Accent Group Limited (AX1) Earnings Call Transcript & Summary

Good morning and thank you everyone for joining the Accent Group FY '23 Full Year Results Investor Briefing. We will begin with a presentation by Daniel Agostinelli, Group CEO; and Matthew Durbin, Group CFO and COO, followed by a Q&A session. [Operator Instructions] Now Daniel, over to you. Thank you.

Good morning, everyone, and thank you for taking the time to attend the call today. As mentioned, I am joined today by our Group CFO, Matthew Durbin. We will now take you through the results for the full year ended 2 July, 2023, and the trading update for the first 7 weeks of FY '24. There will be an opportunity to ask questions at the end. In opening, I am delighted with the full year results, in what is the first undisrupted year since 2019, FY '19. The Accent teams continue to focus on our customers, fresh new product, and return on investment has delivered a terrific result. Group EBIT for the year of $138.8 million is up a 123% on the prior year and a new record for our Group. If I can now refer you to the operational highlights on Page 4 of our investor presentation which was released to the ASX yesterday evening. Our key highlights include the opening of 80 new stores, which now total 821 stores. Our contactable customer database grew by 500,000 customers to 9.8 million customers. For the year, online sales represented 19% of sales. Digital sales in H2 grew by 19.8% on H2 FY '22, and our overall digital profitability was significantly ahead of all prior years. Vertical owned brand and products sales grew to more than $100 million and over 7% of our total sales. We now have 22 Nude Lucy stores that are trading and trading well. Significant continued growth in Platypus and Skechers stores with 36 new stores opened. I will now hand you over to Matthew Durbin.

Thanks, Daniel. Turning to Page 5. Total sales for the year including TAF franchisees are now approaching $1.6 billion and are up 24% to the prior year. Gross margin percentage improvement by 100 basis points to 55.2%. Cost of doing business at 44.5% was an improvement of 280 basis points. EBIT of $138.8 million was up 123% and we had a net profit after tax of $88.7 million, significantly up on the $31.5 million achieved last year. The return on equity grew to 20.1% compared to 7.1% last year and inventory levels at year-end were clean of aged inventory and closed below the prior year. Coming on to Digital on Page 7. Digital sales have increased by more than 3 times in the last 4 years since the uninterrupted FY '19 base. It was expected that online sales will pull back in FY '23 off the back of the store disruption experienced in FY '22. Having said this, in half 2 digital sales grew by 19.8%. In FY '23, the mix of online sales of 19.1% has nearly doubled from 10.2% in FY '19. The focus for online in the last 12 months been achieving profitable sales through improved gross margin and lower costs in digital marketing and distribution. We continue to invest in new and upgraded websites and underlying digital infrastructure with 11 websites opened or upgraded during the year. We wanted to note that as an integrated omni-channel retailer, it's our intent moving forward to remove significant percent disclosed on digital performance, as we feel that this is now intricately linked with overall retail sales. Moving on to loyalty on Page 8. Contactable customer numbers grew by 500,000 customers to 9.8 million customers. This continues to be the result of a strong drive to invite customers providing e-mails in-store along with the impact of our loyalty programs now in place in The Athlete's Foot, Skechers, Hype, Platypus, and Merrell. The Company now has more than 8 million members signed to our loyalty programs, driving repeat spend behavior and improved customer lifetime value. We continue to invest in the rollout of our new loyalty programs and our customer data platforms. Coming on to our retail, wholesale, on Page 8. During the year, 80 new stores opened, 15 stores transitioned, and 21 stores closed from discontinued banners, and where sustainable renewal terms could not be agreed. New stores continue to perform strongly with 36 new stores open in Platypus and Skechers, and Nude Lucy now has 22 stores and is trading well. At least 50 new stores are planned to open in FY '24. Wholesale sales continued to grow in FY '23, driven by our existing and new distributed brands, and sales of vertical owned brands and products grew by 40% to more than $100 million and continue to support the improvement in underlying gross margin. Turning on to the growth plan update on Page 9. The Company continues to have a valuable portfolio of growth opportunities across its core banners and new businesses, including the continued roll-out of new stores, significant further right opportunity in both core banners and new businesses over the next 5 years. At least 50 new stores are planned to open in FY '24. Improved underlying gross margin from continued growth in the Company's [indiscernible] distributed, and vertically owned brands. Along with margin improvements, these brands continue to provide an un-replicable competitive advantage through product access, forward visibility to global product trends, and end-to-end customer access in Australia and New Zealand, along with exclusive products. We continue to expect growth in Nude Lucy from the continued roll-out of new stores and online growth. We continue to expect operational improvement in Glue Store and Stylerunner. Profit growth continued in TAF from profit margin expansion and franchise stores continuing to be acquired. And we currently have a network of 92 corporate stores and 63 franchise stores. Continued growth in digital sales and customer loyalty programs driving improvement in customer spend frequency. Loyalty programs are now launched in Platypus, Hype DC, and Skechers, with more to come over coming 6 to 12 months. Coming on to dividends and trading update. The business announced a fully franked final dividend of $0.055 per share, bringing total dividends for the year to $0.175 per share. On the trading update, the Company's focus since the end of June has been driving full price, full margin sales, leveraging the clean inventory levels as we exited FY '23. This impacted comp sales. Having said that, gross margin over this period has been similar to the strong gross margin achieved in the first 7 weeks of the prior year. For the first 7 weeks of FY '24, total sales were up 2.8%, and total retail sales were up 5%. Like-for-like retail sales were down 1.8% on the prior year. Note, we were cycling strong comp sales of plus 19% for the first 7 weeks of last year. We've seen an improvement in trade from July into August and August marked the date after 3 weeks LFL retail sales were up 1%. Digital sales for the first 7 weeks were up more than 20%. I'll now hand back to Daniel to wrap-up.

