Accent Group Limited (AX1) Earnings Call Transcript & Summary

Thank you everyone for joining the 2025 Accent Group Half Year Results Investor Briefing. We'll begin with a presentation by Daniel Agostinelli, CEO; and Matthew Durbin, Group CFO and COO; followed by a Q&A session. [Operator Instructions]. Now, Daniel over to you. Thank you.

Thank you. Good morning everyone, and thank you for taking the time to attend the call today. I'm joined today by our Group CFOO, Matthew Durbin. We will now take you through the results for the half year-ended the 29th of December, 2024, and a trading update for the first 7 weeks of the second half of FY '25. There will be an opportunity to ask questions at the end. In light of the prevailing consumer environment, I'm pleased with the company's overall performance for the 6 months to December 2024. The Accent team's ongoing focus on our customers, online, in-store, new -- and together with new and fresh product, and the roll out of 40 new stores -- 42 new stores all contribute -- contributed to us achieving a group EBIT of $80.7 million, up 11.5% on the prior year. If I can now refer you to the operating -- operational highlights on Page 4 of our investor presentation, which was released to the ASX earlier this morning. Key highlights include the opening of 42 new stores, bringing the total number of stores to 903 inclusive of our online websites. Our contactable customer database of 10 million customers provides the company with significant owned channels that we reach across the business. Vertical owned brand and product sales grew to more than $65 million and now a mix of around 9% of our total sales. And our new distribution agreements have been signed with Lacoste and Dickies, together with re-signing of the Merrell and Timberland agreements for further terms. I will now hand you over to Matthew Durbin. Thanks, Matt.

Thanks, Daniel. Turning to the sales and profit on the Slide 5. Total sales for the year, including franchisees were $844.6 million. The reported EBIT of $80.7 million was inclusive of $3.3 million of non-recurring items relating to the reversal of a historical impairment of Hype brand value, the impairment of underperforming Vans stores, sale of Trybe and the discontinuation of the CAT distribution. Inventory levels at the end of the half were in line with plan, with age levels clean. The year-on-year increase in inventory reflects converting TAF Franchisee stores, investment in Hoka driving future planned growth and new stores in our expanded store network. Now turning to Page 6, gross margin percentage was down by 100 basis points to 55.6%, reflecting the more promotional consumer environment experience throughout the half. Cost of doing business of 44.7% was an improvement of 31 basis points, reflecting cost efficiency initiatives in support team costs, lease renewals, distribution and other areas. Inflationary pressures continued in store, team wages and annualizing rent reviews. Net profit after tax for the half was $47.2 million, which is up 11.7% prior year. Coming on to Retail on Page 8, owned retail sales grew by $5.1 million to $683.5 million, a combination of LFL retail sales up 3% and new stores. During the half, 42 new stores were opened. 17 Trybe stores including online were divested, and 18 stores were closed including 7 Glue stores and 4 CAT stores, along with 6 stores where sustainable renewal terms could not be agreed. Wholesale and Vertical brands on Page 9. Sales of Vertical owned brands and products grew by more than 8% to more than $65 million, continuing to improve underlying gross margin. Wholesale sales grew 1.3% to $83 million, reflecting stronger sales in quarter 1, and sales weakened in quarter 2. Customer and loyalty on Page 10. Contactable customers of 10 million customers continue to provide significant owned channel marketing reach. You'll note that 200,000 customers moved to the new owner with -- along with the sale of the Trybe. Coming to dividends and trading update. Now the company has announced a fully franked interim dividend of $0.055 per share. The interim dividend represents a payout ratio of around 70% of the half 1 EPS before non-recurring items. The Board reiterates the intent to payout excess cash that is not required for current future investment over time. Now turning to the trading update. LFL sales for the first 7 weeks of half 2 were up 2.2% in the prior year, and gross margin continues to be impacted by the promotional customer environment, and for the first 7 weeks is down 70 basis points. Hand back to Daniel to wrap up.

Thanks, Matt. Whilst we recognize that there is some uncertainty in the economic outlook, we have seen some improvement in like-for-like sales, and are pleased with trade in the first 7 weeks of H2. Looking forward in H2 and amongst many other grocery initiatives underway, we have some plans that will see us open at least 10 new stores, continue to work on our Nude Lucy business, which is strongly profitable, and The Athlete's Foot franchise reacquisition program is on track with a further 10 stores planned to be acquired by June of 2025. The company remains in active discussions with the Frasers Group for a long-term strategic agreement and we expect to conclude negotiations during H2. That concludes our presentation for today and we would be more than happy to answer any questions you may have. Thank you.

[Operator Instructions]. Our first question is from Sam Teeger.

Nice, short and sharp presentation. I think a lot of companies can learn from that. How much of the 70-basis points weakness in gross margins in the second half to-date is due to currency? And can you talk us through your hedging profile and how you expect currency to impact gross margins in the second half and then also into '26?

