J Sainsbury PLC

LSE:SBRY

Earnings Call Transcript 2022-Q3

[Operator]

Hello, and welcome to the Sainsbury's Q3 Trading Statement 2021/'22 analyst Q&A call with your host, Simon Roberts. Simon, please go ahead.

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Thank you. Well, good morning, everyone. Happy New Year, and welcome to our quarter 3 trading statement presentation covering the 16 weeks to the 8th of January. I'm joined this morning by Kevin O'Byrne, our CFO; and James Collins, Director of Investor Relations.I'm going to talk about our trading performance in the quarter, and then obviously, we'll take your questions. I'm going to take about 15 minutes upfront to talk to the slides that I hope you've been able to see this morning, just give you some color upfront. And as I say, we'll get into questions once we've done that. So to get us started, I'd like to start by giving a really, a huge thank you to my colleagues across the business who worked extremely hard to deliver strong availability and service through the peak season and who made our customers feel safe as more and more customers return to our superstores. And of course, a big thank you too, to our suppliers for all their support as we work with them even more closely than usual through what was a particularly challenging backdrop to deliver a greater offer. And you will have seen that we've upgraded our profit guidance today. We're now expecting underlying profit before tax of at least GBP 720 million, whereas at the beginning of November, we said that we expected at least GBP 660 million. So I thought it would be helpful first to give you some context behind this. Now the first thing to note is that we, in the whole grocery market, have seen some benefit from higher in-home food consumption since the emergence of the Omicron variant in the U.K. towards the end of November and the reintroduction of working-from-home guidance. Now this is something that we expect to drop out of the sales base next year, if we trade through a year with fewer COVID-driven restrictions. But more importantly, what we didn't know back in November was whether the major calls we were placing on this Christmas and quarter 3 would pay off. We went big on colleague numbers. We went big on supporting maximum availability on Christmas stock levels and on new products for Christmas and we went big on value for the Christmas all to make sure we could deliver a really good Christmas for our customers. And the good news is that our trading strategy paid off, and we saw a strong operating performance with market share gains and strong sales over the peak days as customers traded up to treat themselves over Christmas and bought into our Christmas value campaign. Now this approach is absolutely in line with our Food First strategy, investing in value, innovation and service to drive volume. And the trading strategy has also delivered the profit outcome that we hoped for. Now I signaled back in November that sales would be tougher in general merchandise than we forecast earlier in the year, but that we expected strong margin and cost delivery against a tougher sales backdrop. And that is how Christmas played out. As you can see, we saw a slightly better trend later in the quarter as availability started to improve. So let's turn now to the slides, and starting with quarter 3 retail sales growth. So we'll start by looking at sales across the 16 weeks of quarter 3. Grocery sales were stronger than we had anticipated earlier in the year, down just over 1% against a very strong lockdown-driven comparative from last year but up nearly 7% versus quarter 3 in the prior year. General merchandise sales were down significantly for both Argos and Sainsbury's as we anticipated in November, reflecting the exceptional performance last year, supply chain challenges impacting availability and some conscious choices we took on promotional participation and category participation to improve profit delivery. Clothing sales reduced slightly, predominantly reflecting a further reduction in markdown and promotional activity with full price sales up 38% versus 2 years ago as we focus on offering good value all year round. It's also just worth noting a 48% increase in fuel sales, partially reflecting higher oil prices, but also normalization of traffic volumes and market share gains. So turning to the next slide. I think it's important to look specifically at trading over the Christmas period itself. Here, you can see that sales were ahead of a strong Christmas last year with sales up 0.1% year-on-year and nearly 7% versus 2 years ago. Up 8.8%, if you exclude the impact of the fact that we were closed for Boxing Day this year. We invested heavily and worked hard to make sure we could deliver a great Christmas for customers, and we were rewarded with strong volumes. You can additionally see a better General Merchandise number as some of the availability challenges eased a little heading into peak. But we would not be encouraging anyone to call the turn yet given ongoing supply chain issues and a tough quarter 4 comparative ahead. The Clothing numbers showing strong growth on a 2-year basis in particular, are probably a better indicator of the underlying health of the business in the absence of comparisons against prior year promotional activity. Now turning to the next slide. We've shown this chart of our supermarket basket size and transaction numbers every quarter since the start of the pandemic. The story has been one of a very gradual normalization as more customers return to superstores and shop more frequently, reducing basket size. Broadly, this has continued through the quarter. But with a positive seasonal uptick in basket size at the same time as frequency has continued to improve. We've been really encouraged to see the number of customers who shopped online at the height of the pandemic now returning to our superstores. On the next slide, you can see here, as we headed into peak, we continue to see supermarket transaction numbers recover as well as gross -- online grocery order numbers growing. We've been pleased with our online operating metrics despite availability and labor challenges. And we've seen a 36% increase in the average number of delivery pass holders year-on-year in the third quarter after the introduction of the monthly delivery part subscription. On the next slide, well, against last year when digital was the only option for customers, particularly Argos, we've seen some moderation of participation but the picture remains one of a transformed digital business with groceries online sales still double the level of 2 years ago. Total digital sales nearly 50% higher, and nearly 80% of Argos sales starting online despite stores being open throughout the whole of the quarter. And we're encouraged by SmartShop participation, suggesting that a very high proportion of those customers who tried it last year have stuck to the habit and also reflecting some new users following the launch of Nectar prices. Now on the next slide, we're really pleased with the progress shown on this chart. There's a lot of noise in the market share data, but we have consistently said that we believe Grocery volume market share is the key measure of our success. And this chart shows that in quarter 3, we continued to outperform the market on both a 1-year and 2-year basis. What I want to do now is to reflect a little on the drivers of that performance and how we're delivering against our strategy. Now on this next slide, you'll all be very familiar by now with the key priorities we set out in November 2020, putting food back at the heart of Sainsbury's with Food First focusing on delivering for our customers and driving profit with our brands that deliver a lowering operating costs through save to invest, underpinned by being connected to our customers and our Plan for Better. So on the next slide, starting with Food First. We've been focused on improving value to customers, increasing