Thank you, Matt. We recognize there is ongoing uncertainty in the economic outlook, and like others, we have experienced softening sales across May and June, and into the first 7 weeks of this year, with apparel being softer than footwear. We continue to be pleased with the trading strength in a number of our banners where lower prior year comps and product innovation has resulted in positive like-for-like retail growth. We are also pleased with the Group gross margin achieved to-date, which will continue to be strong with an ongoing focus. In conclusion, I'm very pleased with the progress that has been made on our key growth strategies as we continue to invest in our business in Australia and New Zealand. In these more challenging times, as we have had over the last 3 years, we will continue to open new stores, to invest in new websites and current websites, and digital capabilities and drive innovation in all our products and customer offers. This concludes our presentation today and we will be happy to take any questions. Thank you.

[Operator Instructions] Our first question comes from Sam.

Your cycling was around 19% comps for the first 7 weeks of last year, but can you tell us how these comps will evolve over the first half? I think the disclosures in the PCP are more focused on total sales growth than comp. So just keen to understand what you're up against as we progress over this half into next half.

Yes. So look, I think it's fair to say that the comps right through the first half last year were very strong. They started strong and they continued strong, and I think it's been well reported that the market did well into November and December last year. So I would say we're cycling strong comps right through till the end of December and into January, Sam, is the truth. We are very pleased that as we've got to August, we're starting to see some comp performance and even above that, in what we felt was a very strong year.

Yes. And the improvement in August, I mean do you put it down to any improvement in foot traffic, weather, better products, is the consumer getting a bit better, like, what do you attribute the better August to?

Sam, I think definitely better product. The teams have got a fantastic forward pipeline of new products coming through. You may be aware that we also have the Hoka brand, the distribution for Hoka. It's been very pleasing to see what's happening within that banner. And we see ongoing strength coming from essentially all new products and the set-up we've got right into December.

Got it. And what do you do with prices in FY '24, given the headwinds from an FX perspective that you're up against? Is the consumer strong enough at the moment to absorb price rises?

As we've previously talked about, we plan for currency through this period to be mid-60s and we put through another round of price rises through June and early July. So far we haven't seen any particular resistance to those price rises. And our hope at the moment, it's not a strategy, but our hope is that with the dollar around mid-60s, it could be a bit lower than that or a bit higher, we are well placed. But if we can take a little bit more price, we feel that's what we can do as we start to get towards November, December. I think that will be a bit dependent on the conditions. But we certainly put another round through in the last 8 weeks, and we haven't seen any major resistance to that. Have you got anything to add to that, Daniel?

