B&M European Value Retail SA

LSE:BME

Earnings Call Analysis

B&M Reports Solid Growth Amidst Competitive Market Conditions

B&M's recent earnings call revealed a 3.7% revenue growth to GBP 2.644 billion, while adjusted EBITDA increased by 2% to GBP 274 million. The company maintained a stable earnings margin of 10.4%. A strategic focus on volume growth, including a 10% increase in home sales, underpins their operations. Despite a lower adjusted EPS of 14.7p due to increased interest charges, a robust balance sheet supports net debt at 1.2x. Looking ahead, the company anticipates a full-year EBITDA between GBP 620 million and GBP 660 million and plans to open 45 new stores this year. An increased interim dividend of 5.3p reflects confidence in cash generation.

Solid Start Amid Market Challenges

In the first half of the fiscal year, the company's revenue reached GBP 2.644 billion, marking a 3.7% increase compared to the previous year. This growth can be attributed to strategic purchases and an effective trading strategy that focused on volume rather than inflated pricing, even in a market struggling with general merchandise weaknesses. Adjusted EBITDA rose to GBP 274 million, a 2% increase, showcasing the resilience of the company's business model amidst broader consumer challenges.

Driving Volume Through Strategic Pricing

The company has been proactive in the home category, achieving a notable 10% sales growth and a remarkable 20% increase in unit volumes in Q2. This push is part of a larger plan to capture market share in general merchandise by offering lower prices through a strategy termed 'Every Day Low Pricing' (EDLP). Over the last five years, the overall business has maintained a consistent growth rate of approximately 40% in the top line, with no significant inflation in general merchandise, which is pivotal for maintaining strong price positions.

Operational Excellence and Margins

The adjusted EBITDA margin, although flat at 10.4%, is supported by a disciplined approach to managing operational costs and maintaining strong sales volume. Notably, there was a 66 basis point increase in trading margins in the UK, attributed to a favorable sales mix and effective management of markdowns. With plans to open 45 new stores, the company anticipates that continued discipline in managing store operations will keep margins stable. Free cash flow for the first half was GBP 73 million, down from GBP 143 million, primarily due to increased working capital needs and higher capital expenditures.

Shareholder Returns and Future Guidance

The company has a strong track record of returning cash to shareholders, having returned GBP 1.9 billion since 2020, and it announced an interim dividend of 5.3p per share, an increase of 3.9% from the previous year. A share buyback program is also underway, with conditions set to allow for continued cash returns based on operational performance. For the full year, the adjusted EBITDA is projected between GBP 620 million and GBP 660 million, reflecting confidence in maintaining operational momentum despite external pressures.

Forward-Looking Strategy

Entering the crucial holiday shopping period, the company projects strength in trading and plans to enhance its market presence in France, with expectations to open more stores than the current year's 11 openings. The management remains confident in navigating through inflationary pressures without passing costs onto consumers, sticking to their successful volume-based strategy. It maintains a disciplined capital allocation strategy that focuses on optimizing returns while ensuring a robust balance sheet.

Earnings Call Transcript 2025-Q2

[Alejandro Russo, executive]

Morning, guys. Thank you for coming. Good afternoon, Asia; really good afternoon, America. I think we have, so you guys know, 140 people on the line, okay? So thank you for coming.

So let me -- a few introductions before we kick off, I think most of you have already made Gareth Bilton. He will introduce himself in a minute, incoming Trading Director. He has a big job ahead of him. He's going to do fantastic. So let's wait for Gareth.

James Kew, Retail Director in role since July.

[James Kew, executive]

Yes.

[Alejandro Russo, executive]

So Gareth is no longer in retail since the summer. James is running the shops. How many years at B&M, James?

[James Kew, executive]

Nearly 14 years now.

[Alejandro Russo, executive]

Nearly 14 years. So this chap is running an operation, which has 32,000 people?

[James Kew, executive]

Yes. Yes.

[Alejandro Russo, executive]

Roughly. So very -- a lot of continuity. James, used to work for Gareth. So it's been a nice transition.

Everybody knows Mike.

Some of you have already met once before, Lesley Buchanan. Lesley, how many years in the business.

[Lesley Buchanan, executive]

Over 10.

[Alejandro Russo, executive]

10 years. Lesley is a senior buyer in Home, key category for us.

And this is Vianney D. I'm not going to pronounce the D because I'll embarrass myself. Vianney is now the Trading Director in France. Executive Director reporting to Antony the MD. How do you pronounce your last name, Vianney?

[Vianney Deregnaucourt, executive]

Deregnaucourt.

[Alejandro Russo, executive]

Just for the record. I'm not going to embarrass myself on that one, actually, my French is too basic for that.

So you will hear from the team today. So today, I will really anchor the conversation on 2 fundamental points, which I will keep coming back. EDLP, volume and how we continue to drive prices down.

It's a continuous process of price deflation year in, year out. You can call it inflation, disinflation, but we're in the business of driving volume through EDLP to continue to give every quarter customers the lowest price, yes? And that's basically the question.

And the second piece, which hopefully comes to life for me. Been over 2 years running the business. This is a team effort. And in every result, you are always going to meet part of the senior team. And actually, it's all -- come in. Hello. Please come in. Thank you. I thought English time was accurate in the good old days. Sorry for that.

And it's all around the B&M culture. It's a very distinct culture. We do things in a very entrepreneurial different way, and hopefully, it actually comes to life with the guys, okay?

So EDLP, volume, continued price reductions. So let me kick us off.

I will just highlight a couple of numbers. Half 1, group adjusted EBITDA, GBP 274 million, which is 2% up in the year. That shows a high degree of discipline in the business on how we buy, how we sell and how we control the cost lines.

Interim dividend, 5.3p, 3.9% up for the half. And Mike is going to give you some color of actually our dividend payout, which is stronger.

Anchoring on those 2 numbers, so let me talk the first 2 bullet points combined, what we've done on volume.

If you remember what we said at the end of Q1, even before that, by the time we had in June, the full year results, I said I detect significant weakness in the market in general merchandise. And I said we had bought in advance to basically take volume market share in general merchandise, against the broad competition on what I sense and see as a weakness.

You can see it in some of the competitor numbers. You've seen Homebase as an example yesterday. It's a broad market, okay? So we set up Q2 to gain volume market share in general merch.

So let me just give you an example. What is the main category in Home? It's a broad cooking, dine, textiles. It's a very broad area, which is instrumental and the #1 category in general merch. Don't take the numbers literally to the decimal, but let me give you the sense of actually the volume we have driven. This is just in Q2, okay?

Total sales in Home roughly grew up in Q2 by 10%, pounds. And the volumes, units that we drew in Q2 in Home is roughly 20%. 10% nominal sales growth total in Home and 20% volume in Home in the quarter. You've seen the shops, EDV, Everyday Value. We've been buying purposefully for 1 year ago, bringing that price point in an organized way to drive that volume, okay? And I am pleased to say that general merchandise performed exceptionally well in Q2, units, pounds and nominal.

