Good day, and welcome to the Marks & Spencer Half Year Results 2021 analyst call. There will be a question and answer session after the presentation. Please press star one to ask a question. Today's conference is being recorded. At this time, I would like to turn the conference over to Archie Norman, Chairman. Please go ahead, sir. Good morning, everybody. It's Archie here. I'm here with Steve and Eoin and the team. Look, hopefully you've all seen the film of the show. You already got the gist of what we're saying. Doubtless, you've been trawling through social media and some of you have already published and said what you think anyway. We're not gonna go back through all of that. I think it's a good presentation. Look, I think this is a strong set of results. I don't usually say that, but I mean it on this occasion. The business is in more confident shape than it's been for a very, very long time. Look, let's fire away with some questions and have a talk about it. Eoin and Steve will do their best to answer your points. I think we should start, if we may, with age before beauty. How about Clive Black? Well, thank you very much, Archie. Neither age nor beauty on my side, sir. Can I ask a question, please, about the cost challenges facing the business? I mean, very pleasing to see the trading progress and very well done. Between the two core categories of clothing and home and food, what is the shape of the cost headwind that the business faces over the next twelve months or so, please? Thank you. Eoin. Yeah. I mean, I think so for both sides, both parts of the business, obviously overall kinda labor cost inflation is going to have an impact. I mean, obviously with the National Living Wage, we'll have to keep up with that and we're gonna see circa 6% growth on that. So that is kind of a core cost element. We are obviously also seeing cost pressures in our logistics networks. You know, well-publicized incentives have to be put in place for drivers and warehouse operatives. Now that's obviously gonna impact more notably quarter three, but it will also have a full year effect into next year. I think we will see that and that impacts. It does actually impact both sides of the business actually, as well. I think in the cost of goods side of things, obviously we are starting to see inflation, and actually, again, in both sides of the business. It's not really impacting us that dramatically in clothing and home now, but the environment is definitely getting more challenging. You will obviously, people will obviously see it at freight in particular, is in some ways off the charts in terms of actual spot prices. But we will, you know, we'll be able to manage it against spot, but it'll still have an upward pressure. Raw materials because of the kind of flow in from costs, from labor really, which is driving a lot of raw material inflation costs, it's starting to filter through. I think, you know, we're probably, as we said in the statement, we're seeing cost prices ramp up, and we think it's gonna be ramping up into next year. It's probably, you know, we're gonna get into a place where it's gonna have an impact this year, but it's gonna be more material into next year. I did forget one cost area, which is energy, which will also impact into next year. Not huge for us, but it does. It's just another one to add into the list as well. Yeah, look, there's no getting away from the fact that we are going into an inflationary environment. Just to build on Eoin's point, I think the other area we know that if you work your way through our P&L, we're over cost is our logistics. That's, you know, we've talked about this is the first stage of transformation. We know we've got more to do to optimize our logistics in both sides of the house. Yeah, as we go through the next stage of our plans, you know, some of those inflationary costs will be offset by better efficiency through the Vanguard program, which Lawrence Christensen has been driving with the teams. Okay. Thank you for that. Is it fair to say then that in the near term, you're more concerned about logistics and food inflation, but for clothing and home, particularly around COG, that we suffer more for H2 2023? Would that be right, Eoin? Yeah, I think that's probably fair. I mean, that's kind of, I mean, kinda reflects a little bit the supply chain there and the lead times of supply chains. I think that's probably fair, that we're kinda seeing that first through into food. Thank you very much. That's helpful. Okay. Thank you, Clive. Shall we go to Adam Cochrane from Deutsche Bank? Hi. Good morning, guys. I have to say congratulations on the results. It's been a rare occurrence to say it, so I'll remarkable almost. Very good. Thank you very much, Adam. That should be a no title. On the question, where are we with repaying furlough and business rates and things? I just want to make sure that we've got all of the right bits in terms of the cost base. Is there any decisions now to repay business rates given how much more profitable you are than expected? Secondly, the third-party brands, very impressed by the sales performance there. How are you thinking about trialing them or how are the trials going in the stores? Thanks. Eoin, do you want to talk about rates and? Rates furlough and stuff like that? Yeah. Maybe you talk about brands then. Yeah. On furlough, we haven't received any furlough income this year. On rates, I mean, I think rates, we've obviously been clear that we received GBP 47 and a half million in the first half of the year. For the balance of the year, it'll probably be about GBP 60 million. Obviously, the rates relief has effectively tapered off now, or tapered off at the end of June, really. We don't expect to be repaying it.v You know, I think when you look at the overall impact COVID has had on our overall business in the 18-month period, you know, our view is we've taken rates relief and used it as it was intended. So that's how we think about it. As I said, we're now not really getting any rates relief right now, and we expect to be paying close to full rates in the second half of the year. Can I just go on. Eoin's comment, right. Look, to bear in mind, Marks & Spencer is one of the highest corporate taxpayers in the U.K. Actually, even last year we were very high because of our aggregate tax and taxes we pay on employment and elsewhere. We pay a lot more tax than many of our large competitors. So that's the first thing. Secondly, the rates relief is we paid rates, we paid less. We