The product segmentation that our banners are getting from third-party suppliers and indeed from our internal distributed brands, its been received well by our customers, and I certainly don't have managers or senior teams in the retail banners saying that our prices are too high.

Got it. And last around the price increases. Is it more than low single-digit as a percentage?

It would be high single-digit as a percentage, but not on every product. So we're quite selective about looking across the board and saying what can have a price raise and what can't. So I'd say, number of products high single-digits.

Okay. And last one from me. Just in terms of Glue, if we look back, it seems that that banner has been a bit more challenging than we would have thought. Do you think you finally got on top of the issues that you are ready to start accelerating the roll-out or is there still more work to be done?

There are more work to be done, Sam. Apparels just seems to be tough all over the place, from everyone asks that we sort of look at in terms of our peers, lots and lots of discounting, winter deals, essentially no winter in Sydney this year, so that's played into some results I'm sure for many. So no, we are not ready to roll-out. We still have quite a bit of work that we would like to do. We've got some legacy leases that we need to exit. So in short, we're not ready. We certainly got a plan in play to get on top of the metrics we need to see before we make that call.

Like, when we're speaking at the half year result, you'll be on top of it then, or it's just more of a longer-dated process to go through?

I think it may be a bit longer given some of the leases 5, 6 and 7 years in some cases. We are going to convert some of those stores or exit and indeed open a few other stores. We only have one store to open in that banner being Knox City here in Melbourne and we just want to get the model right and create some differentiation before we decide to go forward and further.

Next up is Chami. Chami, if you'd like to go ahead and ask your question.

Just want to focus on Nude Lucy for a bit. I mean, you did talk about apparel obviously running weaker, but at leisure or Nude Lucy stores are trading well, as you said in your prepared remarks. Could you expand a bit more here on how that brand has performed and also the unit economics of these stores compared to your average stores at the sort of same lifecycle, how they compare?

I can talk to the product side, and Matt can probably talk to some of the metrics we're chasing there, but we're very pleased with Nude Lucy. We opened another store yesterday. We have 8 planned to open by December 1. It's an exciting business. We think we have certainly got a customer that they're following that brand and all the metrics that we can measure are saying to us that we're on the right path. Product has been fantastic and the forward pipeline looks terrific as well. So right now, it's outperforming anything we do in apparel, that's for sure within the business.

Yes. And to add to that, we previously talked about in terms of the metrics for those businesses. You have to be achieving $10,000 a square meter to be in the game. And if I talk specifically to Nude Lucy, the vast majority, if not all of those stores are hitting those sorts of metrics. And then the other key piece is the margin, and Nude Lucy we're achieving vertical margin and it's not as good as we want it to be, yet, however, if you're getting to 10,000-plus a square meter on vertical margin and you can maintain that consistently, it's going to be a good business and that's certainly what we're seeing in Nude Lucy. In Stylerunner and I'll throw it back to Daniel in a minute, because we've had some great insights into that business over the last few months. The issue in that business over the last 12 or 18 months hasn't been the sales density. It's been the margin. We're really starting to see a strong recovery in margin in that business, where the sales density has been down and that business is showing very good starts.

And in terms of Stylerunner, we've reviewed the business. And as Matt said, we've got fantastic sales and margin has been our issue in there. We've made some moves towards winning with her in terms of sneakers. The market has reacted very positively. We've got amazing support from our brands that supply us sneakers. So if you were to shop our stores now, you will see us leading with the latest and greatest sneakers for women and that model is starting to come to real life in terms of what we are doing moving forward within that banner. But back to the apparel, apparel has been tough and Nude Lucy at least within our business is outperforming anything we do in apparel.

And maybe just on that outperformance, what is the difference in the Nude Lucy brand versus what you experience over Stylerunner, if you could just point to what's driven the success there?