If you look at it from a broader point of view, roughly, if you look at the last 5 years, this business has grown the top line, let's say, rounded up, plus 40%. You've seen it in the RNS, and I'm going to reiterate it here. Our number of containers of the same period coming in general merch from China is up 40%. Top line of the business, 40% for 5 years, containers, physical volume and that's tens of thousands of containers, up 40%.

Don't get distracted because there is mix and there is always a bit of mix change in those containers. But what that tells you is that over 5 years, the inflation in general merchandise cumulatively is nil, 0, 0. This is a business that buys and trades in volume. We are not in the business of driving or selling inflation. You've seen it on a cumulative basis over 5 years. There is no inflation in general merch. You see it in Home in Q2, the level of units and volume throughput is twice the nominal pounds coming into the business.

And the way to think about it is actually quite simple. If you take Home, we've grown 20% of units in Q2. I can tell you categorically, we are gaining market share. And you see that in the bottom line. That's kind of the first point I wanted to anchor, you will hear from the team how that comes to life.

I might steal a bit of Gareth's input in here. But just to give you a sense. FMCG, Gareth is going to talk about FMCG in more detail, current year inflation in FMCG, 0. In fact, it's even marginally negative, deliberately. So we're in the business of selling EDLP. We don't do high-low. We drive volume and units and that is a virtuous circle of B&M.

Volume, and we're in the business of bringing prices down in an orderly manner to give customers the best value proposition we can in the business we operate, okay?

I will jump to the one before last. Very smooth transition team. Since I became CEO, I've been running succession in every function. You have Mike as CFO. France is a very strong stable team. Logistics, you've met Jon Parry and Sharon in Bedford. Retail, James is in this role, not because of accident. This is probably the guy who spends most of my time in shops, James. That might be a bad thing for him, but we kind of enjoy it. So all of this has been planned for a number of years. And Gareth is absolutely the right person to take over from Bobby, who is retiring in March, current year. All of this is planned.

Very smooth succession and you can work on the assumption that the transition is largely completed. So Bobby stays in here until March. And then he's going to help us on an advisory basis for a number of months on a nonexec capacity actually as Gareth needs or help on a net basis. Okay? Think about over 6 months or so consultancy in FY '26.

Full year GBP 620 million to GBP 660 million. That's a range. And you guys know me by now, I don't shoot at the bottom end. You can read what you think is appropriate on that statement. Full year EBITDA, GBP 620 million to GBP 660 million compared to 53 weeks last year of GBP 629 million and a meaningful 52 weeks of GBP 616 million, okay? That's basically setting the scene. You guys can go through slides later.

The pipeline in the U.K. is performing very well. You know we are going to open 45 shops current year. They're in good nick. Highly disciplined. They are performing actually quite nicely.

So we are going to open the 45 shops current year at B&M U.K., we said. The foundations for growth in France are in place. I'm happy how France is performing. I've spent the last 1.5 years with the team putting a lot of the back end to make sure we can continue to grow the business confidently. And you can assume that I'm going to open a higher number of stores next year than the 11, which I will open this year. So this year, France will open 11 and it will be higher next year, orderly B&M way.

You know that we have returned GBP 1.9 billion of cash since 2020 to shareholders. This is a highly disciplined business, the growth, the bottom line and returns cash to shareholders, and I am pleased to formally put on the RNS that share buybacks are underway. We're doing the internal work. It's already in progress. It's not a comment. It's formal. So we will continue to return cash to shareholders every year in the appropriate optimal way, okay?

And when we have all of this in place, we'll update you basically how we're going to do it, simple terms, we will redomicile Lux into a different location, but we continue in the [ LSE ] as a normal business. So share buybacks are coming, okay?

A couple of key points on these slides before I hand it over to Mike. The sales densities of this business are structurally higher than pre-pandemic. You can see it in the top of the chart. Total sales densities have no inflation; it's volume. You've heard me in general merchandise. We've delivered through this period, 40% increase in containers coming from China, which matches the top line, so those blue bars have no inflation. We're not in the business of driving inflation.

EDLP is the sign to lower prices and offer our customers the best price every year. And our growth in stores is highly disciplined. You've heard me before. We went for 51 Wilko shops. We didn't go for 53. I could have chosen 220. So the returns and the cash generation of this incremental CapEx is highly productive and Mike is going to bring that to life. So that discipline in volume that translates into the bottom line and the discipline on how we deploy new capital which delivers best-in-class in this market, return on capital is at the bedrock of the business.

Next slide. I reiterate the same. From pre-pandemic, the top line of this business has grown by 40%. Our volumes in general merchandise have grown by 40%. There is no inflation, and we continue to drive prices for the customer.

The reason why that is important. It's because EDLP volume, structurally higher sale densities. Our revenue growth is underpinned by units of volume per box. There is no inflation in this box. And the lack of inflation allows us to buy more quantities, sell them at low prices, which are winning prices in the market and that's a virtuous circle of retail.

It's really important that I emphasize this message. We are not in the business of driving inflation, guys. It's all around volume.

Mike, to you?

[Mike Schmidt, executive]

Thank you, Alex. Good to see you all. Thanks for joining us. So we're going to begin with a short overview of our P&L.

So group revenues for the first 26 weeks were GBP 2.644 billion, which is 3.7% up on last year. Driven by the sales growth, adjusted EBITDA before IFRS 16 grew by 2%, up to GBP 274 million, which meant our earnings margin, as you can see, was broadly flat at 10.4%.

So given the trading environment and the strength of the prior year first half comparator, which was a record financial year, of course, the progress in adjusted EBITDA really does show the resilience of our business model and our growth strategy in driving value for our stakeholders.

Further down the P&L, our adjusted diluted EPS stepped back to 14.7p, which is linked to the higher interest charges on our borrowings and also the larger asset base from our store opening program.

Moving on to our balance sheet metrics at the bottom of the page. Our net debt ratio stands at 1.2x, which is comfortably in the lower half of our 1x to 1.5x target operating range. And including IFRS 16 liabilities, the ratio is 2.5x, again, a resilient position.

So looking at our revenue performance in more detail. Firstly, our like-for-like sales of negative 3.6% reflected the weather in the early part of the spring-summer season, the overall consumer environment but of course, as Alex has already touched on, the trading strategy that we adopt. As Alex has outlined, our trading approach remains to offer customers the lowest prices possible and to drive our profit generation through volume growth.

Importantly, the business has been gaining volume momentum across the half, and we're particularly pleased with the general merchandise progress that Alex has touched on as we enter the key Golden Quarter period.

Secondly, as we outlined in the full year, we've got multiple growth drivers. U.K. new stores primarily drove the revenue growth in the period, as you can see, but we also have a positive contribution coming through from both France and Heron there. So overall, total revenue growth was 3.7% underpinned by increases in sales volumes with performance strengthening across the period.

Moving on to gross margin. The biggest driver was a 66 basis point step on in our U.K. trading margin. This was driven by a favorable mix, underpinned by the volumes being driven, beneficial FX rates and again, disciplined approach to the limited markdowns that we implemented.

