courier to reach a more female, older customer, and Sprinter Cosmos to a more family sport customer. We focus on key countries, France, Iberia, Italy, Benelux, Greece and Poland, where we have a leading market position to drive efficiency and profitability. We are building a more efficient supply chain with the automation of our JD European DC in Ireland. In the UK, our focus is to have fewer, bigger and better stores, to be more productive and to optimize our central overheads. We have made a lot of progress in the first half of the year, which I will now take you through in more details. This one, it works. In U.S., we are developing the JD brand, gaining again market share in H1 and increasing the awareness of our brand. Our number one brand awareness action is to open stores. In H1, we have opened a net of 52 stores in the U.S. This includes 22 conversions from finish line to JD fascia, delivering on average more than 20% of 15 sales. Second priority is to target key markets in the US with community marketing, activation, local advertising like billboards, buses, local sponsorship and ambassadors. Third priority is about national influencers targeting digital media, performance, search and shopping. Mike will provide and can provide more color on the program during the Q&A session. As a result, as you can see on the slide, we are delivering a significant increase in national aid brand awareness from 34% two years ago to 59%. And this is even more market in our key battleground markets such as New York. More impressively and impactful, 26% of the consumer purchase in JD, almost triple versus three years ago. North America is the largest market in the world, and it is now our largest market, accounting for almost 40% of group sales in H1. Our different fascia provide us with a full reach of the American customer, from coast to coast, with DTLA on the east coast to Shoe Palace on the west coast, from top mall key trading part with JD to local community with EBIT, from all ethnicity and all gender. The acquisition of EBIT has been transformative as it gives us an extensive geographic and democratic reach in the US, creating scale for our strategic partner, the large and emerging sportswear brand. We see great opportunity We see great opportunity in North America for the development of both the JD brand and our complementary fascia. Part of EBIT acquisition, we acquired City Gear Store, a chain of 200 city specialty stores situated in the Southeast with a similar customer base than DTLR. As explained in the details in April, we will convert all the City Gear stores, the 198 stores, to DTLR, giving us an opportunity to improve our sales and profit. Citygear has a return of 250 USD per square foot, while DTLR averaged more than double at around 500 USD, so a lot of value to harvest for us. We have already transferred the City Gear operation to DTLR back in June, and the system cut over on time, on budget and with no issue. Another demonstration of our operational excellence. At the same time, we are starting the conversion program with an initial six-door conversion trial. As of last week, that showed a strong uplift in sales, around the plus 60%. Second priority, synergy and leveraging our scale in the U.S. As mentioned by Dominique, we are on track in terms of our action and the plan synergies. On back office and system change, our U.S. businesses are moving quickly with the ongoing implementation of Workday for finance and HR, leveraging EBIT expertise. With our new skills in North America, we are starting to see significant benefit in areas such as transport, logistics, insurance. And we are bringing learning from JD to develop EBIT range and merchandising. EBIT delivers a positive Q2 like for like, the first for sometimes. Another source of synergy, the supply chain as a distribution center. We are converting our USDC to become multifaceted, to deliver significant cost savings in the future, as well as a quicker replenishment for our store by covering the country from east to west. Our first Multifaccia DC will be live beginning of next financial year with a new West Coast DC in Morgan Hill near San Jose and to be followed quickly by Alabasta, the historical DC of EBIT in Alabama. Turning to the development in Europe, we are leveraging our Multifaccia strategy to gain profitable market share. We have refined our plan and focus on key country, France, Iberia, Italy, Benelux, Greece, Poland, where we have a leading market position to drive scale, efficiency and profitability. As mentioned in April, Germany, the Nordics have been more challenging due to high cost to operate and less appetite from the consumer for sport fashion. So we have taken this learning and are directing future investment on the market where we see more room for profitable growth. In H1, we have focused JD store opening program in Spain, Italy, France and Portugal with a net increase of 35 stores. Overall, I'm pleased to report that we gained again market share in the first six months. The integration of Cury is proceeding according to plan. Cury operates 307 stores across six European countries, including its own market in France, where a majority of the stores are located, as well as 33 franchise stores across nine further countries. We see the potential to develop Korea in