Well, I think the whole leggings and athleisure thing during COVID, it was just what all girls were wearing, all females were wearing. And after COVID, that sort of slowed up. So we started to move into different segments, call it the cafe look, the leggings and the puffer jacket and now it's gone from great looking stylish pants and the puffer, and we happen to be in the sweet spot there. So we've been building on that. Nude Lucy is sold within Stylerunner and performs exceptionally well. So that gives us even further confidence that the look and innovation of product we've got within Nude Lucy has been a winner for us. And indeed, when you get a standalone stores, you get the full breadth of the brand. Hopefully that answered your question, Chami.

And lastly, just want to focus on August. So just to confirm, August is up 1% by maintaining gross margins, isn't it?

Yes, absolutely.

Yes. How do you feel about that? I think Sam touched on this, but just to expand there. How do you feel about it for the rest of the half? And then also to the second half as we go from here?

I'm not going to try and predict what might happen, Chami, it's a day-to-day. I think the best way to answer that is, we are cycling strong comp sales I'd say right through the first half. For retail in general, November and December was very strong last year and we were no exception. So I'll go back to what Daniel said, we're pleased because product innovation is strong, the product pipeline is strong. So there's every reason to be optimistic actually about the next 6 months. Certainly, as we get into the February to June period, the constantly cycling become a little less challenging, but I guess it just depends with what happens with the consumer and social. There's every reason to be optimistic from what we're seeing in August.

And just on maintaining gross margins, do you think you'll be still able to maintain gross margins, more thinking about the second half or some upside there?

Yes. There's no question that through the back end of the first half last year, we were still clearing some of our discontinued brands and products, and that was a headwind on last year's margin. The uncertainty around this year is a little bit of what happens with the currency, so we have planned for a currency level, it's around $0.65. If it's around there, we should be able to maintain margin. I'm not going to necessarily sign a -- we'll get an improvement or we should be able to maintain it. If it's low $0.60s that will be more challenging. And if it gets up above $0.65, then it becomes a little easier. So, we don't think we're going to have the same product clearance issues that we had last year. In fact, on the base that we've now cleared through all of those discontinued products, that should be a tailwind.

Next up, we've got Ben Gilbert.

I don't want to be cynical, but you guys did a phenomenal job on costs in the second half from what I can see relative to sales. And one, how did you do it? And 2, is it sustainable? Because like, if I look through the lines, your marketing costs were down, your other costs were sort of pretty well controlled, your staffing costs, the year-on-year run rates have slowed quite considerably. Just could you talk us through what you actually did into the second half and what you think is sustainable and where you see some of the pressures moving into this current year, please?

Yes, no problem. I'll have a crack at that. So, in terms of last year and we've signaled that right from the beginning of last year, we felt that we sort of had grown a little fat through the prior couple of years. So we had a strong focus on our support team and making sure that we are going to right-sizing the support team, not through redundancies or anything like that. Just putting a very sharp and focused lens on replacements and minor restructures where they were needed within the business, so that certainly helped. We have got a good process for managing our frontline team wages and productivity and we've got a team that is focused on that every day. So we make sure we don't want to spend there. And then the other place is, that was a big change was we pulled out distribution expenses for digital. It was a very big focus in terms of making sure that we're getting that optimized, both in terms of delivery thresholds, so we raised delivery thresholds. And we indeed also raised our delivery charges where things were below the thresholds. And the customer absorbed those costs last year which was terrific. So all of that helped the bottom-line and we started to see some leverage. So where comp sales in our business take about 3% as they did in the second half last year, you get operating leverage from that as well, Ben. So that's a little bit not so much of an outcome of cost management, but just an outcome of those training conditions. So that's last year. Coming onto this year, there are cost pressures. I'm not going to shy away from that. It would be disingenuous not to -- it's very clear that frontline wage costs are going to escalate by 6%-plus this year. And yes, also well reported that sort of local freight as distribution cost is going to go up and other costs because of inflation. We are going to continue our drive of cost efficiency as we have over the last 12 to 18 months, and I'm not going to say that we can offset all of those cost pressures. However, we're going to remain very focused on that and there is still efficiencies to come in distribution, digital marketing and in times like this, you just have to go deep into every sort of cost and bit that's in the P&L and try and find it and root it out, so that will be a focus for us as well.