the rate of product innovation and funding this through reducing our cost to serve and improving our buying benefits as we drive better volumes. On the next slide, this chart is taken from the Nielsen data and demonstrates how consistent delivery on investing ahead of our competitors in value, improving our price position and delivering better value for customers on the products that really matter most to them. Now Christmas was no exception, taking the strong improvement we've built in our base value position and then extending that to the all-important Christmas shop where customers could rely on Sainsbury's quality at Aldi prices on the key items of the Christmas meal. The numbers on this chart speak for themselves with great volume uplifts on these products. Our strategy is based on the belief that if we get prices right on the key items that matter most to customers, then those customers will buy the rest of their basket with us. And we saw increased spend from secondary customers, those who typically spend less of their grocery shop with us. So we saw frequency of visit growing ahead of the market. And crucially, many more shoppers baskets contained all the key elements of a Christmas dinner than 2 years ago with a really strong contribution from the Sainsbury's Quality Aldi Price Match items shown here. The more that customers are able to trust us on delivering on the key fresh and center of the plate items at the right prices, the more spend we will win from secondary customers. Now you may have already seen that we are stepping on Aldi Price Match again this month with our new offers having landed in store last Friday. And we're investing more, but focusing this investment on higher volume items, which show up in more customer baskets and taking out some of the products, which aren't as important to customers. So as you can see here, there's a real focus on fresh food lines accounting for 90% of the volume. Now on the next slide, a time when prices are a concern for customers and cost price pressures are building, we've also reaffirmed our commitment that prices on over 2,000 products will be locked down, providing a level of reassurance that customers really need right now and that we've had really great from our -- support from our suppliers on this. And this work on base prices on Sainsbury's quality Aldi Price Match and Price Lock is showing through in the consistent improvement of our price position versus key competitors, not only on the center of plate meat, fish and poultry items, but across the wider basket. And we continue to build on the progress we've made over the last 18 months. Now on this next slide, as you know, we've committed this year to triple the rate of product innovation. We delivered 600 new lines in the third quarter, of which 300 were specifically Christmas products. And of these 100 with Taste the Difference Christmas products. Taste the Difference was our fastest-growing product here over Christmas. We're already the market leader in premium owned label and have grown sales of Taste the Difference 13% over Christmas 2 years ago, driven by fresh food categories like meat, fresh fruits, vegetables and bakery. And our customers consistently respond well to new trade-up options. And through our work on value, we're making it easier for customers to save on the basics and treat themselves. We know we have a long way to go on this with lots more opportunity. Now this next slide is perhaps the best demonstration of the fact that we're getting it right for customers. Looking at the 8 weeks running into Christmas, customer satisfaction scores increased on availability, range, value and service. Of these, value is the one that is perhaps the most significant. It takes a lot of time and effort to change value perceptions, but this suggests we're landing some stronger progress here now, both on an absolute basis and relative to our competitors. And in supermarkets, we're maintaining a healthy lead versus our competitors on our overall customer satisfaction. We still have work to do to get back on top in online. We've not been helped by labor shortages impacting stock availability over peak and some are ongoing challenges on product availability. We know we can do even better here for customers. Now moving beyond the Grocery business on the next slide, General Merchandise and Clothing. It's worth going back to the priorities we set out for these businesses, consistent with the idea that our brands that deliver need to be profit-focused and to support the core food business. We've been focused on reducing cost to serve and improving profit delivery. Now we've discussed the previous results on our earlier slides, some of the key drivers of the sales declines for Argos and for the Sainsbury's General Merchandise business. Sales last year were exceptional given the combined benefits of lockdown-driven demand and a number of competitors who are unable to trade effectively. Against that comparative, we've seen some very subdued markets. And in some areas such as consumer electronics, this has been exacerbated by stock shortages and global supply chain issues. The chart on the right shows the importance of some of these categories to our sales base, particularly through peak in quarter 3. But turning back to prioritizing profit delivery. We've made conscious choices aligned to our strategy to focus on profitable sales and profitable product categories. At Argos, we reduced significantly the amount of promotional activity that we run, which has impacted sales in some categories like toys and we've stopped regular clothing promotions in favor of the consistent year-round focus on value. Now together with mix benefits from higher participation of stronger margin categories like home furniture, this is driving stronger General Merchandise and Clothing gross margins. And alongside the transformation of the Argos cost base, these stronger, more sustainable gross margins are making our General Merchandise and Clothing sales base as significantly more profitable and sustainable one. Now on the next slide, I said that I will reference these key metrics every time we speak. Clearly, you would expect a full update with results rather than a trading statement. But suffice to say, as I look at these today, I'm pleased that we are very much on track for the full year. And so in summary, we are delivering on the strategy we laid out in November 2020. We've made bold decisions to make the business more efficient through structural cost reductions and to improve the profitability of our brands that deliver. And we've made major calls investing those gains back into the core Grocery offer into value, into product and innovation and into customer service throughout the year and especially over Christmas. And this is delivering volume market share gains and it's strengthening our competitive position. More customers shop more frequently with us for food over Christmas. And as we improved our value this Christmas, we drove bigger baskets and trade up. Now clearly, we've also benefited from the strength of Grocery sales as in-home food consumption has remained stronger for longer. And this has been a contributor to today's profit upgrade. So looking ahead, we do expect some normalization next year, and life will get tougher for U.K. consumers as the cost of living rises and we face our own cost challenges. However, we believe we are in a stronger position than we've been for some time to offer great value for money alongside an improved food offer. And finally, I would say we are moving with a new level of pace and agility to be ready for the challenges ahead. Importantly, this Christmas, we have further improved our momentum in food, and at the same time, we're continuing to build out the delivery of our cost saving programs. So I hope that's been helpful in giving some color to the slides that we shared before this morning's call. And let's now open up the call and take your questions. Thank you.