actually have an issue with the business rates program, which Steve's been very clear about. Insofar as we took rates relief, it was for stores which were effectively closed or very adversely impacted. So that was what the rates relief was intended for. Steve, do you want to talk about brands? Yes. Yeah, I won't start on the business rates as you know. We will never get away. We'll publicize on my views on those. The brands, we are pleased with the start. We started last year introducing a selection of third-party brands which really supplement that which we offer in Marks & Spencer with either adjacent products or adjacent customers or develop or deliver even stronger offers in some of the market leading categories we have. It's very early days. They're about 3.5% of the revenues that we took in this half. We continue to learn about which brands are most appropriate. I think the first thing to say, though, is the one that we own, which is only just relaunch the Jaeger. We've spent the summer really moving through some of the old stock we bought with the brand. The team have reshaped it. I can tell you the launch has been phenomenal. I think on most fronts, not only has it been great in total and online, good in the trial stores we've got, but also good internationally. The reason that's significant is if you go back in the history of Jaeger, circa 50% of the revenues in Jaeger were generated by the overseas businesses account, and it's landed particularly well in the Middle East. I think as we move forward, where perhaps we had an idea that we would do one or two or a limited number of brands, I think what we now see is the potential to increase the scale and become much more of a marketplace in our consideration and really develop the ecosystem, based off the fact that, you know, we've got an exceptional relationship with customers and the data that's now been provided to us by the data engine and by Sparks gives us the opportunity to make sure we've got absolutely the right selection of brands for our customers offer in the future. It's a broader part of the strategy, the brands thing, and we'll come and talk about that later in the year, I'm sure. Yeah. Just something just drew my attention. If anybody is trying to figure out how to ask a question, you press star one, and then you'll appear on the list, I think so. I'm not encouraging you too much, but if you're wondering how to do it, that's how you do it. Okay. Shall we go to James Anstead from Barclays? Yeah, good morning. Two questions. Good morning, James. If that's okay. Firstly, you obviously have seen this dramatic reduction in markdowns, which has been a big driver of profitability. How much of that do you think is a function of the market? Because, of course, you're not the only people to have reported a similar phenomenon. How much of that is specific to M&S? I suppose linked to that, you're still reiterating the target of at least 7% Clothing and Home margin by 2023-2024, despite doing a lot better than that, you know, in six months after you set the target. I appreciate it's an at least target rather than an exact target, but why not aim higher after this very strong six months? Do you wanna answer the first question? No, I'll talk to markdown. Yeah. The first thing to say is that we have for some time been improving the product engine within Marks & Spencer. Katie, Richard and the team have been working on the shape of the ranges, the shape of the buys. Much publicized is the fact we've continued to reduce the number of lines that we offer and improve the depth. You can see that in women's denim where, you know, sales per option now up over 50% on where they were in 2019-20, and we continue to drive through the top 100 lines and top 100 ranges. That's we've talked about that a lot, and I think that's self-help. The second thing is that overall, the consumer is telling us and it's coming through in the revenues that our product is better. Better value, better style, better quality. That, of course, helps the full price sell-through. The third thing is we've removed all the mass promotions now. You know, during the course of the pandemic, we literally took the last three massive friends and family out, and that was, of course, driving a very big discount number. Aso really undermining the value of our product, which I think was contributing to reducing this high-low principle we're operating. It was bad. We've dealt with that. I think there's a lot of self-help in the number. We have, over a period of time, reduced the amount of stock in the business, GBP 1.4 billion to a number now it's got 460 in front of it. That is the direction of travel we have been talking about, and we delivered it. Have we had some help, though, by the fact that there has been less discounting in the market in total? I think removal of some of the other players who were discount generative has been helpful. Does it also help that we've been tight in our stocks because, and we really have played a tight game in the right way because of the pandemic, and we've seen some bounce, of course. I wouldn't deny that. I think we said that in a statement. There's been plenty of COVID bounce back tailwinds there. The direction of travel with Better Buying and better product in the product energy is one that we have been planning and working on. Again, last year, I think I said to you that we were putting everyone through the Academy. 1,400 people have been through the Clothing and Home Better Buying Academy, and we need to bed that in and make sure that is sustained. We're pleased with the results. On your second question around operating margin, I mean, obviously, one thing I think you just have to make an adjustment for the first half of the year is rates, which probably accounts for about 2% of the operating profit margin. So, I mean, I guess it probably more like like-for-like comparison is 8% over 7%. So I think, you know, that and we've said that lots of things have gone in our favor in this first half of the year, which has obviously really aided particularly the full price performance. So maybe we're being a bit cautious, James, in relation to that statement. You know, we need to kind of do this on a regular repeatable basis before we start to kind of upgrading that type of guidance. You know, we're definitely moving in the right direction. That's very helpful. Thank you. Okay. Thank you, James. I think we should go to Anne Critchlow from Société Générale. Questions, please. The first one about