I think it's important to note also, Ben, and I call out to my team who manage our retail stores, the management of rosters has been fantastic, simply ensuring that the right people are on in prime time hours, allowing us to service our customers better, that's been paying some dividends for us, it's been terrific actually.

Really good management in that area. And then the only other thing that I'd get everyone's attention to, we have been guiding on very hard opening new stores over the last 3 or 4 years, we're not pulling back from that at all. This year there is no intent to. However, because of that, you can see that last year for the first time, our CapEx and depreciation were a match. In years before that, depreciation was catching up to the CapEx spend. So we've seen quite significant year-on-year escalation in depreciation on PPE and that starts to slow as well, giving some operating leverage to the bottom-line. So that's another piece that's going on.

So if I just put that together, so it sounds like marketing costs in terms of that run rate, that $50 million bucket, there is still some savings or opportunities to drive efficiencies there. Labor, there is still some productivity opportunities, but it's more we think about, you've got that baseline increase and that flexes around with sales depending on where they move over the next 6, 12, 18 months. And then we look at the other big buckets, through that obviously you're working hard that it will sort of say sort of how they go in terms of other, and distribution there's probably still some opportunities, but there's some pressures coming from those places, et cetera down in the market. Is that a fair way to sum it up?

Yes, very good way to sum it up, Ben.

And then just final one more, so a bigger picture on, Daniel, just where do you sort of look forward, obviously you sort of went through few of these cycles before and how do you think about Accent in terms of you've got a lot going on the business, obviously, it's all going well, fixed way to brands. Do you sort of see this as an opportunity to potentially take on more brands, take on more licenses if we move into next year and people get crunched with the currency that's tight on cash at the start of the year and trading deteriorates through Christmas. Is that how you're viewing it or you viewing it as you've got the right portfolio and you sort of knuckle down and try and sort of take share on the way out?

Ben, we get offered brands all the time. It's just a consistent thing. How many brands can we love and do it right. Unless a brand can deliver for across the whole of Accent Group, i.e., if you take a brand like Hoka, it will go into our Platypus stores in September. Right now it's only in our Athlete's Foot banner and Hype. So, any brand that we look at has got to have something like Hoka that can go across the whole business. We think we can do a whole lot more with what we've got. As an example, it's no secret, Vans has done it tough the last couple of years, it's still very, very strong, but it certainly had come off for the last couple of years through product innovation, but those guys have gotten a fantastic team and what we're seeing from Vans should give us upside moving forward. So we simply want to make what we've got bigger and all of our forward projections, particularly on what we're seeing, shows that we can do that.

Next up, we've got a question from John Hynd. John, if you'd like to go ahead and ask your question.

I just wanted to drill-down on a couple of questions. Just Nude Lucy, having a quick look at the website last night and this morning, it looks like you have overhauled the product range. I guess that's part of the story now, would you be -- I guess are you competing directly with Perfect Stranger now and I mean that brand is having a lot of success as well at the moment.

No, not at all. We don't see Perfect Stranger as a competitor at all. They are very young from what I've seen. I think I've only seen one store but they are chasing a much younger consumer. Our price point is a bit higher. In our view, we are much more I guess lifestyle-driven compared to fast fashion, and that's the position we want to continue on with. And as we called out, we have 22 stores and 8 coming. So we're very excited about the sweet-spot that we're in and we won't be deviating from that.

And on Glue, just the comments you made about timing. Does that mean it's a bit of a -- is it a EBIT drag for you at the moment? I mean it's obviously not performing in line with your other stores. Can you give us some a feel on I guess how much it could be underperforming by or where the upside exists?

John, the best way to answer is to say that it made a loss last year. Certainly, we're not planning for it to make a loss this year. We've got lots of programs in place. We've learned a hell of a lot. We've got a really good team now in that business running it. And why don't we give you a bit more on that when tried it the first half. Recycling loss from last year is certainly not our plan for this year.