[Operator]

[Operator Instructions] First question then from Andrew Gwynn from BNP Paribas.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

Yes, firstly, I mean, fairly boring questions, unfortunately. But the first one on inflation. Obviously, we've seen that tick up for the industry. It feels like everyone's being relatively well behaved, particularly looking at the trial discounters. But just wondering on your perceptions of how food inflation is working its way through the mix? And the second question, and I'm sure it's going to be prodded and probed. But on the PBT for next year, I think you've given us a couple of moving parts of plenty of cost savings but obviously some of the COVID volume dropping out. Perhaps -- I appreciate you're not going to give us a number, but just help us with some of the moving parts where you thought process should be? I suppose very bluntly, should we expect profit growth in '22, '23?

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Andrew, thank you. Well, let me start on the inflation question and then we'll talk a bit about next year. And Kevin, I'm sure we'll comment on that as well. Look, I mean, in terms of what's happened in the quarter, as you can see, two key points. I mean, the first, as I hope we highlighted in the presentation there on the top 100 products, as an indication of products that customers buy most, the fact that we were deflationary in the quarter. And clearly, as you can see, others inflated further. In fact, the discount is inflated the fastest. I mean, it's clear there's low levels of inflation overall in the offer through quarter 3. And as you can see, we've been working really, Andrew, as we navigate this period to make sure that our relative value improves, and that's exactly what we did in quarter 3. And we will continue to do that as we look ahead. Look, I think it's really clear to us all that the market is inflating. It's clear the challenges are there. But I think what we've done this quarter is to do exactly what we said we'd do to strategy, which is to reinvest our cost savings and improving value, work really hard to improve our value perceptions. Value perceptions are up 4% year-on-year. And so we're growing our volumes. We're growing our volume market share. And as we grow volumes, we're working hard with suppliers to make sure we mitigate those headwinds. So on inflation, that's where we are. You can see we've launched the new year with some strong value position. That's really important to us, relaunching Sainsbury's Quality Aldi Price Match. Big focus on fresh products. Big focus on products that customers buy the most often alongside Price Lock. There will clearly be inflation long this year, but you can see us doing everything we can to mitigate that. On next year, I mean, look, as you'd expect me to say, it's too early to talk about next year yet. We'll talk about that clearly more once we both completed this year and reported against it. And -- but for all the obvious reason, and as we all look at it, there's a number of factors, clearly, as we think about the year ahead. The impact on volumes and to what extent the Omicron pandemic factors will drive volume. Clearly, the inflation factors and clearly, the whole cost environment we're thinking through. So we will come back, of course, and talk to you about that as soon as we can. But we'll finish the year first is how we're thinking about it. Kevin, anything to add on that?

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Only build, Andrew, as you can imagine, this is -- we always review this after the Christmas trading period we delivered. This year is a bit more complicated, lots of moving parts. We're pleased with the momentum in the business. We're really pleased with our cost -- structural cost programs. So there's lots of things to be positive. But as Simon said, there's a lot of uncertainty. And certainly, some of the tailwinds in Grocery sales, we'd expect to reduce as we go into next year. So we just need to reflect on where we pitch that.

[Operator]

The next question then is from Andrew Porteous from HSBC.

[Andrew Ian Porteous, Analyst, European Retail]

Congrats on the upgrade. A couple from me. Can you just talk about, I guess, coming back to that inflation point, has there been anything that's sort of really moved picture in terms of what you're seeing away from that, maybe sort of low single-digit inflationary outlook? Is there anything more severe than that we can expect coming down the track? Secondly, around Argos. Can you just help us in sort of how you're thinking about the year ahead? I mean, obviously, pretty tough year for the business this year from a demand perspective. Are we expecting stabilization? Or are we a bit more concerned given the outlook for sort of discretionary spend there? And then lastly, can you just talk about the role that sort of petrol is playing in the business and the magnitude of improved profitability in the petrol industry and whether that's sort of fueling price cuts?

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Thanks. Let's take each of those in turn. So I mean, just to reiterate, I mean, the point on inflation as you described it. I mean, clearly, some things -- we've been planning and seeing for a while. Clearly, there's labor cost inflation. We know that. You saw our colleague pay increase that we put in last week. Really important, we feel to do that. We've had line of sight of that for a while. And so as we think about labor inflation, we've been planning for that -- our cost plans, 200 basis points of cost reduction. So as we invest in things like Colleague Pay, so we drive efficiency and productivity in business and we're planning for that. I think that when we think about next year, clearly, what happens with inflation and the expense to which that comes through beyond where we are now. As I say, we're doing everything possible to mitigate that for customers. We've got very strong cost plans that we are ahead of in terms of planning for next year. And we continue to drive those plans through. So as you would expect, that's focused on saving to invest is such at the heart of our strategy. We think that's important preparation given the environment that's out there. On Argos, let me just talk a little bit about Argos. So I think I would describe an exceptional year last year in the year that we've anniversaried. Well, remember last year, we're locked down over the Christmas trading period. That elevated volumes last year. So the comparatives are clearly tougher. And it's been an exceptional quarter 3 this year, predominantly because of the supply chain challenges that we've clearly faced. And I would just say in terms of the top line, we wanted to guide you in November that the quarter 3 would be more challenging, and we did that. And it was because the products at the heart of the Argos offer, TVs, consumer electronics and toys, clearly, those categories that have been most impacted by the supply chain challenges. And I think it's important to say, too, that the market in these categories has been subdued, too. Gaming down 10%, technology down 11%, toys down around 12% in the market data. So I think the combination of the supply chain challenges impacting availability, impacting the way in which the market's performed. So when we look out over the period ahead, a couple of things. I mean, the first thing you'll remember, we had a particularly strong quarter 4 last year. So as the lockdown continued through this period, we saw strong sales. I think, 17% we did in this quarter last year. So that's in front of us to lap. But then I would say that the comparatives get normalized significantly beyond that point. So that's one point to say. Second thing to say is clearly the choices we've made on the level of promotion we've run are now in the base. So as we look further ahead, we're not going to be anniversarying those in the sense that we've already put them in the base. And the third thing to say is, look, I think it's, in our view, very early, too early to call a turn on availability. There are still challenges out there for sure. They will continue. Some of the big consumer electronics brands are continuing to face those challenges. And so they'll play through certainly well into this year. But on the other side of that, as you've seen this report today and as we said in November, we knew the sales landscape would be challenging. But the work we've done on margin, and the team have been working really hard on the margin in the GMC business and on our cost transformation program. And I would just stress the point that we're a year into that program. It's a 3-year plan, and we're in the first year of it. So there's lots in the front of us to deliver in terms of our structural cost savings, and we're pleased with the progress on more profitable margins. Maybe on fuel, Kevin, should I just maybe hand to you on the fuel question?