Europe by leveraging our existing infrastructure. We have successfully entered Italy in the first half with three stores opening, and we are preparing to re-enter Portugal. We also have our European sporting goods fascia in Iberia, Greece, and Cyprus. Those businesses provide us with scale, infrastructure, and a different customer. In H1, they saw sales growth of plus 1.2%, and six next new stores opening, taking the total store number to almost 400. And finally, an update on our European supply chain project, A long project around LNDC and LNL continue to ramp up and it will launch automation in the coming days. In fact, on Monday, we will start the automation. Initially, this will be for store replenishment with online to follow in the first half of next year. To give you an idea of the scale of the operation, the target is a throughput of 100 million units a year. Automation will unlock significant efficiency within Europe, including faster fulfillment, better stock availability and a reduction in the fulfillment cost per unit. It will eliminate our current dual running cost in Europe and the unnecessary cost and duty of shipping to Europe from the UK. To minimize the risk of disruption during our upcoming peak trading period, we will maintain our dual running with our site in Belgium until beginning of next year. And then, as Dominique said earlier, we are on track to deliver over 20 million pounds of cost benefits relating to the supply chain double running costs across financial year 27 and 28. Before we turn to look at the UK, I want to give you a behind-the-scenes tour of the build of what is our biggest JD store in the world, in Manchester's iconic Trafford Centre. We believe it is also on track to become one of the world's largest sport fashion stores by sales, with a triple-figure turnover in US dollars. This destination store opened in June and set a new benchmark in innovation and merchandising for JD worldwide. It will bring to life the JD Theater, as mentioned earlier, and this small video gives you just a taster. Enjoy it. It is a 4,000-square-meter store. It means that we could play with a lot of new ideas, new brands, new products. Trafford Centre has 19 customer engagement areas. This includes customization, sneaker refurbishment, social media recording studio, even a barber. Not for me. And I'm looking forward to host you and to see you in J.D. Theatre of Dreams in Manchester. As you know, UK is our most established market. As a result, our primary focus is on enhanced productivity, larger through fewer, bigger, better stores, optimising the store footprint in the best location and reinvesting in the best location and in our current estate to make sure that our stores continue to be the best in town. In line with our strategy in H1, we saw a net reduction in UK store numbers of 13, but an overall increase in selling space. Productivity is also about driving operational efficiency and cost saving. So to highlight just a few for you. With our DC, we are now seeing the benefit of closing Derby last year and reviewing our transport costs, bringing in further saving and driving more efficiency in Kingsway. we have some of our tech infrastructure key projects starting to land. Our new HR system, Dayforce, has launched in the UK, which will start to bring scheduling benefits in store as well as overhead savings in our head office. We are also using technology to support both colleagues and customer we we are as we speak implementing erf id in all our store to facilitate click and collect ship from store transaction and making replenishment much more efficient for our people saving critical minutes in store tax this is alongside the self-service checkout and mobile point of sales terminals that we are starting to roll out And I will add one that Dominique is particularly proud of, reducing Audi's fees, having enhanced our process and system in finance. As a final update, we see loyalty as a key driver of ourselves. Our now established global loyalty program, JD Status, is progressing well, and in the UK alone, it's capturing more than 25% of our turnover. Status serves us as a foundation for developing a more targeted and personal relationship with our customers. In H1, we ran tests of personalized offer during campaign period with results in significant incremental sales. This gives us a strong indication regarding the scope and the potential for future development. As a conclusion, in a tough trading environment, we are staying focused on our strategic priorities, our operating and financial discipline. This is demonstrated by our market share gain in H1 and our operating cash flow up. We are cautious about the trading environment. In the second half of the year, we expect full-year profit before tax and adjusting our item to be in line with current market expectations. We are focused on delivering a strong free cash flow, and we have confidence in the medium-term growth prospect of our industry. We are reaffirming our commitment to enhance shareholder return, and we will soon start our second £100 million share buyback program. Before I hand over for a Q&A session, I'd like to thank all my colleagues for their hard work and dedication. Their commitment and their agility are moving us forward, forever forward. Thank you. Maj, over to you.