And then inventory, really you printed a really lean position for the end of the year. Can you talk us through the strategy looking forward now and does the inventory position look much different today than it did in 30 June? And have you had any impact from the global, I guess, for lack of a better word, disruption at the moment?

I might just talk to the numbers and then throw it at Daniel, let him talk to some of brands and what's going on. But in terms of the numbers, we've got more inventory, yes, now. We plan to close clean and to really distinct cut-off all the product that was relating to last year. And then the new product we wanted to get in early this year to start to drive the sales and that new product came in in July and there's more of it that's coming in in August. And typically, we like to peak our inventory and in this year will be sort of mid-October, just in time for all of the important sort of cyber period, and led into Christmas and then through early January and then exit January with again nice clean inventory levels, ready to get fresh inventory in February. So that's the strategy, if that makes sense, and we're feeling pretty good about where it is. We're not seeing any disruption at the moment in the inventory we're getting, we're getting everything we need, everything we want and generally it's coming on time, so.

And I think important, right, there John, the management of inventory overall for our Group is so much more sophisticated than it was only 2 years ago. We're very pleased with the team we put together with planners, we now have senior planners in each banner, reporting to the regional CEOs and we're very pleased on what's going on there. It's a part of the reason why our dividends continue to be strong. We're simply managing that piece a whole lot better. As CEO, I'd love to have way more Skechers than we've got today, it's just spectacular in terms of what that banner can do and if we have more inventory, we will be happier. But then, I've got Matt to deal with here in terms of managing me on that side too. But the real call-out is that the management of inventory across the Group is much more I guess well managed than I certainly have seen it over a long time.

And lastly on loyalty, I think there has been some investments made there recently. Can you give us some detail on how you use the levers now, for example, was it utilized to clear that stock in the fourth quarter or do you pull the lever to achieve the strong like-for-likes in July and August when you've got I guess better stock in? How do you utilize the platform now?

It's a combination of both, John. To sort of sum it up simply, what we're starting to get better insights into for example is the customer that shops with us because they like an Alpha, they like a discount or they like, they'll shop with us in sale, and so we're able to use it to target those customers through a promotionally intense period like May and June where we were clearing that inventory and the leverage that we get with that customer database allows us to get, when we go and sell in June, you get an instant hit and you avoid marketing to those customers who you know are never going to shop with you on a discount period. They are only interested as a whole cohort of customers that are only interested in shopping with us on the new ranges at full price and the better you can identify the difference between those 2 customers is just scratching the surface by the way of this answer. But it is allowing us to do that. So it allows us to pull both levers of different customer cohorts at different times and then that results in efficiency and marketing savings as well, because you are not marketing to everyone, you are marketing to people who are more likely to respond to the cash putting out. We still got a hell of a long way to go in this space, just scratched the surface. We're getting better, but there is a long journey ahead of us.

Next up, we've got a question from Alexander Mees.

Just my first question was with regard to the apparel and footwear equation that you were talking about when apparel underperforming, partly because we didn't have much for winter. The forecast suggests we're certainly going to have a really good summer. Does that mean that you would expect that apparel will start to close the gap as the year goes on?

That's certainly the hope. Well, you'd have to say yes. We have I guess completely over-hauled our team in terms of product innovation. We now have more and more brands approaching us with the right product compared to when we took Glue on and indeed Stylerunner and so on. So we're very -- I guess from what we are seeing and we don't know what the consumer is going to do, but right now from what we are seeing, not only apparel, but also footwear, the forward pipeline looks the best it's looked for a long time without any of these disruptions of getting products and timing and so on. So I would hope, yes, that we would see some upside on what we've been doing in apparel overall.

And then just secondly, interested in the different behavior between different customer cohorts and I appreciate it's sometimes difficult to really ascertain this, because you are not asking for ID, but in terms of the sort of products that you're selling, do you have a sense of whether this variation in the shopping behavior perhaps a younger consumer versus the slightly older one?