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Yes. Thanks, Simon. Yes, just on fuel, we're pleased with the sales performance as you've seen. And we're pleased also with our relative sales performance. We've taken volume share, and we're very competitive on price. But it's just one product we sell. We don't disaggregate our products in that way. And as you know, we balance margin across categories and new stronger categories to invest in the food offer. So areas like fuel. And another example will be clothing, for example, will support our further investment in food.

[Operator]

The next question then is from James Anstead from Barclays.

[James Robert Anstead, Director]

The two Andrews have both taken one of my questions, but I've got one left, which is just around your net debt target. I think you said this morning you're confident you'll deliver the GBP 950 million net debt reduction ahead of your target, which I think is March '23. So I suppose my question is, given you only kind of give us net debt numbers twice a year, do we assume that essentially brought forward now to what is it, September '22? Or is that something you might even be able to hit by the time you report in April?

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Well, James, look, I couldn't be that precise, but it certainly is pulled forward, and I'd be optimistic that we pulled forward the first half of next year. And just in general, we're just very pleased with the business cash generation ahead of forecast, and we'll keep focused on that. So good news and the right time, I guess, to update further on that will be at the year-end when we've got closed out the trading period.

[James Robert Anstead, Director]

And just to follow up with a little bit more color. Is that delivery ahead of schedule, I guess, in part that's a function of your better profitability. But is it -- I mean, I guess, the hope is that Argos is generating quite a bit of working capital. Is that one of the other reasons why you're ahead of where you are expected to be?

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Yes. Well, there's three factors. Those twos are nontrading ones. We obviously settled some long-running legal disputes and got cash for that, which is very helpful. The hybrid bond converted. But the most important is that the business has been generating more cash and there's been strong cash conversion. So our free cash flow will be stronger from sort of core trading. And that will be a combination of working capital. This year, our CapEx, you'll see will be a little bit lower than we would have expected because of COVID. We've moved some projects into next year. But on average, our CapEx spend, I'd expect to be broadly the same year-on-year. So inevitably, we'll get to our leverage targets sooner than we anticipated, which is great. Then we're just going to stand back with the Board and just consider what next from a free cash flow point of view. We're very clear free cash flow is for shareholders. And we'll obviously consider, are there any investments you want to make to accelerate the strategy or drive better returns for shareholders. And then we'll look at -- should we be increasing the cash distribution to shareholders. And if so, how much and how. But that's all a discussion for the end of the year really.

[Operator]

The next question is from William Woods from Bernstein.

[William Woods, Analyst]

Two questions from me. So you've shown that you're kind of not passing on as much inflation as peers in reducing that price gap. I suppose how much of that is driven by actively reducing prices rolling out Aldi Price Match? Or are you just not passing on that inflation, i.e., you're keeping all your prices locked? And then linked to that, you mentioned improving relative value over the next couple of quarters. With inflation increasing in the next few months, do you still feel as though you need to bring your pricing down relative to the discounters in Tesco over those next couple of months? And then finally, just on your kind of increase in expected profit. Are you able to give a rough breakdown of how much you think is driven by volumes, cost reduction in the bank going forward?

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Thanks, Will. Look, why don't I try to give you some sense on value to your point, and Kevin, in terms of the composition of the guidance there. So look, let me take a step back here in terms of -- on the value positioning and the inflation picture out there. As you'll remember, when we laid out our Food First plan, we were very clear that we needed to improve price perception, particularly for secondary customers. And when we think about what we're doing, our plan is all about focusing on the parts of the off where that matters most. And so we've been very, very focused and targeted on what we've invested price investment. We've invested at the center of the plate. We've invested in produce. We've invested in the key areas of the shop that most influence that secondary customer price perception. And one of the things we're encouraged by is that 4% improvement in price perception that we've seen come through. And as you know, these things take time. We're a year and a bit into this plan now, but we can see the momentum building. And so the value investments that we've made and we're making at the start of this year are all congruent and absolutely lined up to that strategy. And so I guess just to your question, I'd want to be clear that we are not reducing prices across the whole store. We're focusing on the parts of the shop that really matter. And you can see, maybe just going back to the presentation for a minute on Slide 14, where our relative value performance against the competitor set is clearly highlighted here. And you can see the degree of improvement over the quarter 3 year-over-year. But the key point I would just pull out here is the center of the plate. You remember we talked about meat, fish and poultry as being so important in driving price perceptions of that secondary customer. And for example, initiatives like the Sainsbury's Quality Aldi Price Match over Christmas and as we start this year are very much anchored into making sure that as inflation pressures build, we can continue to deliver that value perception without having to overinvest in value -- getting all the value benefits in perception, but doing it in a very targeted way. And when we look out over the course of this year, that's what we're going to continue to do, and we're achieving that through two key sources. The first is, as you know, our cost-saving initiatives, our structural cost saving plans. And just to stress the point again, we're 1 year into a 3-year plan. And so as we take costs out of the business, we reinvest it in the offers in the areas that matters most to customers. And the other thing I would say, which is really important here, particularly in the challenges in the market is as we grow volumes, clearly, we're working with our suppliers to improve value. So this all comes back to, in our minds, improving the volume market share, presenting better value to customers, investing where it matters and driving that cost saving program to underpin what we're doing. So I hope that helps give some backdrop to your question. Kevin, do you want to talk about the composition of the relative elements in terms of the profit number?

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Yes. Thanks, Simon. Yes, William, the improvement of about GBP 60 million, it's roughly about GBP 10 million from Financial Services, GBP 50 million from the retail business. On Financial Services, the combination of slightly better volumes than we expected in areas like credit card loans, et cetera, and improved bad debt. Now some of that is a release of provision on the -- COVID provisions that we took last year. And on the retail side, it's largely volume-driven. Obviously, operational leverage kicks in, but also combined with that is very tight cost control. And the teams right across the business did a tremendous job in the last quarter, just protecting every pound from a cost point of view.