All right, thank you very much, Regis. We're going to start the Q&A now. I'll wait for my colleagues with the microphones. So, Lorraine, could you start with Grace, please?

Hi, good morning. Thank you. It's Grace Smalley from Morgan Stanley. My first question would just be on apparel. You mentioned there the improved product assortment after a period of weakness. I'd just be interested to hear more details on what exactly has changed in the apparel assortments, what's making you more optimistic on that category? And Rajesh, I think in the past, you've spoken about a more competitive environment in apparel, so how you see that competitive landscape today? And then my second question would be on the footwear side. Love the new slide with the different categories. If you could just talk about, based on your consumer insights, what you're seeing from the brand's product pipeline into next year, how you see those trends evolving. Do you expect running to continue to market share? What you're seeing in basketball, terrace and skate as well would be very interesting. Thank you.

I think that's too... I'm sorry.

Yeah, I think a part... I mean, if you remember, Riley, 12 months ago, we were sitting telling you the apparel market was really challenging. I think what we find is because there was a bit of a shift in the market a couple of years ago, particularly with the bigger brands, we work on generally about an 18-month timeline. So there's a lag between when the market shifts for us to be able to capitalise on that shift or get at the market, the shift in the market with the bigger brands. We've just seen... the brands catch up with the consumer. That's really all it is. We still have a really strong business in the performance categories, as you can see on the slides, and we've had some new entrants come in in that space, which have worked extremely well for us, like Trailberg, Abel, Monterec still continues to be amazing. We've got a really good business with Thunder Armour. And on the fashion, more lifestyle side of things, that's where we're seeing the real upside. Adidas is looking really good on apparel. We introduced a new own brand called Unlike Humans. So there's just a lot going on. It's just quite an exciting place right now. And on footwear, as we just mentioned, we're still just managing out of this. period where we had three really big items dominating the footwear business to a marketplace where consumers want to try and test new products. There's a lot of new, not new brands, but brands that are re-establishing themselves in the marketplace. Again, because of the supply chain timelines we're not necessarily fully able to get at everything that we would want to get at today because there's a 12-18 month lag on everything over time we'll start to catch up on that stuff but what we're seeing right now is it's still the market's very fluid um there you know you can see the backdrops generally pretty challenging appetite uh the appetite isn't necessarily the same as it was during the COVID year. So getting those newer models and brands up to speed as quickly as the big franchises are declining is still a challenge for us. I think the other thing worth mentioning is obviously we went through a bit of a honeymoon period with women's footwear. She was consuming a lot of product and that softened. So that has had a bit of an impact on us as well.

Okay, let's move to Jonathan at Pill Hunt.

Good morning, Jonathan Pritchard at Pill Hunt. Just on the brand awareness point, obviously you've outlined to a degree what you're doing, but what really has changed, because those numbers are pretty impressive that you've gone from, I think, 34 to 59. What has been the golden bullet, as it were, for that?

Again, I think we just mentioned it, store openings. We've got a good footprint in all the best malls now, in the majority of the best malls. We've opened a few new flagship stores, Las Vegas, as an example. But I think a lot of the great work the team have been doing over the last two years has started to... We've started to benefit from that, particularly in the communities. The brand awareness, aided brand awareness in the key markets for us, New York, Texas, Miami, is significantly higher than that. And a lot of that is around what we do in the communities. There's local sponsorships, activations, partnerships. We're just starting to benefit from that now.

Again, just to follow on from Grace's question, and it does follow on a little bit from what you've just said, but apparel, the mindset of the U.S. consumer for you and apparel, obviously it's pretty much half and half of sales in the U.K. getting there in Europe, but quite a bit behind that in the States. Have people started to genuinely think of JD as an apparel retailer, or is it still a work in progress?

The category in the US is still very much dominated by footwear, but we are building momentum. The apparel business has been the growth driver for us this year in the US, with a backdrop of the challenges that we have in footwear being the same in Europe as they are in the US. So we think we are starting to make really good progress.

In US, it's linked to the market leader, which is only footwear. So I think that the more people know JD, the more they understand the footwear, the fact that we are not a footwear and we are full lifestyle. So the awareness is helping the apparel business too. The two work together.