I can certainly say that we think quite resilient or our sector has been quite resilient. We've had new entrants coming to the market and yet our stores in our view are performing. We always want to do better, but it seems that our sector, particularly sneakers, is just the staple of fashion now. So where we're seeing a lot of growth is obviously women's sneakers. We happen to be well-positioned in almost every banner. So we're having I guess a bit of a free-kick there, which is terrific and we see from what the brands are doing internationally that that's a big growth market that we can play in. And indeed, we put a lot of LTV that way and we think we're on point.

And then just finally, any thoughts about the changes to the buy now pay later legislation, if it has an effect on you?

I don't think so, is the answer, Alex, to be honest. I think customers will find a way to shop and pay, and I think it comes far more to the offer that you've got and so I'm not anticipating it will impact us, certainly not differentially to anyone else.

Next step, we've got a question from Shaun Cousins.

Maybe just talk a bit about the footwear industry. Can you discuss what drove the promotional intensity in May and June? Was it just excess inventory or slower sales? And maybe talk a bit about the support from suppliers, do you get much in that environment? And then maybe the outlook for sneaker industry inventory levels as trade feedback suggests there's going to be quite a lot of product coming to market in the remainder of the calendar year, please.

I'll have a crack at the back end of last year and then throw it at Daniel about what he's hearing about the future. The way I would characterize the May and June is, it was about inventory in the overall channel, not just us, rather than trying to stimulate demand, that was certainly our approach. I can't comment on how others were thinking about it. However, when you look at what was going on, it felt like there was a lot of inventory kicking around that people needed to get through. So that's how I'd characterize the May and June promotional intensity, Shaun.

I think, Shaun, what you're hearing or reading particularly in the US, I think they've got their own challenges at the moment. It certainly does not seem that way in Australia and in the New Zealand. We are not able to just go out and buy a product at off-price if we wanted to. So we don't think it's a major issue. And from our point of view, we're largely out of all of our issues that were there last year and that's why our margins are holding up. So we think it will continue on that path.

And just on store network. You've got a track record of conservatism, which is welcome. But can you just discuss the opportunity to open I guess stores, particularly the relationship with landlords, what sort of deals you're sort of getting with them, how you're managing CPI? And then within that as well, how the regional stores have performed which seem to have been a key element of the growth over previous years?

Well, Shaun, we're at 800 stores now, so we're I guess somewhat important to the main landlords. Our relationships are pretty good. The support is fantastic particularly when we've got innovation going into our fit-outs. Our stores trade well, therefore particularly in the youth sector, so that's what they want as well to keep the shopping centers innovative and so on. We're not seeing any major pull back at all in terms of the support, indeed it's very, very strong. The second part of your question in terms of -- we are conservative. We said at least 50. I'd like to see us do a few more I suppose, but we are conservative, and where we are opening stores, they're hitting the metrics, whether that's an A grade or a B grade shopping center, they're hitting the metrics. So we will continue to do that and indeed in some centers, expand the footprint where possible.

He asked about regional stores as well.

Right. The regional stores have been quite strong for us. We're opening in areas that only 3 or 4 years ago wasn't quite sure whether we could trade in these places and the results have been very solid. So we'll continue to do that. But indeed my drive is that we have to win in A and Bs and the Cs will take care of themselves I guess. And that all pools into our major driver, the database, that's what's allowing us to do what we do, because more and more of our customer base is hearing about the offers we have and the way we show up to market.

And my final question is just around Hoka. That's obviously a brand that's got tremendous momentum. What's the opportunity to extend the distribution reach of that brand, please?

Well, Shaun, right now, it's hot worldwide. We're just on the courts of all that, but we've got a fantastic team driving this. It's very strong within The Athlete's Foot business, it's very strong within Hype. We suspect it will be quite strong in Platypus as we launch it in those stores in September, October. It's a long runway with that brand. We're being very cautious where the brand goes. We don't need a quick sale. We need wholesale customers that understand the brand and can market it in the fashion we need it to be marketed. But yes, there is a long runway with that brand and it's performing very well.

We're going to open some standalone stores later in the year as well, Shaun. So, just a few stores just to test the water on one brand for that banner.

Next up, we've got a question from Mark Wade.