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Thanks, Kevin. Just one last point and -- which might be helpful on your question about value, which I think is an important part of the equation is our success in driving trade up. So as we invest in value and improve perception with those secondary customers, and we shouldn't underestimate the significance of the trade-up that we've seen happen. You heard me talk about Taste the Difference. It was our best-performing products here on 2 years, 13% up. We added a lot more new products into that. So coming back to this core principle, which is we present better value at the heart of the plate, and then we encourage those customers to shop across the rest of the store, and that's exactly what happened this Christmas. And that trade-up opportunity is clearly a really important one for us.

[Operator]

The next question then is from Victoria Petrova from Credit Suisse.

[Victoria Petrova, Research Analyst]

Congratulations on guidance upgrade. I have only one question left. So I'm looking at this GBP 60 million increase in underlying PBT. Could you -- and obviously, I understand all the moving parts. But if you were to split this GBP 60 million upgrade into external factors, and completely seems very specific factors, I completely give you credit for taking advantage of external issues. But is -- what the split would be?

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Victoria, really hard to call that one, but a very good question. Look, there's got to be some and some hasn't there? I mean, there's no question in the volume upgrade we benefited from eating -- more customers eating meals at home, particularly probably the run into Christmas and the fact that people could then have a full Christmas and there wasn't a complete lockdown. So there's definitely a tailwind from the COVID situation, which as we say, we think would be a bit lower going into next year. .

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Yes. Just one other point, I think, just to build on what Kevin said, Victoria just worth being really candid with you. When we spoke to you in November, it seems a long time ago now, doesn't it? We were around 50 days to Christmas there, I think. As you can see, we placed some pretty major calls this Christmas. We recruited 22,000 colleagues into the business to make sure that, both in our stores and online, we could get the service and availability. That was the highest recruitment drive we ever did. As you can see in some of the key elements of product, we bought big. We made some really big calls. And some of those decisions happened in February and March last year. So these were strategic calls we made early in the year. And as you can see, we invested in a very bold value platform. And honestly, at that point in early November, we made the calls based on the insight and the opportunity that we saw, but we just didn't know how they were going to play out until Christmas happened. And the other point I would just say just in a bit of backdrop to Christmas, it was a really interesting way in which the consumer behavior played out this Christmas. So we saw customers shop early where they could guarantee certainty. So things like food ordering, online grocery delivery shops, customers secured those very quickly because securing availability was very much front of mind for the consumer this Christmas. But then what we saw happen in the peak Christmas week is it came very late. I think there was a real, let's call it, apprehension while everyone waited for any change in government guidance. And so whilst the 23rd of December is always the biggest day, it was a bit of a nail biter that week, honestly. It came very late. And what we saw happen, therefore, was all of the calls we've placed in terms of fresh foods really gearing up the organization and the operation to do that really came through. And I would just finish the point in terms of the upgrade. It was a really awesome team effort. Our teams in our stores, online, supply chain and logistics, all of our commercial teams, all our technology teams, all of the support in the organization really lined up to drive this plan. And Kevin talked about the momentum in the business. We felt a new surge in our momentum, Christmas week, as we landed that offer, and that was a key part clearly of how our performance came through.

[Operator]

The next question then comes from Clive Black from Shore Capital.

[Clive W. Black, Head of Research]

Very well done on your update. Two quick ones from me. I mean, Aldi and Lidl have been out in the front for trying to put the fear of God into you in the last couple of days with their trading statements. I just wondered, psychologically, how you feel about the trading environment going into the much warranted cost of living crisis that is going to hit us? And then secondly, just in terms of customer behavior and what they put in their baskets, you've talked about mix a few times around difference. But it suggests that across the business, shoppers actually look quite confident and were buying quite high value items as opposed to trading to the bottom. I just wanted more color on that point, please.

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Yes, sure. Thanks, Clive. Look, how do we feel as we look out in terms of the consumer environment? I mean, I think as I hope you hear in our tone and in our messages today, we're very focused on the value positioning of Sainsbury's in grocery, and it's a year into our plan. If we can continue to drive confidence in that secondary customer, we see a lot of opportunity in front of us to continue to get that customer to want to buy across the wider store. And that's absolutely, as you know, at the heart of what we're trying to do here. That's what happened this quarter. So whilst there will clearly be inflationary impacts out there presenting relative better value so we can drive volume share, more customers, more frequently buying more of their food with us is at the heart of what our value play is. And look, this Christmas, it really worked. I would just say that the Sainsbury's Quality Aldi Price Match plan, the team did a really brilliant job bringing that together. And it was a real cross-business effort. The week before we launched that, the whole organization was joined up in how we were going to land that. And -- but we think it was important to give customers the certainty of that value so they bought across the rest of the stores. So when you think about the discounters, as you saw in the presentation, we've just shared, now you can see on the top 100 SKUs in quarter 3 and the discount has actually inflated fastest on those products, and we were deflationary. So that's the way we think about it. And look, the cost-saving program and the volume play is an absolutely key underpin, so we continue to do that. So as we look out, we're determined on value, Clive, to make sure that we put better forward and we continue that strategy. On your second point, maybe a couple of data points that might just help give some sense and colors to what happens. Customers were looking to treat themselves this Christmas for all the reasons that I think we all expected, first-time chance to get-together, bigger groups saying -- we saw in elements of our trade up, 13% up, as I say, on Taste the Difference, 25% up on -- in meat, fish and poultry. 16% up in produce, 12% up in bakery. We saw our biggest ever period for champagne and sparkling wine. In fact, New Year was interesting. Actually, having closed on Boxing Day, we set ourselves for new year, which we thought was important. And we saw our biggest ever new year, and again, trade up was important then. So I think the core of the strategy for us here is get real confidence at the center of the plate. And then with an assortment that we have across the store, customers shop that broader -- that's what happened this Christmas. And importantly to say as well, the great thing about retail, isn't it, that you learn a lot every year, and we think we've got more opportunities to keep pushing into that space, more opportunities to keep driving the trade up and to extend how customers treat themselves when they shop at Sainsbury's.

[Clive W. Black, Head of Research]

And just a quick follow-up, Simon. You -- are you particularly worried at this stage about the -- given the rhetoric around cost of living crisis, et cetera, about trading down in the future this year?