Can we go to Richard Chamberlain at the front row, please, Lorraine?

the end on the end here which thank you thank you yeah thanks richard chamberlain rbc um three for me please i wonder if you can see how um europe uh online performed in the period i appreciate you've obviously got the automation benefits still to come through um and then again on europe what what we just what are the plans for the korea uh store estate that going forward? How do you see that shaping? And then third, I was intrigued by your comment in the US about sort of neutral reaction from consumers to price increases or tariff-induced price increases there. Do you think we're going through a sort of temporary window where you know, consumers just haven't reacted yet to those price increases? Or is there something else behind that, like an improving product pipeline or something that's actually still stimulating demand and helping to offset those price increases. Thank you.

So European online is doing well, I think, but we are starting from a low base. So I think that we have implemented in the last 18 months much more ship from store, and that's created a big difference because in the past we were shipping a lot of things from UK, so our We were not competitive in terms of time to get to the consumer. So we've seen a growth in terms of our online business in Europe, thanks to a better service. And the thing that is coming with the airline now coming to first half will become to fulfill online order, will continue to do that. So we are just playing catch up. But we're starting from a low base but growing. In terms of store estate for Korea, I think what we see is that Korea will continue to develop out of France. So France, we max out in terms of number of stores. So we cover all except the ones that we had to develop. divest because of the antitrust so now we are recoming to the same part which you know it's a stupid thing around that but that's life that's the way it works and we will expand in Italy in Portugal so Portugal is to be back in Portugal and Italy it's a growth country for us for JD is a key country and I think that we see the benefit of expanding our offer a little bit to offer the same as we offer in France in Spain Portugal with a with Korea and JD. So that's the plan. In terms of the price impact, as you know, what has happened in the US, it's a targeted price increase. When the product is good, price is not the issue. So I think what is still to be seen is what will impact when, because at the end, everything will translate into price. For the moment, it has been targeted on products that everyone feels that it will support a price increase. What will happen when a lot of other prices will start to come to the system? That's another question, because for the moment, and it's not an industry question, it's more an economic question. I think that a lot of US companies have really shallowed the tariff. At one point of time, this will come to the consumer, what will impact at that time. But what we know, and that's the last three years' experience, is that the U.S. consumer is the most resilient in the world. They just keep buying. So hopefully it will continue.

Okay, thank you.

Let's go to Ashton next door.

Thank you. A couple of questions from me. I guess the first one, just on the European margin, I think you mentioned that you get around a 20 million benefit from Herlan. I guess what's the roadmap towards high single digit margins beyond that? Is it cost out or is it sales led? The second question I have is just on sort of the online approach. You mentioned that gross margin at the group level was down 40 basis points from investment and price. Online sales were down slightly. I appreciate the market's not really helping, but just could you elaborate on your approach to online and whether there's more that you can do there? Yeah. And then I think, Dominic, you mentioned with regards to tariffs that you helped by purchasing ahead of tariffs. I'm not sure if I got that right, but I suppose as we look into FY27 when you are purchasing at more normal rates, what should we think of the moving parts there? Is it gross margin down or is it more pricing to come?

So I think Dominic will take the first and I will take the online at the end.

Okay, so in terms of European margin, it's a multifaceted story. Obviously, you saw the half one margin there. Overall, it's around 4%, 5% operating margin. There are a number of things we're doing which give us confidence we can see that improving over time. I think first is sales-led. As we grow scale in the markets and we're taking market share, we'll start to see more sales on a fixed cost base. So that flows through in part. Second is efficiency. And that comes in things like supply chain. So at the moment, we are bearing significant costs by having three warehouses in Europe for JD, plus shipping stuff from the UK as we bring hair online over the next year. you know, before peak for stores, next year for online delivery, and we start then to step away from the double running costs, and distribution of the UK will always remain a little bit, but, you know, in the grand scheme of things, not very much. That will play through to a better cost base, a more efficient cost base, but also a better service for customers. As Reggie said, you know, at the moment, in some cases, if you buy something in Lisbon, you may have to wait six days for it to get to you from Rochdale, which isn't a great service, as we do more of that through Hale, and that will improve the customer piece. And then the final piece is picking up on what Reggie said around being more targeted in the markets where we invest. And as we learn more about where our concept resonates better with customers, we can tailor our investment to make sure we're getting the best returns on our investment and taking action to improve performance where it's slightly weaker. So a combination of those things over a period of time should see us having the European margin moving closer to that higher single digit that we see in some of our other markets. Shall I deal tariffs as well? Yeah. So just on the tariff point, you know, there's always a lead time when you buy goods. And so when you're buying for Q3, a lot of that was bought well before even the tariffs were announced. So that means we do get the benefit of that. And I think it's the same in many industries. You get the benefit of that in this financial year for us. Looking through to FY27, I think it's too early to tell. And I think as we go through and look at what our buys are going to be, look at what our terms and conditions with our brand partners are going to be, we'll have a better feel. So we'll provide an update on that in the new year.