Our operations in France and Heron Foods have also shown robust margins. And I'd particularly call out that I'm pleased with our clean spring/summer stock exit position because this sets us up well for the next trading year where we know we'll be buying at a comparatively more favorable FX rate year-on-year.

Slide 12. Our adjusted EBITDA increased by 2%. That's driven by volume-led sales growth across all segments, and as I said at the start, that is 2% growth on a strong first half of a record financial year.

B&M U.K.'s EBITDA margin has remained broadly stable despite absorbing the preopening costs for 30 new stores opened in the half, and also, of course, the significant increases in hourly wages.

France's underlying EBITDA margin is up. However, the reported margin you can see on the screen shows a dip due to the one-off costs of a new warehouse management system transition that is now successfully completed.

Heron Food continues to report a very healthy 6.7% EBITDA margin.

And so as we look at the group result, we see it as all 3 businesses contributing well to the overall profit performance.

Looking at our operating costs. The adjusted costs have increased in nominal terms, primarily due to the expansion of our store estate across the 3 fascias. The most significant increases in U.K. operating costs this year have been driven by the national living wage rate, which rose by nearly 10% for the second consecutive year. And we have a robust approach of using our higher volumes to offset those increases through enhanced productivity.

You can see the mitigation has already been significant. And indeed, we estimate that with a flat like-for-like position in the first half, we would have achieved a stable operating cost margin there in the U.K.

Our cost base, however, is significantly variable and controllable which has also helped us maintain our margins during this period. We consistently drive the cost discipline across all our businesses. However, this cost discipline is implemented in a way that protects the integrity of our operating standards, something that James no doubt will touch on.

If you visited any 1 of our stores on any day of the trading period, be it the first, the last or a day in the middle, I think you would find that the operational standards remain the same throughout. And protecting our standards and maintaining our cost margin advantage in the industry is critical to our business model. And as we look at upcoming cost pressures, both our targets and our mitigation approach will be no different.

So I mentioned the disciplined focus we keep on our financial returns, and I thought it useful at this stage to update you all on the latest performance of our store opening program. Before today, we most recently updated on a cohort and new store openings through to the end of March 2022. So here, I update that on the 18 months of openings that have followed since that last update given to the market.

This is a group of 35 stores. It took a required total investment of GBP 50 million to get those open. That is CapEx, of course, picking out the stores, but it's also the preopening OpEx and it is also the working capital that we include within the financial returns metrics we adopt. So that's the stock of the shelves.

Those stores generated last 12 months revenues of GBP 257 million, and the contribution, including a full allocation of costs, be it central costs, be it distribution cost, the profit contribution was GBP 50 million. So that is a GBP 50 million profit return on GBP 50 million of investment. That is a fully loaded payback of 12 months. On a cash-on-cash basis, of course, with rent incentives that will typically be available, it is even more rapid.

And if you look at where those stores were opened on the map, you can see that they're a balanced group spread across the country and actually spread across the type of stores that we're opening, just showing how well each format within our model works.

So moving on to the cash flow. Post-tax free cash flow for the first half was GBP 73 million, down from GBP 143 million in the same period in the prior year. Two things that drove that change in performance: firstly, increase in working capital; secondly, higher capital expenditure year-on-year. I see both of those factors as timing effects. Across the full year, we expect a similar number of store openings as we saw in the financial year '24, so that's around 45. And so that CapEx number across the full year for new stores will balance out.

And then on the working capital side, the working capital investment in the first half has been higher this year because of the earlier shipping of autumn and winter stock. And again, we expect to sell that through and end the year with a year-on-year stock position that only reflects the additional new stores that we're operating.

So given the ongoing underlying profit and cash generation progress of the business, the rapid payback of our CapEx spend, we're declaring an increased 5.3p per share interim dividend, up from 5.1p in the prior year. That reflects an updated post-IFRS 16 dividend policy where we will aim to pay out a stable or growing ordinary dividend that is near the midpoint of a range of 40% to 50% of post-tax earnings. And it really is the resilience of our cash generation and earnings progress that gives us confidence in declaring that increased range.

So finally, before I hand back to Alex, it's just worth reiterating what we see as critical in the business from a finance perspective. I think the first piece is around the discipline we have in driving profitable and sustainable growth. For us, that means growth is volume led, coming from both like-for-likes and from new stores.

Secondly, we see the long-term potential for total growth is significant; the returns from our new stores as highly attractive. And attached to that growth focus is a relentless control of our operating costs to retain our customer value proposition and to retain our margins for shareholders as well.

We have cash discipline. We keep our stock buys tight. We exit each season clean. We maintain our capital-light investment base. And we're going to carry on operating with a robust balance sheet. And together, that means we're going to continue to grow our profits and our cash returns to shareholders.

Alex?

[Alejandro Russo, executive]

Thank you, Mike. This will take me 5 seconds. This is a team effort. This is already on the website. You've already met Jon. Suzie Williams, hands up. Suzie's our Group IT Director. How many years in the business, Suzie, already?

[Suzie Williams, executive]

4 January.

[Alejandro Russo, executive]

IT systems in this business transform. Thank you for the hard work, Suzie.

Pete Waterhouse, Group Financial Controller. He stood up with me when I took over. You already know Pete.

And it's a fantastic team, actually. A broad set of skills with depth in each function, okay? And you will hear from Suzie. We're going to invite Suzie to talk about IT in [ major ], right? No pressure.

Gareth?

[Gareth Bilton, executive]

Thanks, Alex. Good morning. So if you allow me a couple of minutes just to indulge, because I've stood here and talked to most of you before, but usually, I'll stand and talk to you as -- so James [ it happens ] as the Retail Director, so it's different for me to stand talk about to you as the Trading Director.

But I guess what -- a couple of things I wanted to say before I get into the detail is I've 26 years in the business. And I've seen the business through lots of different lenses over the years. And to be stood here as the incoming Trading Director is a real privilege for me.

I've seen the business grow from 7 stores when I first joined, so to be the incoming Trading Director at this level is a real privilege for me. I'm actually pretty lucky to inherit such an exceptionally strong foundation in that trading function. I've got some brilliant buyers, experienced buyers that really know our market well. And I'm really looking forward to building on that foundation and taking the business forward. So I guess buzzing is probably the phrase you would describe for me for the last few months and the years ahead.

So I'm going to share some headlines with you from our function. I'm going to enlist the help of Lesley and Vianney to talk about some detail. But I'm going to talk to you about price specifically because it's fundamental to our business. And measuring price is key to us, so we know where we're at. And measuring price actually, in FMCG and against general merchandise, is 2 completely different animals. And I'll talk to you about the difference going forward.

But I'll talk to you about FMCG first. So you can see the slide behind me. But the first point I'd make is we are religious and obsessive about measuring price in FMCG. We have a weekly rhythm that probably John White, who's our Grocery Trading Controller, would say is the highlight of his week and the bane of his life, both at the same time, because that index can drive lots of emotion, good and bad.

But basically, I'll talk to you about the how we do it and a bit about the why we do it. And how we do it is we religiously measure a broad basket on a weekly basis across the 4 big mults and the appropriate discounters. And then we index that price on a like-for-like comparison product-wise, gram-for-gram, pound-for-pound, and we index it and you can see from the slide that our index against those -- that competition is anywhere between 120 and 127.