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Well, I think, look, maybe we would all, of course, caveat everything I'm saying, well, there's no room for completion right now. The consumer environment is going to be challenging for all the reasons that we know. And in the end, customers will be looking for certainty of good value for money. So our objective here is to be really determined in what we're pursuing on value and to give accessibility to trade up. And I think we can do both, Clive. I think we can accentuate our value credentials. And the team and I are very clear that we can also extend the reason why customers choose to soft Sainsbury's. So no complacency in that at all, but a real determination to push forward on both fronts.

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Clive, that it will be one of the factors why we've put some caution into next year, I guess, it's just that uncertainty because there's no doubt, we see in the general merchandise business, we can see people moving to more premium products, largest TV, 65-inch TVs, higher-spec laptops, that kind of thing. And inevitably, be using some savings we've had over the last couple of years, we expect that to change.

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Yes. I think that's important point, the distinction between the Grocery business, to your first question, and as you say, Kevin, General Merchandise and Clothing and making sure we've got plan that's right for both markets because it will be different.

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Yes.

[Operator]

The next question then is from Nick Coulter from Citi.

[Nick Coulter, Director]

Just a follow-up on Clive's trade-down question there. Just to check, you're not seeing any evidence or forward-looking dealers with customer panels or any data that suggests you're seeing a trade down either in Grocery or in General Merchandise at this point in time?

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

No, I mean, just maybe try and just give as much color as we can and what we've seen happen this quarter. And I think a key sort of feature of this is establishing stronger confidence levels on our core price offer, as I say. So as we've built up the credibility of Sainsbury's Quality Aldi Price Match, we're coming up to a year now since we launched that. And as you've seen, what we're doing here is continuing to improve it based on customer feedback. So the reason I would highlight that is because 90% of the volume going through that platform is now fresh. And that's where customers are buying into those products and then buying a wider assortment. And we're not seeing that drive a trade down because what that is, is a price match to Aldi that is then getting customers to put more items in their basket. And as you've seen us report on the Christmas activity, we actually saw customers -- more secondary customers shop across the rest of the store as they bought into those price match products. So if anything, I think the focus for us here is and create real search for customers, improve their confidence in our value perception and then make sure we present both assortment and availability and service so they shop across the rest of the store.

[Nick Coulter, Director]

Yes. No, I get that, but obviously, inflation is very uneven, and we're seeing probably some very strong inflation coming through on particular lines in different areas. So you're saying you're not seeing people trading across and substituting but between lines. And so essentially, it feels like you're saying consumer at this stage is very robust?

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Yes. And I think clearly, we're all looking at a set of Christmas trading results here, where the consumer has been looking at trading up and has been looking at all of the things that are consistent with the Christmas period. I guess what I'm trying to describe is as we look out over the medium-term outlook and the inflationary pressures that are there and the pressure on consumer spending. We're very cognizant of that, which is why we're putting so much of our energy into value. I would say on the General Merchandise and Clothing business. I think clearly, the rules are different between food and General Merchandise, as Kevin was saying. So we're paying very close attention to make sure that whilst there are inflationary pressures in that part of the business, again, we focus more on all year-round value. And look, this is a day-to-day, week-to-week focus. We listen to our customers week in, week out. I mean, our -- every meeting we have in our business starts with what our customers are telling us. And look, so we'll be very attuned to these dynamics as the quarter and the first half of '22.

[Nick Coulter, Director]

That's why I'm asking. I wonder if there are any customer panels that you're doing at the start of the year that are kind of giving you pause for thought, but it doesn't sound like that at this stage from what you're saying?

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Absolutely. And just to assure on the point you made. I mean, one of the things that, as a team, we're very focused on is clearly listening to customers, as you'd expect. And we have a whole range of mechanisms with which we do that. So as you can see in our presentation again today, our in-house measurement of customer satisfaction across a whole range of measures, availability, assortment, service, value, ease of shop and whole host more are absolutely the kind of focus of our day-to-day, week-to-week focus in the business. And everything that we do is driven from understanding that. So absolutely as this year unfolds, we'll be very close to what our customers are seeing, thinking and feeling.

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Nick, just to give you a bit more comfort -- Nick, just to give you a bit more comfort would be in this quarter that we've just started, you'll see us investing more in value, you'll see us being more loud about that in our marketing, et cetera. So we're doing that anticipating the customers we'll be looking for more value against the backdrop that you're talking about.

[Nick Coulter, Director]

Great. Then on GM, and apologies if it's a bit of a picky one on Slide 20, but just to try and help understand the profit bridge. Are those -- so the charts on the right-hand side on gross margin and cost of sales, are those zero access? I assume they're not a zero access on Slide 20?

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

No, they're not.

[Nick Coulter, Director]

Okay. Well, I mean, it's -- I guess, to be innovative for best friend. Acts that's interpret. .

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Yes, that -- maybe that was the intention. But look, not joking aside, and Nick, if -- what we're trying to say here is Argos cost of sales has materially reduced in the period we're talking about. And then if we look at the total GM and the gross margin and whether we're looking at gross margin across the categories within Sainsbury's, Clothing, in particular, or across Argos, we've been trading in a more disciplined way. And hence, we're pleased with the margin delivery.

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Yes.

[Nick Coulter, Director]

Okay. So it's just gross margin up, cost down and that's as much as we can take from those charts.

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

And I guess with the profit uplift sort of supports that it's coming through in the bottom.

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Yes. I mean just one maybe ancillary point if it's helpful just on that slide and just back to my other comments on costs. We're 1 year into our 3-year cost transformation program in Argos. So if you think about the changes we're making in the store in store from stand-alone stores and also the logistics network. So again, just to, I guess, underline the fact that what you're seeing now in terms of the cost changes is at the first part of a 3-year plan.

[Nick Coulter, Director]

That's great. So zero access would be pretty impressive, but clearly not. Okay. Last one then maybe if I can. One of the newspapers reported that supermarkets might consider entering the potential or reported option for Boots. Could you comment in any capacity and maybe generic thoughts on M&A? Or if you'd rule out any interest and why? And I guess, Simon I know the Boots business is obviously one you know very well. .