the Vanguard processes, just to ask when the remaining 25% of the food estate will adopt those processes. Then a couple of customer data questions which are sort of linked. Are you ready to share any plans for Sparks yet on improving the incentives for customers to use the card? Also just to ask about the HSBC credit card. Who owns the data there, and do you have the opportunity to look at what customers are spending on those cards? Thank you. Shall I do the Vanguard and the sort of first phase loss, and you do the HSBC question? Yeah, I can do it. Yeah. Yeah. Gotcha. Yeah, yeah. Good. On Vanguard, the first thing is that I think I said to you earlier in the year, we had intended to complete that before Christmas, but because of the change in the COVID, we just paused the depots that were around the South East, largely because of the impact of London trading and the return to work. 75% were completed. We continue to deliver against the results, and we're pleased with the progress, particularly in areas like waste reduction that we've seen come through. In terms of the next 25%, our plan currently, assuming there is no further massive interruption to, you know, through the pandemic or anything else, we will be completed by the end of Q1. We'll start to roll that through. Normally, they take about six to eight weeks to normalize into the system and start to see the benefits come through. By the end of Q4, start of Q1 next year, Vanguard food practices will be rolled through the food estate. I think importantly, though, Lawrence and the team have turned their focus, quite rightly, into the Clothing and Home. We've already got the first pilots in Clothing and Home. You know, the journey there, having got to the end of replacing the warehouse management system, having got to the point where Darlington is stabilized, we can now start to do the work on the Vanguard processes through Clothing and Home. There's a lot to do there as well. You know, plenty of, you know, or an awful lot of unproductive stock, which we see can be taken out of stores and centralized back in warehouses to make sure we optimize markdown. Again, Lawrence, fantastic job with the team, but yeah, good progress in food, more to do in clothing. I think, Anne, just on, as Steve says, I mean, the Clothing & Home's a massive task, and that's great. It's all opportunity and all upside. The issue in Clothing & Home, as you can imagine, is the whole supply chain right back to the manufacturer in Asia. You can't just manage the store end of it. It's gonna take a little while for that to come through. On the food thing there, the only thing I'd add to what Steve said is that clearly the idea of Vanguard is you optimize the flow of stock precisely according to the sales in your forecasting system. It won't surprise you know, in the current circumstances, the flow of stock is not as smooth as one might like. A lot of the benefits of Vanguard, in my judgment, is still to come. Yes. I understand. Bumpy is the way we describe it, and it's. That's not because we believe that the program is in any way flawed, it's quite the reverse. I think had we not had Vanguard in place, frankly, with some of the things we see in front of us in terms, we'd have had a few more difficulties. One of the things is helping us cope with some of the bumpiness of the journey. Sparks. It's Sparks that's giving us the edge, but Sparks, 13.9 million people on there has moved up from less than 10 as it was 18 months ago. We are very pleased with the number of people joining. The scheme has been vastly improved from where it was sort of 4 years ago, and we are seeing improvements in the customer satisfaction levels. There is more to do, and we'll continue to improve that. The key thing, though, is that we are more focused actually on moving people onto the app. The app growth is considerable. T he digital team has done a good job there of moving people across. And the spend of people that use the app is considerably higher than those that don't. And the customer perception of our app is much stronger than Sparks on its own. Yeah. I think, but I think as Steve said, I think there's more to do there. I think you know converting it to Sparks has gone really well. Over 13 million users is very good. We are adding the services, so you can obviously order things like bra fit through there. You scan and shop. We're trying to get the connectivity with them, with the stores much more clearer. That's all really good. We are introducing payment options next year, which is going to be a step on. Overall, we're gonna be investing pretty significantly in the Sparks platform as the kinda core platform, really our ecosystem in the future. On the M&S credit card, which is supplied by M&S Bank, which is obviously our JV with HSBC, we do have all the data. That is actually an important element to our data analysis that we do because it also enables us to show spend outside of M&S as well as inside M&S, which is very helpful. That is a core part of our data engine. The aggregate of our data, if you assemble all the customers we have data on, it probably comes to about 20 million. Just bear in mind that that's not all current because some are not that active, some are more active than others. I think the broad point that underpins this is that we see data as core to our future strategy, and it relates to the brands program we referred to earlier. This is a pillar of what we're trying to do. At this juncture from, remember what Steve said, we've got 13 million Sparks customers. That's really from a standing start a year ago. We relaunched the scheme, we scrapped the old scheme and customers are invited to sign up to the new one. It's not a bad outcome, and we're not complaining. That's stage one. You know, getting the customer data is stage one. Using it is stage two. Yeah. That's why we're hiring all these expensive data scientists and people to figure out how we effectively weaponize what's to be a major strategic advantage for the future. Yeah. Great. Thank you. Okay, thanks, Anne. Anything else from you? Okay. Thank you, Anne. Charlie Muir-Sands from Exane. Yeah. Morning, guys. Thanks for taking my questions. I've got three topics, but all quite brief, hopefully. The first one relates to the clothing and home supply chain outlook. Obviously, you know, you've talked about some of the well-publicized pressures there. I think a couple of your competitors have also shared their views on retail prices into next year. I guess you've also