And it's important to point out that that indexes pre-loyalty schemes because we don't do loyalty schemes. We leave apps and complexity to others. We prefer an Every Day Low Price model, as Alex has talked about, and keep it as simple as we can.

That said, we can't ignore the impact of the loyalty scheme. You take the competitive loyalty schemes, they make a big difference to their price. So we do measure against that loyalty scheme impact. And even when you take that loyalty scheme impact into account, across that same broad basket, the index is still between 115 and 120, best case to worst case.

So we take massive confidence from that, that our price in FMCG on a like-for-like comparison against the same products gram-for-gram, we are worst case when you take into loyalty schemes 15% to 20% different. And pre-loyalty, the index is 120 to 127. And we audit that and we document it, and we're really comfortable with that.

And Alex has already made the point, but it's important to stress at this point, that in our grocery pricing model currently, there's 0 inflation, slightly backwards, as Alex said.

In terms of the how as well and the why, the way we're able to achieve it is, I guess, discipline is the word that I would use, discipline in EDLP, discipline in SKU count. Managing that SKU count and staying as a limited SKU count retailer is really important because what that allows us to do is it allows us to buy in volume. So we constantly review the range. We chop out the tail. If we can't generate volume in a product, then we would rather drop out of a product than not be able to sustain volume or not be able to be competitive.

And to bring that to life, if you take the beers, wines and spirits category, for us to be competitive in any real way in beers, wines and spirits, we would have to engage in [ discount ] deals, high-low pricing, loss leaders, and it's not our game.

So we stock it as a category. We've got a range that we consider appropriate for our customer, but it's never a category that we're going to push to try and be market leading and because we would have to move away from our core strategy and pricing to do that. So that's an example of how we do it.

And the EDLP philosophy, you shouldn't confuse that with a reluctance from us to engage with our brand partners to drive promotions. Because clearly, we do that. We've got strong brand partnerships, but we will enter promotions from a planned and organized and cyclical basis.

And the main reason for that is, it enables us to drive volume. It enables us to pass on more value to our customers, and it drives something new and exciting to the customer where it keeps that FMCG piece rolling.

So if I move on to general merchandise, it's more difficult to index price in general merchandise for a number of reasons. One, comparing like-for-like products is difficult, quite often. So if you take a throw in household textiles, for example, you compare our throw to a Dunelm throw, or a Home Bargains' throw or a Tesco's throw, they may be a different size, they may be a different weight, they may be a different thread count. It's very different and very difficult to get an exact match. So we index it best we can. That doesn't mean we are any less relentless about benchmarking that price gap. Lesley and her team in Home are all over that.

And we have to benchmark it because there's a couple of important things to mention about general merchandise as well. The difference in quality or size may not be immediately obvious to the customer. And in fact, in some general merchandise categories, that difference in quality might not even be relevant to that customer.

If you take a dustpan and brush for example, I don't think anybody cares too much whether 1 brand's dustpan and brush has got a heavier plastic weight or a different bristle count in the brush, a dustpan and brush has got to be fit for purpose and the right price, because value and price perception in that market is much more important. So that's a big a focus for us as price as well.

Our price gap in general merchandise, we are confident after all the benchmarking and measuring that we do is actually stronger in general merchandise than it is in FMCG. We're very comfortable with our price. We're very comfortable in our quality and we are very comfortable in our breadth of range because we think that gives us an edge over some of our competition.

And I'm sure Lesley would argue, particularly over recent weeks, that SKU discipline in general merchandise is probably more important than it is in FMCG because generating volume in general merchandise is much more difficult than it is in FMCG. So constantly reviewing those ranges, reviewing that line detail of sales and profit at a line granular detail is fundamental, and we will very quickly exit lines from the tail so that we can focus on the volume lines. So we won't get involved messing around with products in general merchandise where we're selling 1 and 2 singles a month because that's not our game. Our game is volume, volume driving value, the value and the cost price upside, we pass on to the customer. That's what we're in. And that requires a relentless never-ending cycle from Lesley and her team.

What's consistent with FMCG, though, is that EDLP is our start point in general merchandise. Alex talked about the Everyday Value event. And just to add some color to that, the Everyday Value event is an event that we planned to close the end of summer season sale. It was almost a new event. And we bought a range of products that was deliberately low priced at retail price. The quality was no different than the standard ranges, but we bought in volume so it was non-margin dilutive. We didn't mark down to that price. The margin was built into the cost price and the retails were reflected in the plan and it generated incremental sales. It was a successful event for us, and it helped us transition from 1 series to the next.

All of those elements added together meant that we were able to generate exactly what we set out to do. We drove

[Audio Gap]

We offered fantastic value for money for our customers and strengthened our market share through the value proposition.

So I'm going to pass you to Lesley and Vianney in a second to -- and we'll talk through some product detail. But before I do, just to hold on price for a second because it's a really important point that I think there's 3 points that I would want you to take away from the price.

Firstly, value to our customers is always our start point. Driving value, getting the right price first time is important. We don't want to mark down to a price. We buy good volume at healthy margins but let us maintain that and any upside in that volume-buying process in the cost price, we are relentless and obsessed with passing that to the customer to drive the value message. That's the first thing I'd ask you to take away.

The second thing is that volume is the key to unlocking value. The more we're able to ramp that volume up, the better cost price we get, the easier it is for us to unlock value and keep that ball rolling and generate value for our customer and continue to take market share.

And the last thing is it's always EDLP. We don't do gimmicks. We don't do high lows. We won't ask you to download an app and scan it at the till to get 50p off 1 thing, which is hard work. It's a clear transparent pricing model for our customer that keeps it simple.

Mike talked about operating costs and keeping it simple. All of these things are key to our [ processing ], part of our heritage, and we have no intention on changing any of those things going forward.

So thanks for listening to me about price. I'm going to pass you to Lesley and Vianney who are going to talk about -- I'll put your slide on for you, chaps -- going talk to you about product, and then I'll just come on at the end, if that's okay, just to indulge myself further in 2 minutes whilst I've got the chance. Lesley?

[Lesley Buchanan, executive]

Is that the slide the other way? Or have you missed one? Yes.

[Gareth Bilton, executive]

That's yours.

[Lesley Buchanan, executive]

That's mine. Okay. So over 10 years been here, but in the last 6 years, I've been heading up the Homeware buying team. So I'm just going to put a bit of color around kind of how we've been buying and what we're doing and what we're moving forward with.

So I'm just going to pick up on the EDLP because from a product ranging perspective, that is always the starting point for all of us. So always the starting point of that EDLP.

Now I think last time I talked about our Simply ranges. So our Simply range is around volume, value, core ranges, and they are ultimately the foundation of where we start. So that's the starting point. And that's where we start to layer on then, the seasonal, the trend and the newness.

So myself and the buyers and recently Gareth, we have been traveling 4 or 5 times a year now, so since September. We've been in Tokyo. We've been in Chicago. And we've been in China. And what we're doing out there is just looking for inspiration, what the new colors are, what's coming next, what's new, how can we tweak some of those lines that we've got in the ranges.