Concerning online, I think that it's mainly so. As I said before, I think online in the US and Europe is doing well. I think in the UK it's been more challenging. And I think that especially in terms of traffic and conversion, that's where we have been investing more in price in order to make sure that we are competitive in a very promotional market. So that's the thing. And as the UK weight is much higher, that has an impact on the online margin.

Let's move to this side, please, Dom. Let's go to Will in the middle and then Kate Calvert in front.

Good morning. William Woods from Bernstein. Two questions. The first one's just on the ongoing shift in the footwear product cycle. You mentioned women's footwear softening. Do you think there's anything more fundamental going on in that cycle? Or do you think it's just the classic brand and style cycle happening? And I suppose when you look at the apparel business, do you think that cycle still applies there? So we'll go through the same with sports, fashion and performance that you've grown quite well in the next couple of years. And then the second one is obviously you've done a lot of work on UK productivity products. through fewer bigger stores, customization and loyalty, etc. Are you applying any of those learnings to the US and Europe? And I suppose I'm particularly thinking about the new stores that you're opening. Are you changing what you're doing because of what you've learned from the UK at this stage? Thanks.

Yeah, I mean, I think with reference to women's, I mean, you know, women... generally compared to men have a lot more choice and they like to change their mind more and as I say they were consuming a lot of sports shoes and she's finding other things to buy right now that's just the nature of women's fashion right you know we'll have another upside up cycle sometime soon I reckon but you know we don't know when we'll just take it when it comes I think when it comes to the apparel cycle All I can say is we've got a very adaptable business model. We've got a wide range of brands that we can access. We have the ability to build what we need to build from a product point of view with pretty much every brand. We have complete flexibility in that respect, which none of our competitors have that. So we're very agile and we have our own brand portfolio and licensed brand portfolio as well that chip in and help us deliver good things like speed to market and a pricing architecture as well.

It's a good question around the learning from you.

Yeah, the stories, I mean, I think specifically, you know, the UK, how consumers are shopping is clearly changing. And I think especially when you look at JD as a business and, you know, we have seen some fairly significant price increases in our world over the last three or four years. So I think what the expectations of the consumer now have changed slightly when they are buying a pair of shoes, which is £150, they've won a great experience. And we're also seeing, in particular, the traffic declines primarily are coming from high street locations and we are seeing a big shift. We're not seeing the same declines, we're not necessarily seeing a big shift, but into the retail parks and the mega malls and it's really the retail parks that have grown the most within our store estate over the last decade. two or three years, which has grown the space significantly. The learning from Trafford Centre is for us is that it's the same point. Consumers just want a great experience. And what we have found is the impact of that creating that you know, fabulous store has been far greater than what we expected, you know, outwards of like 30 mile catchment areas. So there's a lot of learnings in that for the future in terms of how we look at the store estate generally.

And I suppose, does that change the US and European strategy or do you think you're just experiencing slightly different trends in those markets?

It doesn't change, it influences and helps us maybe make some different decisions in the future.

Good morning, Kate Calvert from Investec, a couple from me. First one, I'm sorry to return to inflation and tariffs, but what sort of level of inflation are the brands putting through at the moment in the US, and do you think it's enough to have offset the initial 10% increase? So we're kind of yet to see the August increases, and what sort of inflation is going through in Europe and the UK at the moment? And in terms of my second question is just on gross margin. Gross margin X acquisitions was down 40 bps. I suppose the question is really on direction in terms of the trend of the gross margin, because obviously apparel has been much stronger and you have gone through quite a few years of good full price sales. Do you think we're kind of back to a more normalised gross margin post-COVID?