got a big currency tailwind benefit. Do you think you need to raise prices to protect bought-in margins? That's the first question. Can you do all three questions first, and then we'll spill from there? Oh, okay. Yeah, sure. Absolutely. I mean, the second question relates to free cash flow and use of cash. I note the comment on the pre-recorded call saying you're unlikely to pay a dividend this year. I just wondered if you could just help us out, where do you think normalized CapEx will get to, and how long do you think before a dividend comes in? The third question, and this I appreciate is- Sorry, our mics are going to set in. Let's answer those two questions. Well, let's try and answer them. Yeah. Okay. What about inflation and margins? I think we said earlier, we do expect to see inflation come through in cost of goods and in transport. Will it be at the rate of, I mean, the spot rates that people are paying at the moment for containers? I don't see that being sustained at all. We are protected to a degree because we have longer term contracts with people like Maersk, and we're also hedged for that currency going forward. We've bought ahead into spring/summer. There is inflation in certain raw materials. I think that will be sustained, and we will work hard to make sure we mitigate that through other efficiencies. Inevitably, there's going to be some inflation. Our key thing is to continue to make sure that we offer our customers great value compared to competition, and we've done a good job of getting rid of the high-low promotional aspect of the business, which means we are offering better values and better prices. There is a virtuous circle there of continuing to be able to drive volume with our manufacturers, and that point I made about denim has helped maintain the margins that we've got. We do see it coming through. At what rate? Not sure yet, but it's definitely out there in the market. I think, you know, the currency challenge, yes, we've got that again. We're hedged a little bit, but Yeah, we do. I think you've answered the question perfectly. We do expect some movement, but it's very hard to give you exact guidance on that right now. I think you should assume, given it's an inflationary environment, there will be inflation pass-through, but we've got to do it in a sensible way. On free cash flow, I like t he normalized CapEx, what we said actually is we expected CapEx to revert back to kind of pre-pandemic levels or a little bit above pre-pandemic levels, actually. As you can see, we're not expecting that to happen this financial year. There's been a bit, we're a bit behind in our capital spend program. Some of that's in property to do with materials, getting materials in, and slowness there, which is kinda knock-on impact on some of our programs there. I do expect that to catch up. Some of it's actually in technology around having the right people. That's probably one that's a little bit more concerning because they are programs that we have to deliver against. It's not a good thing for me that the capital is behind. It obviously helps free cash flow, but not a good thing. I expect to try and catch that up into next year. We're definitely looking at capital above, you know, GBP 400 million type of numbers into next year. That's what I will be targeting. Great. Thanks. Then my third topic, and I appreciate this is perhaps waving a red rag, is an online sales tax. I know it's buried in the Autumn budget. Is the government still considering the possible implications there? I just wonder what your view is on, you know, whether you think that is a sensible thing to do and how you as a company would adjust to such a situation. Well, thank you, Charlie. That's probably not really a result-focused question, but it's a good question. If we're not careful, Steve will take up the next 30 minutes answering it. But Steve, give us the top line position on that. Fundamentally, we have a problem in the retail sector. Any other sectors, by the way, because the business rate structure is outdated and unfair. I mean, what you've got is a tax that the government collects very easily from visible assets. It means there is a bias towards bricks and mortar retailers in the tax collection, and we are already, I think as I just said, a top 25 taxpayer in the U.K. What it means is that others are not paying their fair share of the U.K., in the U.K., and it means that there are uncompetitive positions in my mind. Is the answer an online sales tax? I don't think it is, frankly, because what it's doing is penalizing the consumer for the fact that the tax is not collected elsewhere in the P&L. I think there should be other charges within the tax system that the government should overhaul. We recognize that, you know, from a treasury point of view, this is a revenue problem. They get a lot of revenue from a tax which is now out of date and unreasonable and actually quite socially damaging because it impacts, you know, high streets and town centers in leveling up applications. Yeah. It's quite conflictive with government policy. That's the core problem. I don't think we should equivocate that then, as Steve said, with an online sales tax. It's a slightly perverse thing for the U.K. government at this juncture saying, "We've got probably one of the most advanced consumer online economies in the world. Is it the right thing to turn around and tax it in a way that other countries aren't?" I think those are quite big and difficult policy questions. Great. Thank you very much. Okay. Thanks, Charlie. Shall we go to Simon Irwin from Credit Suisse, and then we'll go to Georgina from JP Morgan. Hi, everyone. Three questions. Hi, Simon. For you, as per usual. First thing, congratulations. Can you just talk a little bit about what you're seeing in terms of recent trends in Clothing and Home, particularly around Home itself, and also in some of neglected categories such as formal wear and party wear, et cetera, as we kinda move into peak season. Secondly, can you just talk a little bit about international? You talk a bit about sort of moving to local sourcing in Ireland. I mean, should we look at that as being a kind of permanent diminution in overall profitability, if you have to go down that route? Thank you. We'll take those two questions and come to. Okay. The third. Trends-wise. Look, the first thing is that we must almost separate out longer-term trends from some of the short-term things that have happened are still happening in the market. There is an