Now I've brought some trend boards next to me here. So you can see alongside me, these are where we've brought all the installation back, we've pulled everything together, brought it back to the U.K., and that's how we start to build the ranges.

So trying to build commercial, EDLP, product, into these fun ranges really. They're design-led, they've got color, but equally, completely commercial for our B&M customer. So these are 3 ranges here.

They are seasonally relevant, so they're relevant to the season as in they sit with that time of year, but they are not weather-dependent. So real core products at great prices, but a bit of fun.

Now using our design team has been key because it gives us exclusivity. We've got products that are just exclusive to us. And excited to share that we did win some awards this season. So the big Christmas press day, so -- and I've brought 3 things to show you. So the first award was this one. So this is a snow globe candle, GBP 5, gorgeous fragrance, if you want to have a little sniff on the way out. Comes in 3 colors.

Then we've got -- we've won this for the Gingerbread Advent Calendar. So Gingerbread, probably 1 of the biggest things going on at the moment, this comes already filled, but you can use the drawers, you can fill it with yourself. So innovation, exclusive to us and designed by us.

And then finally, I think this is my personal favorite, the Movie Night In. So GBP 7, you get sweets, popcorn, the cups to put the drinks in, so perfect. And the most fun thing is the tray. Turns into a tray like you get in the cinema. So exciting and new things going on.

Now we've been working through customer moments. So staying completely customer-focused, obviously, is key. We recognize our customers have got really busy lives. There's so much going on, and we want to take them through the year, through the seasons. So whether that's spring clean, whether it's the kids going back to school, older kids going to uni, so much going on, and we want to be there for them.

What that then allows us to do is bring those events into the stores. It allows us to create a bit of fun. In the seasonal space, James' team land it for us.

And then the most exciting thing is how we get that through social media. So we're super passionate about our social media at the moment. Our buyers absolutely love it with TikTok, Instagram, any platform. What's fascinating and what is really exciting about social for us is we get so much user-generated content so -- and what I mean by that is there are so many wannabe influencers out there, that they love shopping at B&M, they buy and then they love showing their haul. So everybody wants a like and everybody wants a share and what that gives us is a lot of content then for us to share with our new customers and equally, our existing customers to come in and buy.

Now to do all of that, we've got to stay really close to our sourcing and we have some great factories in China, direct sources, but we also have our Hong Kong office as well. So our buyers have such a range and a scope of getting the best cost prices, the best quality, finding the best new product and that is all done through the traveling and through the trips.

Now we're going to do something a bit different this year with Gareth. We'll be signing off our Christmas ranges in the U.K. And then what we're doing is we'll travel and we'll go into Hong Kong, and we will invite our biggest volume factories to come and sit face to face. We'll talk through the quantities we're buying, how much we -- what the product's going to look like, what color it is, what fragrance we want in it. Everything will be done sat there in that room. So we know we're walking away with the best cost price, the best quality and the best product that we can put into our range.

At the same time, leveraging that buying power, so with Vianney and his team and on a much smaller scale, Heron, where they will play into some of our events. We will add their volumes into ours and that buy. So the buying power just becomes really, really impressive for us and then we can drive those cost prices down.

And the last thing Gareth's already touched on, but SKU discipline. It's very much what keeps our business simple. The granular detail and the level that we will go down to, I think a recent conversation on the buying floor was toilet brushes, so how many toilet brushes are in the range? Right, we've got to cut the tail. These are the best. These are the volume ones. That's what we keep driving to take the tail away and we layer the new lines in.

So I'm really happy with the progress that we've made on Home, but also super excited about what else we can do with it and moving forward with Gareth, bring in those new products again, traveling and keeping the newness flowing, exciting for our customers.

[Gareth Bilton, executive]

Thanks, Lesley.

[Lesley Buchanan, executive]

Thank you.

[Gareth Bilton, executive]

Vianney, so tell us about France, U.K. synergies.

[Vianney Deregnaucourt, executive]

Well, so I'm the French Trading Director. I've more than 15 years of experience in retail business for international group. I worked 6 years in China. I think we -- or most of you, we met last year.

What I can tell you is that B&M culture is so disruptive in France. We talk about discipline. We talk about simplicity, and I can tell you that even also in France, we say sanity, not vanity. And this is very important in our business model.

So to make sure that B&M France is not disturbing the U.K. business, we -- I mean, Gareth, Lesley and I, we have defined some points of synergies that will drive the mutual growth. So let's go through the 3 points.

So the first one is by operating in 2 different countries, B&M can tap into a broader customer pool -- sorry, broader pool of consumer insights. So that means we can take benefits of the 2 markets. So that's the first point.

Second, as Lesley mentioned, our teams are traveling together. We go to Europe. We go to China. All together. We have also joint sign-offs on product ranges that make it more simple, the process of buying. It's reduced complexity and also, we leverage the U.K. private label portfolio. This is very important. In France, we don't invent any new brands; we take benefits of U.K. private label. That means we have a consistent brand image of B&M, whether you are in France or in U.K.

Last, and this is my favorite topic, I'm passionate about sourcing. So direct sourcing, and I spent years in China visiting factories, this provides a really, really strong competitive edge in the market. When you direct sourcing, you can have a better cost efficiency. You can have supply chain control. Well, in simple words, we choose a product we want. There is not any middleman between which is sometimes the case for a direct competitor. There is a middleman, yes, but we do buy direct at B&M.

And also what is very important is that we pull the stock when we need it. And we just mentioned that our business is driven by volume, and this is very important to pull the stock when we need it. So we consolidate orders together, and we have a fantastic office in Hong Kong, and this is our shared window to grow the business altogether.

So to make it simple, we buy together in volume, and we localize what is needed, either for price point reason, because we do have price points with different price points in France or for any specific needs for the French market.

So I think you can understand that France is successful. We have a double-digit growth in transaction. We have a double-digit growth in sales volume. And on the top of that, we have now more than 3,000 SKUs in FMCG, which can drive footfall for the business.

So B&M France is now a scalable business. And later on, Alex will talk about all the investments we did. And well and from my side, I'm very -- I'm looking forward also to go to U.S. with James and Alex to meet a few investors in person and end up in France. Thank you very much.

[Alejandro Russo, executive]

Thank you, Vianney.

[Vianney Deregnaucourt, executive]

Thanks, Vianney. So just before I sit down, as I said, whilst I've got the podium and a new role, I'll just take a couple of minutes. At risk of repeating myself, I've been in the business forever, and I've seen it through lots of different lenses. So for me to be able to move forward, I am beyond excited about this new role.

And because I've been in the business forever, the buying team that we've got, I know most of them already from previous roles. So their transition's been smooth and being able to have that relationship with them from the start, it enabled the transition and enables us to get some traction quickly.

Going forward, buying decisions will sit with me. We're already locked down for spring/summer '25. Volume, value and customer are at the root of those ranging decisions. We're just about finalizing autumn/winter '25, and those same --

[Alejandro Russo, executive]

'26. '26.