Thanks, Sam, I'll take that. In terms of the 70 basis points for this first 7 weeks, we're not -- we're still not attributing much of that at all to currency. Indeed, that's why we've called out promotional environment. We're still having to offer customers value to stimulate demand. That wasn't necessarily the case in back-to-school categories, but across lifestyle categories, it has been for that period. As we get into the second half of or the back end of the second half, I'll note that currency is at around $0.60 -- yes, $0.64 today. We have a forward hedging profile maintained at about 30% of forward hedges, and I don't anticipate a material currency impact on margin in the second half, albeit that that's with the caveat that it sort of sits around the $0.63, $0.64 levels that we've seen in the last month or so. If it drops below that, then it could indeed have an impact as we get to May and June. As we get into next year -- yes, if I look at last year's achieved currency rate, it was around $0.67. I expect by the time we get to the end of this year, it'll be about $0.64, $0.65. So it'll be a little bit dependent on where the currency lands over the next few months, and we continue to put our hedging in place. But right now, we've set plans for that currency at $0.63, and that's what we're sort of striking our forward plans on. So, hopefully, that gives you a bit of color. Yes.

And the 30%, how does that compare to the amount of hedging you would typically have at this time of year? Is it a bit low?

Yes. Look, it's lower. Certainly, in the last 18 months we've had our hedging at around that 30% level in truth. So you actually have to go back further than that. Our long-term settings is, we like to be about 50% to 60% hedged, that's our long-term ideal. However, with the dollar hovering at low $0.60s for that period of time, we've taken a view to be 30% hedged and by the rest spot.

And in terms of the store roll out guidance for the second half is probably lower than what you've done previously at a gross level. Ignore the closures you're going to do for Glue. I appreciate that your roll out targets have historically been conservative. But can you step us through your roll out opportunities after how you're seeing exist in your key brands?

Yes, Sam. I mean, from our point of view. I mean, if you look at Platypus at the moment we're at 206 stores. From our point of view, we're everywhere we really need to be. What we are focused on is, in many cases, expanding the footprint where it would makes sense and we can achieve a pretty good outcome on rent and contributions from landlords. As an example of that, if you take the Erina Shopping Center we are currently in the 160, 170 square meters. That store is trading very well. We are looking to go to 250, 260 square meters in that center and expand the offer that we've got in that market. So there's a lot of that sort of stuff going on. We're also planning, as called out in some months ago, we've been looking to refresh and refurbish as many stores as we can as they come up for renewal. Where we have done that, we've seen pretty good results from that effort and that investment. So there's going to be a big program of doing a lot of that this year. However, Nude Lucy, Stylerunner and indeed, The Athlete's Foot will still show growth. So how conservative that is? That number? I'm not sure I'd be disappointed if we only open 10 new stores. But equally, we're in a position where we think what we have we can make bigger.

And just in terms of how you feel about things, looking out into '26 would you be disappointed if your network only grew by net 36 new stores?

I'm not so sure I'd be disappointed because I'm really looking forward to what we're doing with the current footprint of the stores. But yes, I mean, we're used to opening as many stores as we can where we think they're going to hit the ROIs. But overall, the focus is on really making sure that given we've got a good sample of stores in the market and a good footprint, is how do we make what we've got, I guess, to do better in the centers where we operate.

Our next question is from Chami Ratnapala.

Thank you for leaving more space for the Q&A. And I think a few questions from me. Firstly, good to see you calling out the strong banners there. I think there are quite a few of the strong ones that we know about mentioned there. Perhaps, just a bit of flavor on how these have grown versus where the group is tracking currently?

It's fair to say that Nude Lucy, in particular, Athlete's Foot, they are comping stronger than some of the other banners. However, it's -- at least in the last 7 weeks and indeed -- well, the last 7 weeks, I guess, most of the banners have definitely seen an uptick in what's going on. Very pleasingly, Platypus has been positive as we've refreshed stores. So I guess, that's the only way I could answer that. We've also got some pretty strong brands. We distribute that are performing fairly well in our banners, i.e., our Hoka brand is very strong in our banners and across the market. And I guess, overall, the only way I could answer that is, the last 7 weeks has definitely seen an uptick from where we were.

Dan, I mean, it leads me to the next question. Back-to-school. I think last year, back-to-school was pretty ordinary. I mean you've grown -- your growth rate has sort of improved from November to December. But anything to call out here? I mean, just that sports category or the back-to-school category, how it's done? And could you have grown better because you -- I think earlier, Matt called out that margins were predominantly due to promo activity. How do you -- what happened to that from November, December to Jan? And if you all had discounted a bit more, could you have grown faster? Perhaps a bit of color.