I will do the first one and you do the second one. So I think on inflation, I think that, as we said before, roughly what happened with tariff is a third has been shallowed by the manufacturer, a third has been through the supply chain and the manufacturer, and a third to the consumer. That's roughly what has happened. So the part which has been given... And in total, the tariff impact for our industry is on average a sort of 10% if you put everything to the consumer. So what has been passed to the consumer is around 2% to 3% if you take that on total. So that's the type of magnitude. But that has been done on some products, not all, and with a very targeted view and has no impact in terms of volume. The question will be the 70% which has not been passed to the consumer at one point of time will be in the systems, you know, when you go to new products and so on. But that is what will impact at that moment. And I think we are not so nervous about our industry. I'm more nervous about the global impact in terms of what happens to the U.S. consumer when they... discover that everything go up in term of price because that will happen over time it's not happening now but it's going to happen that's a key question that we don't have the answer but for our industry I think the way it has been managed I think it has been well managed and I think that we've seen no impact for the time being

Just on the margin point, Kate, I think in the first half, the 40 basis points really reflects more tactical moves than something structural. And if you look at where it happened, it's sort of online in Europe where we just needed to be more, you know, chose to be more competitive in a more promotional market. In the US, something we talked about at the year end, I think, around finish line, which is, as it winds down, is less differentiated. So price plays more of a role than would be the case in JD and some of our other facials. I think you hinted at, but maybe you didn't mean, that with more apparel is that lower margin. Actually, apparel and footwear are similar margins for us. And apparel is supported by having a higher proportion of own label. And as Mike said earlier on, they play a really crucial role in the overall offering they bring to customers, unlike humans and others. So that itself isn't a driver. Actually, the main driver is really the product cycle. In a cycle where people want the product, you know, we're a full-size, full-price retailer. We get the margins and we get the price. Where it's slightly softer, you just have to be, you know, you have to respond to that a little bit at the margins, and that's what we're seeing. So I don't think it's a structural shift. I think it is just reflecting where we are at this point in time on some of our products.

Can I just come back on the gross margin question, just in terms of the full price sales? As you came out of COVID, because there was a lot of stock shortage, you had very high full price sales. I know you're being taxed at the moment, but do you think the underlying has got back to a more normalised level? Just generally in the industry and everything?

Yeah, I think... I mean, the... The position that we're in just now, there is a shift slightly back towards apparel in the mix, which will be beneficial. We don't know how long that run's going to maintain itself, obviously. But I'll just reiterate what Dominic said. It really does just come down to the product cycle and the appetite for that product at full price. What we're seeing right now is the good stuff's really good. The stuff in the middle is slightly more challenging to sell at full price. We would like to assume that if the market can course correct and the... along with our brand partners, we can drive that demand into new franchises, that will see a higher level of full-price sell-through, there's no question. It does come down to the brands and the ability to create energy in the marketplace as much as anything.

And to be precise on your question, which is around the COVID, I think it's already done, so it's no more the COVID where we were at one point. So I think it has been going down slightly, but surely, so I think we are in a stable, yeah.

Let's move to Warwick behind you. Thank you.

Thank you. Morning. Warwick O'Kines, BNP Paribas. One question for Dominic, actually. Could you talk a bit more about the H2 profit expectations? First half, PBT down about 50. Second half implied about plus 10. What drives this swing? You talked about a few items like mark-to-market, finance charges, inhibit synergies, but maybe you could just flesh out that swing, please.

Good question, Warwick. So, look, I mean, if you look at the first half and the profit bridge helps there and some of the things you saw as it was all the headwinds there, we'll still get a benefit from acquisitions slightly less in the second half. Obviously, we've got Korea coming in for a few months. Interest was a drag in the first half. Actually, as we anniversary acquisitions, that can become a slight positive in the second half. So half on half. quite a big swing mark to market we expect some of that to unwind in the second half so again half on half quite a quite a big swing and then new space with trafford and others coming online we've had a lot of pre-opening costs related to that in the first half we should see that stepping up a bit into the second half and i think the phasing of our opex synergies should is weighted towards the second half rather than the first half. Although, as you saw on the slide, I think we've done a very good job in the first half in terms of neutralizing some of those headwinds. So taking all of those things together, actually you see a step forward in those points, in some cases mechanical, more than offsetting the ongoing pressure from like-for-like and margin through the second half.