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Thanks. I mean I think a couple of things a couple of things obviously say here, of course, lots of speculation in the market. We've all seen that. I think, look, clearly, a lot of strength in that business. And as you say, a business that I have some knowledge of. I mean, what I would absolutely say is, as you and can hear in our plans. We've got a lot on our plan, and we're very focused on it. We're incredibly focused on putting food back at the heart of Sainsbury's. And we're in year 1 of a 3-year transformation of our business and all of our focus is on that.

[Nick Coulter, Director]

Got it. Okay. And just from an M&A, you expect obviously Sainsbury's did do large-scale M&A with Argos. There obviously are a set of criteria that you would use for large-scale M&A? What would those broad criteria be?

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Yes. I mean, forgive me for repeating myself, but I am going to just repeat what I've just said as you'd expect, which honestly, we, as a leadership team, we're 12, 15 months into a real focus on what we think this business is capable of. We've relaunched our strategy. We've got a bold transformation plan to really shift the gears of what we think we can do. As you know, we're very focused on putting food back at the heart of the business. We're seeing the early and encouraging signs of what we think that can do. But we're in, as I say, year 1 of a 3-year plan. So that's what we're focused on.

[Nick Coulter, Director]

That's great. Your repetition is important.

[Operator]

The next question then is from Xavier Le Mené from BofA Securities.

[Xavier Le Mené]

Three quick ones, if I may. Just the first one on inflation, so back to the trading down, a question you already have. But is there potentially a level of inflation, food inflation, where you would be potentially a bi t concern and its impact on purchasing power? So do you think, I don't know, about 4%, potentially the market we struggle on the consumer will be under pressure? The second one is just promotional participation. So going forward, do you think you would have potentially to resume promotion in a more challenging consumer environment? And the last one, just on Argos, more specifically, are you able to track the loyalty and the number of regular customers you had before the pandemic, say during the panic and maybe today? So is it going up, down? So any color on that would be quite helpful.

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Okay. No problem. Well, let's try and without repeating myself and ourselves too much try and speak to inflation first and then promotion and then Argos, to your question. I will be a little bit repetitive on the first point. And I think, as I say, look, I'm not going to predict what I think food inflation is going to do this year. I think there are a lot of factors that make that an unclear picture yet, but it's clear the pressures are there. You've heard us say this morning that one of the key features of our Christmas trading update has been the positive impact of improving our relative value. And so that's exactly what we will do in the challenges of the environment ahead. I'm very clear, we're very clear as a team that consumers are going to face more pressure in their personal wallet. And so our job is to make sure as that happens through energy prices and other factors, that we put very best foot forward on value. And that's why Sainsbury's Quality Aldi Price Match, forgive me for repeating it, Price Lock, as such is central parts of our program and why, as a team, we're so focused on making sure that we shift value perceptions because in any scenario, we have an inflationary cycle, customers being confident they'll be able to access better value at Sainsbury's is going to be key in how we navigate through that period of time. In terms of your second question and promotion, I mean, as you can see, we're very focused on the price on the shelf -- the price on the shelf available to all customers. And we're pleased, as we've put in Sainsbury's Quality Aldi Price Match and Price Lock that customers are responding to that price. We've also importantly, launched Nectar prices this quarter. Over 95 million permutations out there every week as customers can access individual prices uniquely served up for them. That launched early in the autumn, and that clearly has come through in the period as well. So our focus is on those key value programs, Sainsbury's Quality Aldi Price Match, Price Lock and Nectar prices. And then on your third question on Argos, I mean, I think one of the things that was important to us, and we're pleased that we did is we launched Nectar in Argos just on the way into the pandemic. And that's meant that we're able to get much more of an insight as to how those customers are shopping. And of course, Nectar is a source that links together all of the insights about how customers are shopping, both in Sainsbury's and Argos. And so Nectar is the way that we keep an eye on that. And I've put a big emphasis this morning on our price -- sorry, on our profitability and our cost programs in Argos and General Merchandise. And of course, we're very focused on the proposition and making sure as the pandemic situation hopefully changes over the course of the year ahead, the areas that we think we can push forward on. We think we've got opportunities in areas like home and furniture as we roll out Habitat. We're very focused on improving availability. Clearly, the challenges in availability will continue in Argos in the short term for sure as the wider industry. But as availability improves, we think that will be important for customers in driving their stickiness. And of course, we're rolling out the local fulfillment network, as you'll remember, which will improve availability as more of the fulfillment goes through that model. So a lot in front of us to deliver that. I hope that gives some kind of backdrop on the Argos picture as we look further out.

[Operator]

The next question then is from Maria-Laura Adurno from Morgan Stanley.

[Maria-Laura R Adurno]

The first one is with respect to Clothing and the fact that you actually had a higher proportion of items sold at full price, I was just wondering if you could comment, as you view that -- in terms of how you view this evolving into this year? And the second question I had is looking at it slightly differently around the comments you made on inflation, how are negotiations with suppliers going for the year ahead? Have dynamics changed versus last year? So any comments would be helpful.

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Sure. I mean, let me just try and speak about Clothing and I'm sure Kevin will comment on this one as well. And I think look, as ever, as you'd expect, we're making choices based on the environment that we're in right now. And so, of course, the environment in Clothing has been different through the pandemic, which has meant that we've chosen to run less promotional days. And that's worked for us. As you can see, we've been able to deliver 38% more full price sales in the period. We've been very clean in terms of markdowns. And important to say actually that some of the global shipping challenges have impacted Clothing as well. And so we had products that we would have liked to have arrived a lot further before Christmas than they did. I certainly saw Christmas jumpers arriving quite close to Christmas. So there's been some impact there, which is why when we talk about the overall performance of the Clothing business, we think less promotion has been the right thing to do. The team has done a brilliant job navigating what's been a pretty uncertain environment in terms of products across the world and into our business. And look, I think we'll look at how the environment plays out. What I would say is we think we've got a great brand into. Customers really like the brands. We think there's a real opportunity to continue to drive it. And we'll adapt as the environment opens up, but less promotion has worked for us in this period. And we're confident we've taken a lot of learnings from that. Anything on Clothing?

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Just the other thing to add Maria, general direction of travel is fewer promotions sort of focused more on everyday value. That's sort of the general direction of travel. But of course, trading is dynamic, and we would flex depending on the circumstances.