So, I'm just trying to stay on wholesale opportunity. What are you seeing there in terms of the way those customers are reacting, your forward orders, that kind of that visibility of the sell-through, how is that channel performing against expectations?

Wholesale is going well across the board. We called out that last year it continued to grow strongly, and I've previously said that if you look at the last 4 or 5 years, we've doubled the number of stores that we've got in our business and wholesale has kept pace in terms of the mix in our business. So it's been strong and we don't know what's going to happen this year. It certainly was strong pipeline of orders, and the other sort of new brand that we've taken on recently is [indiscernible] and we're also very positive about the forward pipeline of orders coming through for that brand as well, so I have lots of reasons to think that wholesale will continue to grow.

I guess, Mark, we're fortunate that we partnered up with probably the best brands in the world in our view, and it's in the sweet spot of where we operate. And as I mentioned earlier, all the brands we do sign up without any real major rush, we slowly but surely get them together through all of our banners. So we get the upside as we get it right. But we're very cautious on how we do it, we just don't spray and pray, I guess. We put them in slowly but surely and then market it that way.

And just looking at the opportunity in I guess store maturation. So you've laid down what 300-odd stores now in the last 4 years, a phenomenon right now, those were concern at one point you had that kind of reached maturity on, maybe not concerned is the word, but is the opportunity for them do you think for that cohorts that still matures, I mean I guess sales are growing fast in the store footprint, but is there much opportunity for them to go further?

We think so, Mark. Some in the market were saying that we will mature at 300 stores and I disagree. We're now at 800 stores, and I certainly think there is still more growth in many of our banners, but indeed if you take Hoka, as Matt mentioned, we will open a couple of stores, we're very confident based on what we're seeing from around the world that there is a channel to open, fastest growing running brand of the world. Therefore, we should be able to hopefully open more of those stores as we get it right. But no, I don't think we're mature at all.

Sorry, Daniel, I meant more like just from those existing 820-odd stores, like can you kind of squeeze more out of those rather than, let's just really open more, to just kind of get more out of those existing stores as they mature?

I think that's right, Mark. We're still getting comp growth across the portfolio and we're also looking at across a number of our banners how we expand the footprint of some of those stores and do more within the box. Skechers in particular, the product width and product range that they have, including apparel, but they are starting to get some more traction with that, they've still got a way to go. So I think there is an opportunity for that as we move forward from the existing portfolio. I think that's right.

Ian, if you are able to unmute, please go ahead and ask your question.

My name is [ Ian McLean ], I am a 16 year shareholder and footwear retailer, so a big fan of what you've achieved. With the Glue store, there was a newspaper report I think in May that you responded to say that you weren't selling it and that I was supportive of that, JD Sports performance in Australia has been really impressive, how the Glue Store is going now? And is there an opportunity to grab market share from JD?

I would love to say yes, but not that easy Ian. JD is I mean they are a very strong force, particularly in apparel, they are chasing what we call the lad, they are very strong in that space. In terms of what Glue does, we are not chasing that same consumer as such. If you look at our stores, the brand portfolio that we have in there, I don't think any of those brands are now sold within JD Sports or if there are, we will simply move to a different segment. We are more after the fashion-conscious I guess teenager rather than what we call the lad, which is the tracks that look and so on. That's not where we're going. So I think they are 2 different customers to be totally honest with you, Ian. So we don't really see that we're up against them in the main.

And if I can just ask one more. Is there sufficient product differentiation in the assortments at some of the different retail labels, and specifically maybe say with Platypus versus Hype [indiscernible] are doing.

Absolutely. Particularly now, Ian, we spent a couple of years making sure that segmentation was prime in our minds. If you go to a Hype store today, some of their biggest brands that are sold in that banner did not even exist in the Platypus business, certainly in the segmentation area, if you take Nike or Adidas, Hype have got a higher segmentation, higher price points, whereas Platypus were quite happy to have the commercial version of those shoes given the size of Platypus across the country.

We have no additional questions at this stage. So, Daniel, I'll pass it back to you for any additional remarks.

Well, I thank you all for taking the time to call in today and we will see you soon and hopefully deliver another strong result. Thank you.