Just before we go to Anne, next to you, Warwick. Quick question on the lines from Richard Taylor at Barclays. Question for Dominic is that, can you explain why the Genesis option has been revalued upwards by £160 million?

Yep, I can. At the full year, we explained that as a result of the change in the payment dates, we've moved it out from 25, 26, starting in 25 to 30, 31. That would result in about a £250 million increase. I think that was in the annual report. The actual increase at the first half is £163 million. So we've got the £250 million uplift, but then there's a currency impact on the overall option, bringing that down to £163 million for the first half. So in broad alignment with what we explained. I think you have been quick.

So just for everyone, because it's... We have the option to buy back the 20% that is owned by the Marshall family and the initial agreement was to do that in four years from this year to 2028. We just moved back to two years between 2030 and 31. That's correct. So that's what Dominique was referring to. And we did that in order to manage our cash flow and to manage the best way to do that. That's the context, yeah.

Right, let's go to Anne.

Thanks. It's Anne Critchlow from Barenberg. A question on tech infrastructure. So I appreciate you're in a catch-up mode at the moment on infrastructure, but just wondering what the potential might be to invest in, say, systems for pricing and promotions or allocation of product by store, various AI systems we're hearing about from other retailers, and also whether there's any timeline for an RFID rollout from the UK to the rest of the world and any implications in CapEx for that. Thank you.

Yeah, so I think on tech, we've done a lot. And I think that, unfortunately, this is mostly OPEX than CAPEX. So we have done, the big one was our HR system in the UK, which is done, which is day four. We are looking at finance system and HR system in US, which is workday. So that's as we speak. In terms of our merchandising tool, we are looking at the implementation of O9, which will improve... which will include AI tools to do that. We are not so keen on pricing and all that stuff for the time being because I think we believe that with our buyer we are doing the job and a fantastic job around that. And AFID is that the rollout is in UK, but will go to the rest of the world just after. So it's just that we start everything in UK. So we are pretty advanced. There will be the self-checkout the same. Most of that is OPEX. So that's why OPEX has been inflated by around 20 million in the last three years around system and all that stuff. So it's not a big impact on CAPEX, but a significant impact in terms of our OPEX.

Anne, please could you pass to Alison?

Thank you. Hi, Alison Lago from Deutsche Neumis. So just a couple of mine left. Could I ask on the working capital please, just in terms of the stock build we saw in the first half, could you talk a bit about where that's gone in terms of the stock and I suppose what you're thinking about in terms of requirement for H2, particularly in terms of anything further required for investing or pivoting the range in the new acquisitions. And then the second one just on CityGear and that change into DTLR. So interest as to how much you're kind of changing in that proposition. Are we talking here about, like you're talking about some relatively large uplifts. Are you really changing the range? What are you doing in terms of store fit out? Yeah. And I guess what the kind of potential capex behind that might look like. Thank you.

Yeah, I will do the City Gear and you do the stock one. So City Gear, so what we are doing with City Gear, so we have done a test of six stores where we have done a full conversion with a new merchandising, a new refurbishment, in fact, and that sort of costs around 200,000, yeah, around 200,000 per store. And that is with the full rebranding and merchandising. What we have done for all the estate is to put that under the management of the detailers team so that imply the fact that we are slowly but surely changing the range but we do that in a very you know when the product get out of stock we bring new products so that is what we're doing And there is a limit around that, and that's why we will have a program big enough next year to refurbish a significant part of the estate and doing what we have done with six textiles. But we didn't want to rush too quickly. We just wanted to make sure that we are... We do the system, the management and all that stuff in order to put the basis before doing a conversion. We learn a lot from the finish line program and what we are applying there is what has been very successfully applied by JAD team when we move from finish line to JAD. We do the same recipe and with the same potential because You have a double turnover per square foot, so there is no reason. And the level of investment is lower because the DTLR concept is much less sophisticated than the JD one. So if you want to model it, it's $250,000 to invest in a store and with an uplift, which is for the moment is around the 50-60%.