[Gareth Bilton, executive]

Yes. Yes. Well, back end, FY'26, autumn/winter '25. At the back -- we're just about ready to sign those off and volume, value and customer will sit at the root of those ranging decisions as well.

We been to Hong Kong and China a couple of times already. Relationships with China are as strong as ever. It's a good transition there. We are actually -- we're in January 2026 buy mode. We are -- this is -- so Christmas this year is yesterday for us, we're already moving down that road, and we're making good progress. We're in a good place to move forward and I'm really excited about pushing it on.

So thanks for listening to me. I'm going to pass you over to James, who's going to talk about store standards in retail.

[Alejandro Russo, executive]

James, you have to save all the time that Gareth, Lesley and Vianney have used.

[Gareth Bilton, executive]

Sorry.

[James Kew, executive]

No problem. Morning. So as Alex touched on at the beginning of the session, I've been with the business 14 years now. I started way back then as a store manager and operated around 10 different stores and opened several new stores in the south of the country.

I then went on to do roles as area manager and sort of retail operations. And my most recent role was Retail Operations Director where I clearly worked closely with Gareth over a number of years and a lot of the projects that we obviously did in stores.

The key one being, I suppose, the transformation of our store standards that we've seen in the past few years. And if I look back even further than that, when I joined the business 14 years ago, the significant difference in our store standards.

So for me, there's no change to that. We prioritize our store standards. It's what our customers deserve. It's what our colleagues deserve and we continue to push on and build those store standards. We're currently running at 8 out of 10. You've seen it in the pack. We can push it further than that. There's a limit of where we need to go, but we've absolutely got more opportunity to push it further.

I spend my whole week in stores, quite a lot of time with Alex on a Sunday down to London, straight up to Liverpool. And also...

[Alejandro Russo, executive]

It's a long day.

[James Kew, executive]

It is. It is a very long day, and it also involves around 30,000 WhatsApps a day is what I'm currently receiving. So Suzie, our IT Director, goes through a few phones to me through the year as I fill up the storage.

Additionally, I have a separate team outside of my retail field team that now complete 350 visits per week. It's a great tool for me because it gives me a real non-biased view of my estate every 3 weeks. And also, we use it for multiple other elements as well. We get validation of completion of activity. We can use it for a number of things.

So we are running AT 8 out of 10, 350 visits per week, 20,000 WhatsApps. And the main measure the guys are looking for when they're doing these visits is, is it available to every shelf every day, every shop? Is the store clean and is the store well priced? So really simple measures, but that's what we're great at. We keep it simple in stores so that the stores can crack on with trade in their shops. So really pleased where standards are currently.

The link between retail, buying and logistics I would say is stronger than ever, and that is really enabling us to land events quicker, more efficiently and at a much lower cost and this is an example of something we landed this year, EDV, where it's all SRP, the store managers loved it, straight on the shelf, easy to implement and easy to move around.

So one thing we have introduced is a bit more of a disciplined approach to our secondary space. So store managers join our business because they love the autonomy in our stores of being able to trade the shops. But at the same time, we know that our best-selling lines are a big percentage of our business. So we put a little bit more discipline for the stores around what they should do with these lines so we can hold the volume in every single shop every week. So that's been a bit of a change.

As a store manager, I think you still have a good level of autonomy in your store and you feel you can trade it because that's something we can never lose and when we have store managers join us from competitors or other businesses, quite often, that's why they love joining B&M because it feels like a bit of old school retail and where they can actually trade the shop.

And I think my final point, I suppose, is that everything I'm saying, how do I know that it's actually making a difference to our stores and to our colleagues? Well, we're now in our third successive year of a 500 bps reduction on our labor turnover. So 3 years in a row, we've seen that, which is clearly helping me to build a more robust succession plan as we look to open more stores and need more senior management to run these shops.

So all in all, we keep it very similar to what we've done in retail. It works. I was very lucky to inherit it from Gareth and obviously, we'd done a lot of work for a number of years. We look at standards. We keep availability strong every day. We clean our shops and we price our shops. And I've got no doubt now that we're in a great position with some of the new things Gareth will want to do in terms of activity, we'll be able to land them really quick and say, at a low cost for our customer to ensure that the product's on the shelf as quick as possible.

[Alejandro Russo, executive]

Thank you, James.

[James Kew, executive]

Okay? I'll pass back to you.

[Alejandro Russo, executive]

I will be very quick, so we can open up to questions. And hopefully, Dave, we can allow an extra 15 minutes or so just to make sure we cover any questions.

20 seconds, that gives you an idea of the stores we've opened last financial year and year-to-date, highly disciplined. Mike has already covered the detail. Every single store we open earns its return, is highly targeted. We choose a place where we open them. I'm very happy with this pipeline.

Capacity. We're already on contract. We are going to open -- rather than calling it a DC, I will call it an import center, Ellesmere Port, it's a big animal, 674,000 square feet, open second half of next year. And I'm going to put this in writing and in statement. We only open a DC because we have the volume. Only a mad person would open 674,000 feet if we didn't have the volume.

Good deal. Work in progress, sign, we're building it. Fitting it out. It's not a build. And this is not a Bedford, guys, don't worry. This is a lease, no dramas. It's low cost. It's all designed to keep pumping that volume on general merch.

France, WMS implemented. We're already extending the DC. Comes into line next year. We're going to be easily adding 60% DC capacity in France going large for the second half. Again, why do we do that? Because we are growing volume. Okay?

France, the business is trading well. We're going to grow the business. I'm very happy with the French senior team. Vianney is a good example. We continue to grow that business with discipline.

Heron, it's a great small business. We cross-fertilize. We learn where it's appropriate. I never talk too much about Heron, but there is not much to say. It's a nicely run business as part of the portfolio that keeps growing with discipline.

I'll close with a couple of key messages. We are going to trade well. We are going to trade with volume, sure. And Golden Quarter, the stores and the range and the pricing is well set up. The team will deliver between GBP 620 million and GBP 660 million current year EBITDA. I never pitch at the low end. So you take your own judgment on that. And share repurchases are on the way. The work is now advanced. And when I'm ready to update you in the new year, I will do that, but this is a formal commitment and statement.

Open to questions, Dave?

[Dave McCarthy, executive]

Okay. We'll go to online, first of all, Alex. So we've got 1 here from Christian. How are price gaps versus the 2 out of the big 4, Tesco and Sainsbury's? Are they stable over time? Or have they diminished?

[Alejandro Russo, executive]

I think we've answered that in writing. Gareth has already got into the detail. It's stable and it's in the chart. After discount, against the big 4, we are as high as 20%, never below 15%. And you can assume that the most expensive of the 4, it's at 20% so it's very stable and steady. I think Gareth has answered the question in detail.

[Dave McCarthy, executive]

Yes. So no big variation from Tesco and Sainsbury's.

[Alejandro Russo, executive]

Correct.

[Dave McCarthy, executive]

Second, do buybacks mean you are unlikely to pay special dividends?