acceleration if you talk about trends. There is, over a period of time, there's been acceleration away from tailoring. There's no doubt about that. However, as we saw at the Investors' Day, people are still wearing suits. Tailoring is not finished. We saw a very strong bounce back in tailoring as we got back to work, back to school, as did the market, frankly. September was up 3% on two years. Yeah. September, 3% on two years, which is fantastic. However, it sort of just come back off a little bit as we got into October, November. I think that what we're seeing, though, is the strength of our casual wear range. Again, good growth, good market share gain in denim again. Denim goes from strength to strength. A good reaction to our jersey wear and our knitwear ranges. Again, areas where we already lead in the market. I think, and really that relaxed dressing style, kids wear has been really strong throughout the period and continues to be strong for us as we've repositioned away from what was a fairly formal go and see nan for Sunday lunch type range to something that represents really what kids wear. We've continued to make market share gains there. We went back to being number one in school wear in September. Specifically in home wear, we've had a good run in home. We were repositioning the core home wear before we went into the pandemic. It was accelerated by the fact that, frankly, everyone was at home. That trend, to a degree, has continued. People are spending, you know, I think with people spending more time working from home now, that's likely to continue, albeit not necessarily at the rate that it was. As we see the consumer behavior, it's probably, you know, we've been through the sort of return to work and the investment piece buying that you get around this time of year. We're now really into gifting and food, and we think our customers are, w ell, we know our customers, from what they've said and what they're doing, are looking forward to a strong celebratory Christmas full of events. That will lead to party wear continued to being strong, albeit it's probably more about separates than big pieces, for example. Then as we get to the new year, we think there'll be another push into health and fitness, which has been continuing, and we are positioned as the number one brand in the full price brand in the UK in terms of Goodmove, house own brand for sport and leisure wear. Again, I think there'll be a back to work moment again in the spring. We've got different shape movements in consumer behavior. The long-term trends I think are still true. I think we're well positioned in the work that we've done in the product, in GM with Katie and with Richard, to make sure that we're in. We are, you know, continue to be strong where we've always had strength in formal wear, but pushing into more share in those leisure wear. Why don't I take the international question? I think you probably need to divide the international kind of story into two, which is international excluding Ireland and then Ireland. In the international excluding Ireland, I think what we've seen really is predominantly the impacts of lockdowns, and largely in Asia and in India that was more severe in Q1. It sort of got a little bit better in Q2, and we had an improving performance. But in other parts of Asia, that's carried on a little bit longer. We're obviously quite hopeful of recovery there. As you've seen, our online part of our business is performing really strongly. In Ireland itself, actually, it is a tale of two halves as well, a tale of two stories there as well. Our Clothing & Home business is actually performing really well, and that's very encouraging. I think in some ways we're as well positioned in that market as we are in the U.K. in relation to Clothing & Home. It's obviously the Food business which has been hit the hardest by Brexit, and that's where most of the costs that we see, where the impact on profitability, it hits us. The truth, I think it is a long-term game or a medium-term game to try and ameliorate those costs. I think it's gonna take a bit of time. It's hopefully gonna take a little bit of changes from a political perspective, but it's gonna take time, and it's gonna take time for us to bed in sourcing. We definitely believe we've a lot of work to do in our Irish Food business, and that's both north and south. It's not where we want it to be from a profitability perspective or from a consumer proposition perspective. We've got a lot of work to do, and it's gonna take a bit of time. Okay. Do you wanna come back on that, Simon? Yeah. Well, no. I just had the third. Was just whether you've got anything to kind of say, given you're measuring your U.K. business versus 2019, to what extent are you benefiting from the demise of Debenhams? I mean, is there a very different pattern in terms of stores that used to have a Debs nearby versus ones that didn't? So the macro. There is doubt that we are having some benefit from the closures of other competitors in the high street, okay? Mainly Arcadia and Debs. Is it very visible at the moment? No, it's not. If you look at the total Clothing and Home market, it's down. I think there is probably a better quality of sales we're getting because of course there was an awful lot of discounting in those two players, and that's gone out of the market, and I think that's helped everyone with their full price sales. In terms of shape, I think probably because our locations are largely in places that have been quite heavily hit by the pandemic anyway, in terms of the shape changes, it's quite difficult to say that, you know, in places like Bluewater or Bromley, et cetera, it's quite difficult to say what exactly has come through. Has it rippled the market? No. Too early to say, though. Too early to say. No. Part of the trouble is that very high proportion of the Debenhams stores that were closed were in old town centers which have been majorly impacted by the pandemic, and our stores have, too. There's so much noise around that. No, I know you're thinking, look, surely you can compare the Debenhams locations and non-Debenhams locations. The answer is it's too cloudy to be able to say that. There's clearly been some benefits, particularly in specific categories. With Debenhams, our interface with Debenhams across categories isn't, wasn't actually that high, but there's clearly been some benefit. Part of the benefit, incidentally, is going to be that we, as we said, we're taking a number of Debenhams sites. We'll have