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

I mean, just -- and I guess more broadly on value. I think we've hopefully tried to give you as much color as we can on value. But as I said, come back to sort of core principles, we're investing in value at the heart of the plates. You can see our relative improvement against competitors. You can see what we've done in the Grocery offer to make sure that we're putting best foot forward there. And one of the features of that has been improved availability. You're asking me about suppliers. And I think that I just couldn't underscore enough the importance of, as we improve value, the partnership and the way in which we've been working with our supply base. If you go back to September, 4.5 months ago and think about the challenges in the U.K. food supply chain at that point in time, we were coming out of a big staycation that really impacted volumes. We had challenges with CO2. We have major challenges in the availability of the workforce in the meat processing and poultry industry. We have big challenges with having enough drivers to move products around. To get to the outcome that became possible, not just in Sainsbury's, but across the industry, that has been a monumental effort of collaboration across the supply base suppliers working together to drive the outcome. And back to the first principle here, we want to grow volume in partnership with our suppliers so that their business wins and our business wins.

[Operator]

The next question then comes from James Grzinic from Jefferies.

[James Robert Grzinic, Equity Analyst]

Just two quick ones. Sorry to go back to inflation again, but I guess would be helpful to understand what your Q3 Grocery inflation was, take your point you were deflationary in the 400 lines, but if you can give us a broader picture? And in your mind, is the peak of that probably going to be Q1 -- a fiscal Q1 '22 dynamic from your perspective in terms of inflation pass-through? And the second one is around temporary costs. Can you perhaps help us understand the scale of temporarily elevated costs that the business has been facing more broadly across the supply chain?

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

James, just on the overall inflation in quarter 3 was around 1%. So those core lines that we pointed out, we deflated, but overall, food inflation was around 1%. We don't break out the temporary costs. The only thing I'd probably guide on is COVID costs and we can go back at year-end and give you more detail as this is a trading update. But we talked about -- last year's number, it's going to be at the higher end of that given the recent outbreak and some of the additional costs that we have to incur because of that.

[James Robert Grzinic, Equity Analyst]

Thank you for that, Kevin. But more broadly on the supply chain, special rates that you had to pay for drivers, et cetera, et cetera. I mean, there's been a lot of distinct the supply chain above and beyond COVID. I'm trying to understand how big that is?

[Kevin O'Byrne, CFO, Member of the Operating Board & Director]

Yes. And we're not breaking that out this morning, James. We did -- we took a number of actions. We gave retention payments to our grocery online drivers. We gave a mixture of some pay rises and some retention payments right across our logistics infrastructure. But we're not breaking out that number this morning.

[Operator]

The next question then is from Sreedhar Mahamkali from UBS.

[Sreedhar Mahamkali]

A couple of quick maybe last one then, please. Firstly, on Argos. As you look forward, I know you don't want to give us anything just yet in terms of outlooks and things like that for the year ahead. But just as you look ahead, do you plan for some consumer headwinds this year as the supply chains ease, though you still have the benefit of easier comps? But from a demand point of view, should we be thinking there'll be some headwinds, especially with discretionary categories? And again, sticking with Argos for a second, I'd be interested in if you were able to share what you're learning from the rollout of the local fulfillment centers. I know you talking about 32 local fulfillment centers. So that will be very helpful just on Argos. Secondly, I guess a little bit related to James' point a second ago on pricing. You clearly shared very helpfully top 100 SKUs. But the overall chart, will that look broadly the same if we look for prices across the full stores?

[Simon John Roberts, CEO, Director & Chairman of Operating Board]

Thanks, Sreedhar. Well, let's take the questions in turn. So first of all, just in terms of the GM, let's call it, the demand outlook given inflation. I mean, I think a couple of things I would just come back to. The reason we're so focused on our margin discipline and cost transformation plan is because we see the importance of those in mitigating the input -- impacts of demand over the medium term. So clearly, there will be impacts as inflation passes through on discretionary spend. And therefore, delivering on year 2 of the cost transformation plan, making sure we're really disciplined in our margin choices on promotion will be an important factor in ensuring what happens at the top line, we can mitigate that if there are impacts. We're planning for some, of course. And we're confident in what we've learned through this quarter and the second half of this year is preparing us for that outlook. I would come back to one of the key parts of the Sainsbury's GMC business, and Argos is clearly to make sure we present good value. And so in that environment, given that customers are back in supermarkets more than they were a year ago, we're seeing a higher return, as you've seen to customers in the store. That's a real opportunity to make sure that we put best foot forward in terms of value and availability as availability improves, but we're very alive to the impact as of discretionary spending and making sure that we're managing cost and margin to mitigate that as far as possible. I think on the second point you raised, we are in the early phase of the local fulfillment center rollout. So as you say, 32 by the time we get to the endpoint. So we've opened in Bristol and Leeds. We're pleased with how the programs going. As you say, the key feature of this is not only the reduction in costs as we become more efficient in our distribution, but also over time, as we get to more live locations, improvements in live availability same day. And as a team, we're really focused on this because, of course, availability is really important to the Argos customer. So let's hope the supply chain challenges globally improve as we get further into the year and combined with this rollout these two things together, we think, will be helpful. When we look at what customers say, availability is the biggest driver of the reasons they choose to shop with us. So we see opportunities as we roll that out to get those benefits. And then I think in terms of inflation more broadly, I mean, we've tried to answer as far as we can, I think, this morning on what we see. As you say, the value platform in Grocery is essential. What I would just say is I draw attention again to the two key slides in the pack. Our relative value index against our key competitors and the improvement year-over-year, both in the overall basket and at the center of the plate. And also, as you say, Sreedhar, on the 100 items, we've been deflationary. And you can read into our results there, the fact we've grown volume market share on a 1- and 2-year basis ahead of the market points to the fact that customers are seeing better value in our offer. Okay. I think we've come to the end of all the questions. So thanks very much for joining us this morning. I hope we've been able to answer your questions as far as we can. Look forward to picking up again very shortly. Just finish the call by saying a huge team effort from the whole team to deliver what's been a pretty challenging environment out there this Christmas. And so the results in the upgrade, pleased to share today and we're taking that momentum into this year. So speak soon, and thanks for joining us. Thanks, everyone.

[Operator]

The presentation has now ended. -- This presentation has now ended.