[Alejandro Russo, executive]

No, we haven't made basically the decision on how we distribute it. That's a recommendation that will come from CFO at the right time. What we will is continue to distribute excess cash. We generate a lot of cash. And when we are ready to go, Mike will be updating the market how and when we do it. Cash will be continue to be distributed. We will optimize it in the right way.

[Dave McCarthy, executive]

Okay. How difficult is it to redomicile? And are there risks in achieving this?

[Alejandro Russo, executive]

No risks. Requires the right leadership, which we have in the business and the work is underway.

[Dave McCarthy, executive]

Okay. We'll go to questions in the room. James Anstead first.

[James Anstead, analyst]

James Anstead from Barclays. Two questions. One, very clear you wouldn't give a current trading update with the first half or full year numbers. But you do make a comment that you're expecting trading momentum to continue to improve in the first half. So I just wonder, can we deduce from that, that like-for-likes are back in positive territory so far in the third quarter? Any comment on that?

[Alejandro Russo, executive]

We don't comment on per quarter. It's in writing. We are going to trade with volume momentum.

And there is a reason why we won't comment. Dave said that very clearly. You guys will have a good update in January. We're going to trade, and we will deliver volume market share momentum.

[James Anstead, analyst]

But just so I understand the comment correctly. You're saying that trading momentum has improved from the first half.

[Alejandro Russo, executive]

Trading momentum has improved in Q2 versus Q1, and we will trade, win momentum quarter-on-quarter.

[James Anstead, analyst]

Okay. And then just a clarification on the question about specials because clearly, it doesn't sound like the domicile will be -- that issue will be sorted out by the end of this financial year. But you already indicated that the ordinary dividend payout ratio is going to move up quite a bit. Just to measure our expectations correctly for January because you've been in a bit of a habit of doing special dividends after Christmas. Should we assume that this January...

[Alejandro Russo, executive]

Yes.

[James Anstead, analyst]

There isn't?

[Alejandro Russo, executive]

No, there should be.

[James Anstead, analyst]

There should be a special then?

[Alejandro Russo, executive]

And it's always subject to all in the quarter. When we trade well, we do it. Absolutely. So the increased dividend payout, Mike, doesn't have no impact on the extra cash distribution?

[Mike Schmidt, executive]

Correct. So let us trade the Golden Quarter, we always come out post the Golden Quarter. And when we've got the view on the full financial year, this is a highly cash-generative business, I'm sure there will be news to discuss and once we finish that trading period.

[Alejandro Russo, executive]

The business, as you know, James, as Mike says, this business generates a very high degree of cash and we'll not hold it. Richard Chamberlain. Hi Richard?

[Richard Chamberlain, analyst]

Alex. Richard Chamberlain, RBC. Three for me, please. You've mentioned that the seasonal impact on like-for-like was less in Q2, but I wondered if you could make an estimate of that. I think you said it was around 1.5%, something like that in in Q1 if I remember.

[Alejandro Russo, executive]

And what I can say about Q2, which we touched earlier, general merchandise volume and value performed very strongly as we set out to do, as you remember on the back of Q1, particularly on the Home areas.

[Richard Chamberlain, analyst]

Sure. And then what will be the likely openings rate in Q3? I understand it's going to moderate, I think, but I wondered if that's going to have any impact on sort of like-for-like on existing stores because it might put less pressure on inventory, I guess, on the existing estate.

[Alejandro Russo, executive]

We're going to open 45 for the year. If you look at the council websites from memory, James, we opened 34 already, 35, 34? 34? 34?

[James Kew, executive]

It's over 35 now.

[Alejandro Russo, executive]

We're over 35 now. We're going to open the 45 in a year. We never opened in December for obvious reasons. We want to trade the shops. We'll open up to the end of November, and then we'll resume. So basically, the openings in Q4 will be pretty much done.

[Richard Chamberlain, analyst]

Okay. And then just a final one probably for you, Mike, would be the dollar sourcing tail -- the FX tailwind that you're talking about for next year, can you help us at all with that? Will that go some way to helping offset some of the U.K. labor NI cost headwinds, I guess?

[Mike Schmidt, executive]

We don't comment specifically on what our FX rates will be. I can tell you that they'll be favorable. And I think we do see that benefit coming in, which will help us drive value for customers, first and foremost. And that will drive the volume, which will help us offset any inflationary pressures in the business. And I think as we look at the inflationary pressures that, of course, will be there, we don't see those as being any different to the levels of inflationary pressures we've managed over many years now.

[Alejandro Russo, executive]

We manage them through volume, Richard.

[Richard Chamberlain, analyst]

Okay. And presumably, you're already pretty well hedged are you on the FX or you've bought cover for...

[Mike Schmidt, executive]

So we buy cover ahead at least 9 months, no more than 15 months ahead, so we are well covered. It gives the buying teams, so gives Gareth and all of the buyers certainty as to the rate that they're going to be buying products at as and when they're signing off their ranges.

[Alejandro Russo, executive]

Warwick? If we can keep it to 2 questions [ sharp ] guys. It's easier and on time.

[Alexander Richard Okines, analyst]

I've just got one actually. Warwick Okines, BNP Paribas Exane. Alex, you talked about the virtuous circle. Do you think that to make the flywheel work even harder and stronger, you need to invest in deflation in FMCG?

[Alejandro Russo, executive]

No.

[Alexander Richard Okines, analyst]

You talk about flat.

[Alejandro Russo, executive]

Absolutely not. The price is rock solid. We are obsessive about the pricing. The pricing is sacrosanct. The price perception and reality isn't changed. Why doesn't that price position move? Because when somebody tries to move, we move. It is sacrosanct. It's at the right level. In some departments, we can, of course, be a bit more aggressive than others. If we are at 17% or 18% let's say, against one of the big 4, it doesn't mean guys that in every SKU and every department. So we -- that's a commercial decision. We do it on a quarterly basis. But no, I'm comfortable with the price position. Thank you, Warwick.

[Dave McCarthy, executive]

Izabel, you can go next.

[Izabel Dobreva, analyst]

It's Izabel Dobreva from Morgan Stanley. So my first question is you talked about the volumes and the strong price position and Home sales being up 10%. So could you explain what else happened in the quarter, which meant that the like-for-like was down 2% if all of the other components are in place? So why was the like-for-like negative? That's my first question.

[Alejandro Russo, executive]

If I can answer the first question directly, which is reinforcing what I said earlier. The market, most of the competition have been riddled with inflation for a number of years. You had the peak on inflation 2 or 3 years ago. We've never inflated, so we are in the process of going ahead of market to continue to give price point to the customer. And the fact that we don't have an inflation an FMCG, in fact, this is slightly negative, and we continue to drive for the customer the price point on general merchandise, we're simply driving volume market share with a discipline on margin and the buy, and we are driving that volume. And at some point, we will annualize LFLs. Okay?

[Izabel Dobreva, analyst]

Sorry, to be clear, just to follow up on Warwick's question. So are you saying there is deflation in FMCG?

[Alejandro Russo, executive]

For sure.

[Izabel Dobreva, analyst]

There is?