to completely reconvert them. I mean, the Debenhams store shape, configuration, design is not the future. It's not ours. You know, Eoin is wincing because the cost, but the locations are very good. We'll get some cracking sites. Yeah, yeah. The only other thing to add to that, Simon, don't forget just how big the beauty business was. The branded beauty business was part of the Debenhams mix. Yeah. That doesn't, that's not coming our way. It's not coming our way at all. No. Okay. Yeah. All right. Thanks very much indeed. Thanks, Simon. Now, well, let's go to Georgina Johanan from JP Morgan, and then we'll have Simon Bowler. Simon. Well, I was gonna say the second Simon, but that'd probably be a mistake. The other Simon. Morning, guys. Can you hear me? Morning. H-hi. Hi, Georgina. Hi. Good morning. Good morning. Just two questions from me with the second having two parts if that's all right, please. The first one, just looking to next year, I mean, obviously there's a huge number of moving parts and, you know, I appreciate there's no crystal ball, but in terms of your thinking at the moment with all of those moving parts, if we were to take your guidance for this year and obviously strip out that rate benefit, that would obviously be our starting point for looking at next year. Would you actually expect, with all the internal positive work but the external headwind, to be able to push ahead on a year-over-year basis next year? That's my first question, please. My second is just around- Okay. Georgina, let's take that and we'll come back. All right? Yeah. Thanks. Well, why don't I have a go at that? I mean, I think the, look, it is, as you rightly say, hard for us to be kind of giving guidance or forecasts for next year at this point in time. Particularly as we sit today, there is just a lot of uncertainty out there in the marketplace. I mean, it really is. You know, it's the, I think Fraser used the term, the supply chain is a little bit bent out of shape, and it really is a little bit bent out of shape. So I think we are cautious on the trading environment into next year. I think it would certainly be our ambition to progress, but we're gonna have to kind of see how we get through this year first before we kind of sort of make those statements. You know, that being said, the business is in good nick as it goes into next year. There's still a lot more to do, but I mean, it is very reassuring that, you know, we've got the core growth that we've seen in food and the better full price performance in clothing. We have to sustain that and you know that's some of that we're getting good tailwinds, as Steve has said before today. We've got to work hard to sustain that. I think it will be a very good performance to progress from next year as I stand today, given the trading environment. Okay. Georgina? Great. Thank you. That's very clear. My second question was just around all the work that you're doing with third-party brands. I guess, first of all, what are you hearing from them in terms of the model that they'd like to work with you on? Would they prefer a wholesale model, more of a commission-based marketplace model? I'd just be interested to hear, please. Then second of all, I appreciate it's still early days, but what are you seeing in terms of new customer acquisition coming through those brands? Are you generating the type of customer that wouldn't have traditionally shopped at Marks, please? Georgina, Steve's going to give you a line of length on that. Just a caveat. A year ago, we didn't talk about third-party brands, and in truth, it didn't feature as a large part of our strategy. We decided to start experimenting as part of our innovation program, and it really started with, I guess, Nobody's Child and then the Ghost collaboration. There's been a tremendous amount of learning in the last year. It's quite small at the moment, both in economic terms. We're quite excited about the idea of it. The reason is this, we're not going to become a sort of general purpose platform. That's not our idea. But for our customers, there are certain things that they like to buy. Our third-party brands are all about our customers and what they like. In tomorrow's world, when people don't want to shop around endlessly online, when search engine optimization is extremely expensive marketing costs, when small brands have difficulty acquiring customers, and we've got this massive platform with the data and the magnet brand about M&S, it's a reason why we are competitively advantaged in trading with third-party brands, and they will enhance our platform. That's the logic of it. We don't know where this could go. In truth, we don't know where this could go. We're quite excited about what we've seen from our little toe in the water. Is that fair, Steve? I think that's very fair, Archie. I think to just emphasize Archie's point, the general brand, the general platforms, you know, ultimately are sort of like dangerously heading towards the same place as some of the department stores. What's the differential when they've all got the same brand in the same place? Some level of adjacency and added an addition to our ecosystem is appropriate for our customer base is one of the strengths that we have. In terms of the. Can I just add one to add specifically to the question? About half and half is consignment versus wholesale today. I think it's at this point in time we are favoring moving more to consignment and more to a kind of a drop ship model because I think we are prioritizing getting the value of our data and our ecosystem rather than providing a full solution to a brand et cetera and so on because that's you know that's what our priority and focus should be. We shouldn't rule that out in the future but that's what our priority. Reflecting where we are. It's where we are. Sorry, we're not brilliant on clothing, home, supply chain. The time may come when our fulfillment capacity changes, and we can take a different view. I think to Archie's point, you know, this is all based around a data engine, so, and making sure the adjacencies and the ecosystem develops. I think that the proposition for customers, therefore the way we will fulfill to customers, will develop as we change our capacity in terms of our capability online. Indeed, those brands change their focus. I mean, it's interesting to note that Seasalt Cornwall, for example, has changed its focus away from some others into Marks & Spencer because of the way we fulfill. Different brands do have different requirements, by the way. It's not one size fits all. But what we can see is that with those adjacencies, again, early days, we saw that with Nobody's Child and with Jaeger, we have picked up some new customers to the Marks & Spencer ecosystem. It's a relatively small number. 