On the stock point, yes. I mean, stock was up 14% in the first half. A large part of that was Korea, which we didn't have in the numbers last year. But we also were carrying more stock as we went into the first half. We've got quite a bit of distribution centre changes coming, so we want to make sure we're well set up for those. And that does sometimes result in a slightly elevated position. And just picking up on the CityGear piece, as we start to you know, range those stores more with what DTLR and Shoe Palace use versus what they had, you end up with a slight sort of overlap. But that's manageable. It's something we've done in the past. I think, you know, heading towards peak, you know, there's no material shift and pivoting in terms of stock we're bringing in. We're actually coming to the biggest part of our year now. And as we go into that, we feel comfortable overall with the quality of the stock that we have. And, you know, the real position to look at our stock is at the year end once we've been through peak.

We've got time for two more, so we'll go with Wendy first of all.

Hi, thanks for taking my questions. Wendy Liu from JP Morgan. I have two, please. One is a follow-up on the footwear cycle you mentioned about there's a couple of small promising smaller franchises. I was wondering if you can expand on that. Are you talking about specific brands or are you talking about particular categories? Is it rounding? Is it more lifestyle. This is question number one. Number two, I understand you don't comment on current trading, but I was wondering if you can share a few observations about what you are seeing in different markets in terms of customer customer behavior. You mentioned about early signs of unemployment in the UK and the US, if I hear that correctly. I was wondering if you can expand on that and I guess broadly, what are you seeing in the various markets from what you can see today?

Yeah, I will start. As you say, we don't update on current trading. I think what we said around customer, we see the level of uncertainty is high, which is never good for consumption. And we know that the key... The key KPI we are looking at is unemployment because our young customer is the first one to be impacted by that. And for the time being, nothing has happened, but we see the signs are more negative than positive. That's what we are at. So for the time being, nothing has happened on this side, but we're really looking at and that will be a negative for us if that happens. So that's what we flag. I think that at the same moment, we are in an industry where it's about fashion, it's about new products. So if the new product is good, the consumer finds the money to buy it. So that's what I would say.

I think on the footwear, I think that... Yeah, I think you mentioned a lot of the things that are happening in the market already. We're seeing the market shift back to where it was around... 2019, 2020, running back to being the dominant category, the brands that play in that space, we know who they are. You've got a few of the smaller brands gaining a bit of momentum just now, Saucony, Salomon, those guys, but really it's on running. ASICs, New Balance, Adidas are doing some really good stuff in the performance categories, and we're seeing some new product from Nike that's hit the ground running, pardon the pun.

Wendy, could you pass to David, please, behind you?

Hi, David Hughes from Shore Capital. Just on the US and obviously the margin drop, you talk about a part of that being driven by the finish line conversions. Could you just touch on what part of the conversions is driving that margin drop and how long you kind of expect that to carry on since you're still going through with quite a lot of conversions left to do? And also with the city gear conversions, will we accept similar margin pressure in the US as a result?

No, what we're saying is not the conversion that is driving the market. You know, Finish Line is our biggest online business in the U.S. so far. It's no more. It was still three months ago. Now it's JD, but it has been. So on this... finish line online business that where you know because the brand doesn't have any more resonance with the consumer less store this is where we have been been more aggressive promotionally to to drive sales that's what we were referring so it's not about the conversion it's more that City Gear website doesn't exist anymore so we will not have this issue but our biggest online business for a long time has been finish line in the US and this is where we see you know been more challenging for us because we have no more store presence or the store presence is reducing so the appetite and for the consumer, for the finish line brand is reducing. So in order to drive volume, we need to be more aggressive on promotions. That's what we're referring to. So it's not about that. But the good news is that JDNOW website in the US is bigger than finish line, which is a great achievement of the team.

Any final questions at all from the floor? There's nothing on the lines either. So in that case, we will close the meeting there. So thanks very much for joining us, everyone. Appreciate your support.

Thank you.

Thank you.