[Alejandro Russo, executive]

Disinflation. Correct. We are driving prices ahead of the market, which is what we do every year. And we choose in which departments we set out to do. So when we exited Q1, you heard me, the big opportunity was in Home 1. There will be more to come in Golden Quarter and at the right time, we'll update everybody.

So the message I want to land on this point is the volume engine room of B&M is around low prices and never sell inflation. We sell volume. And the reason why we can put that price to the customer, it's because we buy in volume. So we don't rely on inflation. Okay?

[Unknown Executive]

And Alex, I'd just add that that volume comes from total sales. I mean, there's this obsession with like-for-like. But don't forget, we've got a very good, very profitable new store opening program. And the beauty of a new store pr opening program is 100% of the sales from that are volume.

[Alejandro Russo, executive]

I'll just make 1 final point in here, and then we can move on from this question, I would suggest. LFL transactions every single quarter are well ahead of nominal LFLs, which tells me the health of the basket, of the health of the footfall. You've heard that last year, it was the same in Q1. It's the same on Q2. We are in here, Gareth has been clear, low prices, volume, SKU discipline and we will never allow an inch of inflation in the business versus the market. Next question, Dave.

[Izabel Dobreva, analyst]

Can I ask my second question?

[Alejandro Russo, executive]

Of course.

[Izabel Dobreva, analyst]

I had a question around the buyback for the specials. So depending on which mix you choose, I'm interested in the total extra cash return level that you're thinking about. And my question is, is the free cash flow generation of the business the binding constraint? Or would you be willing to increase the leverage in order to maintain the special, whether that's in a dividend or a buyback form?

[Mike Schmidt, executive]

So we're jumping ahead to a situation where we have buybacks open to us. which is what we're working on currently. So I don't want to move too far ahead in terms of the guidance we're giving. However, cash generation, as you can see, is very strong each year.

We've got a clearly stated leverage policy. We're not changing that. So it's 1 to 1.5x as being the range that we're operating the business within and targeting the midpoint of that range at this point in time.

[Alejandro Russo, executive]

Simple English, there's no change.

[Mike Schmidt, executive]

And there's no change, therefore. What we will be doing is optimizing the capital allocation between buybacks.

[Alejandro Russo, executive]

It's not how much we distribute; it's how and when. Next question, Dave.

[Fintan Ryan, analyst]

Fintan Ryan here from Goodbody. Two questions for me, please. Firstly, within the guidance range of the $620 million to $660 million, I appreciate you said you're not aiming for the bottom, but what are the puts and takes at the bottom of the range versus the top of the range?

And then secondly, just in the statement, I think there's a slight change in the statement around margins within France. Appreciate there is a -- you said there was an incremental cost from the warehousing in H1, but is there any range?

[Alejandro Russo, executive]

Good questions. So look, the range is well underpinned by our cost prices and price position. So margin, I'm fairly comfortable. We have a full tank to trade at the right time with discipline as we always do. The cost lines are well controlled. Let me trade the Golden Quarter. As I continue to do exactly what we did in Q2, which is volume throughput, I am comfortable with that range. Yes?

Without getting into a numbers conversation, I think what I can tell you is that I don't need a high nominal LFL to be comfortable in the range. Yes? So why is that? Because the volume that is going through the system basically oils the whole machine. Volume is very high. I can keep coming back to Ellesmere Port. I'm not opening 700,000 square feet because I'm pumping oxygen. And I guess what I'm saying in between the lines, there's a lot of people pumping out oxygen. So let me trade the volume. The stock availability is fantastic. It's on the shelf at the right time, we'll trade it. Yes? That's the first question.

And on France, basically, to be able to continue to grow our business, we basically put the same warehouse management system as we put a few years back in the U.K., all done implemented. If you guys have been in IT, there is no IT implementation, which is actually easy going, it's done. All correct and the business is going to trade strongly for the balance of the year. Okay? Hi there.

[Adam Tomlinson, analyst]

Adam Tomlinson from Berenberg. Just first question's just on general merch. So you talked about homewares, particularly. Can you just give a flavor of some of the development that's gone on in other categories? And just how that's changed over the last year or 2 versus last Christmas?

And the second question is just on pricing. You talked about the U.K. in comparison to the supermarkets. Can you just give a flavor again of how you're positioned in France as well?

[Alejandro Russo, executive]

Good question. I think what you will find, if you get into the shops, our Christmas seasonal ranges, the pricing is really sharp, Adam. I think you can read in between the lines. We've planned that a year ago. This is not markdown. This is not giving away margin. We've planned this for a year ago. So some of what you have seen in Home, probably you can say there's a customer in the shop, so that would be a good example. Yes?

And in terms of FMCG, as Warwick asked, I'm very cool with the price. I won't let them move. Yes, Vianney? I think France is going to trade well, expect them to trade well. The guys will continue to drive volume. It's the same product really on general merch and the FMCG, as Vianney has said, is over -- just over 3,000 SKUs that drive the footfall. And it's the same dynamic in France that you can expect, I expect, the team expects on the year. As the sales densities of France continue to converge to the U.K., which is actually the objective, the driver of that LFL in France is fundamentally largely customer transaction. Yes? So I always expect the LFL on a yearly basis in France to be driven by footfall, Adam. Okay?

[Dave McCarthy, executive]

A couple more questions online. Why keep net debt -- why keep a net debt balance sheet? And what is the impact of the NI contribution and minimum wage increase on EBITDA?

[Alejandro Russo, executive]

If Mike answers the first, I'll answer the second one.

[Mike Schmidt, executive]

So we keep a prudent level of net debt within the business because we think it helps drive returns for our shareholders. It's that simple. It's about having a robust balance sheet but having capital discipline there. Alex?

[Alejandro Russo, executive]

NI, what I'm going to say about NI is the opposite of what some competitors have said. A discounter has an advantaged cost base, relative higher cost base business in being able to absorb whatever they throw at us. That's what we do in B&M in running the business on an EDLC basis.

What I can tell you categorically is that we are not going to drive inflation to pay for NI because NI is a fairly insignificant number in a tank which is full. We'll continue to drive volume. We'll continue to buy and source on an advantaged basis. And on the record is the business is not going to use inflation to pay for taxation.

[Dave McCarthy, executive]

Okay. Any more questions? Back to you, Alex.

[Alejandro Russo, executive]

Apologies for the 15- or 20-minutes delay. I think it was important for me that you get to know the team. This is a team exercise. James is already up and running in shops. He's enjoying it thoroughly. Gareth is going to be fantastic in this business, it's been a very well succession plan between Bobby and I. And I will be remiss if I don't say that Bobby has been a wonderful partner to work. I've always worked very closely with him and Bobby. And actually, he leaves, when he retires in March, the business in very good hands.

This was a joint decision. We knew the characters. We interviewed the right people. We've got the best guy to the job. So the team is well comfortable. There is depth on that bench. Okay? So read by what I'm saying is that this chap is already making all the decisions for next financial year. Yes?

And in terms of New York, Boston, Chicago, I think, Dave, you and I will be flying to the U.S. to meet a few investors face to face. And this time round, I've invited Vianney and James to come with us. So actually, they can spend time with them.

Thank you for your time. Good to see you.