3% of the people who bought into those brands were new customers. What's interesting, though, is about 8% were people who were Marks & Spencer clothing customers who had shopped clothing at other departments such as lingerie and not bought womenswear. I think, you know, again, in terms of building the relationship with our customer on a broader range of products, as Archie Norman said right at the start, that are adjacent to the current relationship, they're really important priorities. You say small toe. Yeah, very small toe. Tiny toe. Toe nail, maybe, in the water. All right. Time's ticking on, so can we try and just. It's not your fault, it's our fault for being too wordy. Georgina, do you want to come back? No, that's great. Thank you very much. Thank you very much. Do we go to Simon Bowler from Numis, and then we've got three people who are patiently waiting. If we're quite clipped, we'll get through everybody. We've got Simon, Richard Chamberlain, Maria-Laura Adurno, and Lorenzo Maggioni. Yeah, let's crack on then. Simon. Great. Thank you. I'll keep it with just two quick ones, and I'll tax your memory to be able to remember them. The first one is just you've spoken to kind of Marble Arch and 20 asset management projects. Is that consistent with the GBP 200 million release of capital you've spoken to before? Or if all of those came off, would we be looking at a bigger number? The second one is around hospitality and food on the move, where you've kind of spoken to the improving run rate and exit rate in September versus the first half. Can you share a little bit of color on what trends you're seeing and how hopeful you are of those businesses fully recovering at some point in time? Yeah, I mean, I'll answer the first question. Do you want to answer the second too? Look, I think it is. It broadly consists, I would say, Simon. I mean, if all of those 20 come off in a favorable way, it's probably. There's probably a little bit of upside on that. But it's also kind of over, you know, a multi-year program as well. So yeah, we've definitely stepped up our game there, and we're making really good progress. So yeah, there is potential upside in terms of the total cash potential there. Yeah. Specifically in terms of hospitality and food on the move, we have seen improving trends, particularly since people returned to work. The shape of it is really interesting. I mean, for example, we're back up on the year on sandwiches, albeit we've still got considerable challenges in the city centers, and the shape has really moved around, again, people working from home, different priorities for school. Yeah, we've got challenges in all the places you expect. You know, the three-day week in a city, for example, gives us a problem with those stores, and they were circa 25% food on the move businesses. Overall, we've seen that improvement. As I said, sandwiches are back up on the year at this stage. Hospitality is a bit more challenging. I think the whole hospitality sector is saying this now. We're just not seeing the volume return of people, and we're running about 30% down on the footfall. That's been consistent now for the last 2 months. I don't expect that to change between now and January. It might have another change in January. It is good in that we're already starting to reshape away from some of the small cafe propositions we had in the smaller foodhalls as we put the footprint back into our core clothing, our core food proposition. Part of the reason we've done that is because we've been growing market share in core categories such as fresh meat and vegetables. We've gained over 1% market share in those categories. That's part of the core strategy, sort of more relevant to a broader range of shoppers, and bigger footprints in our food business. To a degree, you know, the refocus of what is your core is, in line with our plan anyway. All right. Simon? That's all good. Thank you. Thanks very much. Okay, let's crack on. We come to Richard Chamberlain, and then from RBC, and then we'll go to Maria-Laura Adurno from Morgan Stanley. Richard. Yeah, thank you, Archie. Morning, team. Sorry, Richard. Two from me. First one is on seasonal stock. It sounds like you're a little bit light on seasonal inventory at the moment. I just wondered whether that means, you know, you have some sort of higher risk of discounting into the Christmas peak. I guess you might have a shorter window to sell that product this year. The second one, I just wondered if Eoin or team could run through the sort of current thinking on not planning to pay a final dividend this year. Because I guess with the higher profit expectations, slightly lower net debt, you know, working capital in good shape, you could make an argument that maybe you should, you know, look to pay something at least for sort of signaling purposes on confidence in the outlook, et cetera. Yeah. Well, the answer. Might do. Thanks. do. Thanks. Richard, the answer to the second question is probably shorter than the answer to the first. If you want to- Well, yeah, no, I mean, I think I've been pretty consistent with saying that we have to have good clarity that we're gonna where in terms of our investment grade metrics. There's no doubt about it, which you're absolutely right. Like, you know, the performance to date has helped. There's some benefits in working capital, which will unwind into next year, so we have to kind of take that into account. We are underspend on capital as well. I have to look at all those i n totality. Where I stand today, I don't think we should reintroduce it in this financial year. As I said, most of the shareholders I've spoken to have asked me to prioritize the balance sheet. We've got shareholders who would actually say w e'd rather you don't pay a dividend. No, because if you believe where this is now into faster growth, then restoring the balance sheet, we've got some quite significant growth things we want to do going forward. Yeah. Eoin says that is our priority, and that's the board's view. Yeah. Okay. In terms of flow of merchandise, the flow of merchandise has been bumpy. We have got broadly the shape that we wanted within the range that we've got today. We've been very careful not to allow terminal seasonal merchandise to move later than where we can reasonably sell it. Where we are carrying any merchandise or reshaping the intake flow, it is of goods we know are appropriate for the forward season. When I look at the sales and the trading between now and Christmas, there's absolutely, definitely not gonna be mass discounting in this business. That we're not doing that at all. Where we just see if we've got individual lines that need correcting, we'll take action. Of course, that's just normal trading. The January sale looks at this stage to be in good shape and in line with our plans. What we'll do is we'll make sure that we flow merchandise as appropriate next year. You know, in the grand scheme of things, you know, this business, if anything, has still got too much stock in it. I'd like to bring the stock levels down. We've done that quite successfully over the last year. While the shape of it, you know, it's a bit raggy in places if I'm honest, but overall this is again, the direction of travel, and it's one of the things we've accelerated during the course of COVID. Yeah. Okay, great. Thanks. I guess you'd also have an option to hibernate some stock if necessary, would you? I imagine that would be a pretty small bit. I mean, just to be clear, Richard, we've got nothing in hibernation at this stage. We were really disciplined about anything we put away at the start of the pandemic, such as tailoring, which is now back out and it will not. We're not in a business that wants to hibernate stock. We will deal with what we've got in front of us. It's about buying better. And therefore, you know, where we've got merchandise, which would have come late that we think is terminal, we have, you know, made sure that we have taken the appropriate action. Okay. Thank you, Richard. Thanks very much. Appreciate it. Now, look, time's marching on, so I'm just going to take two more quick questions and then we'll close. We'll come to Maria-Laura Adurno from Morgan Stanley, and then Lorenzo will come to you. I'm sorry, we've got other stuff to do today, so we'll take any questions or discussions later in the day. Maria-Laura. Thank you very much for taking my question. Just a very short one. Can you perhaps, in the context of everything that you've said around food inflation and how the market is playing out so far, talk a little bit about what you're seeing on the food front from a competitive standpoint, given the recent changes in the market? Thank you. I mean, we've seen. I don't think it's saying much that's related to the recent moves in the market. I mean, if we're talking about Asda and Morrisons there, I don't think we're seeing that much. I mean, I think they've got, you know, somewhat differing strategies to us. I mean, I think we've tried to keep relatively focused on our strategy of going after medium-sized baskets. You know, in a lot of cases, secondary shops, which we've been quite successful at with a pretty strict range architecture, you know, underpinned by our Marks & Spencer and our other value campaigns. That seems to be working. It's hard to kind of I'm almost struggling to see how that's kind of, you know, how that's working versus competitors. On inflation, though, I mean, I think we're seeing. I mean, you saw with the Kantar data, you're starting to see inflation come through the system. Everyone is flowing inflation through the system. We're actually a little bit behind the market actually in flowing inflation through the system. I think you're seeing that that's happening across the board. Yeah. Look, you know, to be honest, as Eoin has implied, we don't think I don't want to give the impression we don't think about the competition, but we think about our business first, and we have 3.5% market share. What's happening at Sainsbury's or Tesco is not the biggest issue for us. It's about the changing shape and evolution of our business, which has been, you've really seen evidenced in the last few months. I mean, we have on a two-year basis without the benefit of online, because all that's in Ocado, we've been pretty much the top performing food retail business, and that's not driven by what anybody else has done. That's driven by what we've done on product innovation, on value, you know, on quality, which, you know, is a relentless focus for us, and on the stores and the beginning, we're just seeing the glimmers of life from the rollout of the renewal format. Okay. Maria Laura. Thank you. Thank you very much. Thanks. Okay, last question. Last but not least, of course, from Lorenzo Maggioni from Bank of America. Hey, guys. Yeah, I'll be quick. I'm conscious of your time. On the sort of discounting environment, do you think this sort of lower, better environment for yourselves and sort of most of the market will carry on through, I guess, Black Friday and the other important sort of discounting holidays in Q4? Or do you think those are sort of slightly different beast where you should still see, you know, very significant discounting across the board? Cheers. I mean, look, and also we haven't actually talked about Black Friday because we haven't done Black Friday in this business now for four years. I mean, it's another one of those mass discount promotions where when you look at it in the cold light of day, you've made no money whatsoever, disrupted your supply chain, and we think it just adds to the sort of tricksy promotional thing that it disrupts your value statements. We are not taking part in Black Friday. We haven't done for a number of years. What we're seeing is a much more normalized trading pattern that you would expect from a standard retailer. My view is overall the market is coming off more and more rather than growing. I do think that again, most people will take advantage of the market and the way that it's structured at the moment to continue to try and push a full price stance. Well, yeah, I don't have a crystal ball on other people's trading at the moment, but the two major players of discount are out of the market at the moment. No, that's very clear. Okay. Good. Well, look, I think I'm going to draw a line under it there because our hour is just about up. We really appreciate good questions, good discussion. Our team is available. Fraser's here. Eoin and Steve, we're available, not completely available, but we're around during the day if you've got any other questions. Do come back to us and we much appreciate your time. Thank you very much. Thank you. Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.