Well, we were quite pleased with back-to-school in The Athlete's Foot in the main. Most of our banners play a little bit in this space now, but the real business for us, the majority of it comes out of The Athlete's Foot. Although, last year was -- I wouldn't say it was a miss last year in terms of what we had on our budgets. This year was again an improvement on that. That business was not as affected in promotional activity. So we're very pleased. And we have just a team that has really gained strength and understanding of that customer, and we continue to be pleased on all things with The Athlete's Foot, but in particular, back-to-school. We also have our own brand called Alpha, which is a Vertical brand that we design, make and bring in the market. That has further grown again on last year, and it's now in its, I think, its sixth year, and we're very pleased with what that's doing. Could we have grown it more, Chami? From my point of view, we could have grown everything more, we'd love to. But I guess, that business has had a very strong comp stack over many, many years and continues to find strength across the board. Other brands within that space are starting to understand the strength and the size of business available for back-to-school. So we are seeing many other brands come into the space, which is positive news for us.

And then wholesale into Jan, Feb, the positive momentum has continued or anything to call out here? I mean it's really good to see the growth reverting. Anything to sort of -- has it been pretty consistent or?

It's still not where we want it, as many of customers that we supply are being quite cautious. However, it's definitely an uptick on where we were, strongly led by, again, Hoka. But indeed, we're definitely seeing an uptick from where we were. We're a bit fortunate at the moment that we distribute a brand called Merrell. That's starting to show some good signs in market around the world. So we're enjoying a little bit of better trading there together with Saucony, which has been a bit of a sleeper in our business. And when I say a sleeper, it's always been strong in The Athlete's Foot, but we're suddenly starting to see that brand trend around the world as well, which is wonderful. And anything to do with sport at the moment is having a major, major resurgence in terms of a fashion shoe. And we happen to be fortunate to have both Hoka and Saucony in the business. Where we are having some challenging times still, although there's definitely been an uptick is the Vans business, has been challenging worldwide. However, it's starting to show some very slight comp growth, which is better than where we've been. And I'm happy to report that we distribute a brand called Dr. Martens. That's definitely starting to see a nice little uptick. So all-in-all, it's still, I think, challenging in terms of wholesale, but better than where we were.

Our next question is from Ed Woodgate.

So maybe just initially, just on the Frasers Group negotiation, is there anything you can talk to there and just provide some color on the nature of the discussions? I appreciate that might be sensitive. So understand if not.

Yes. No problem, Ed. Good question, but we can't say any more than we put in the release at this point. We're working hard on it.

And then as far as more pertinently, maybe C2B. So the last update, that was a key focus. It looks like you've done a good job there. Is there much more that you can do in the second half? Can you talk to how much cost you took out of the business and whether that will annualize into the second half?

Yes. So what we've talked about -- there's a couple of different initiatives underway. We've certainly made some significant reductions in our support office team costs. We've talked about 100 heads or about 10% coming out of that. And you guys can do some estimates on that. There's about 6 months of that still to come, so there's definitely annualizing benefit into the second half. We're very, very focused on the lease renewals. And whilst times are becoming more challenging, we're still achieving really positive outcomes on those renewals. You can see from the fact that we only closed 6 stores. That we couldn't reach new negotiated terms out of a very long list of renewals that we had to get through. That we're still having success in that. That's also borne out by our rent percentage to sales or lease percentage to sales, which is a bit difficult to say under AASB, but you can work it out with the cash cost and so forth. And further, we're still getting benefits in distribution costs. So all of those initiatives roll through into the second half. Having said that, we still have to work very hard because as we roll into the second half as well, we're still experiencing a 4% indexation in frontline team wages -- store team wages and rent escalations relating to the significant CPI increases that we saw last year. So yes, look on balance, I think we can still keep moving ahead on cost of doing business as a percent of sales. It's certainly our objective, and that's what we're going to be fighting hard to achieve in the second half. That's all caveated by you need to get some positive comp sales because without positive comp sales it's very difficult indeed to do that. Hopefully, that gives you some color on that.

Yes, great color. And just following on from the comp sales. I mean, can you just provide some color on what the [ GPM ] comps look like for the remainder of the half versus what you've seen so far? And then just any sort of color across demographies and regions as far as the top line performance?

Yes. So look, as we get into the fourth quarter of this year, comps -- the prior period comps become a little bit less challenging. So that should be good. And certainly, the news of an interest rate cut feeling good about that. Maybe another one to come this calendar year. Let's see what happens there. In terms of regions, New Zealand remains very challenging. We've been calling that out now. I feel like a broken record for 2.5 or 3 years, and we are still yet to see green shoots in New Zealand. That's 10% of our business. So that's been weighing on comps now for 3 years. And it's still a very challenging market, I don't think just for us from what I hear. In Australia, there's not that much difference, to be honest, between the various states. New South Wales is little bit stronger than Victoria, but nothing material in that. Certainly, Western Australia continues to be strong and Queensland continues to be strong in terms of economic growth. So hopefully, that sort of helps. But that pattern has been in play now for probably 18 months. We haven't really seen a shift.

And maybe just one quick last one, two-parter. So just to clarify, you might have already said that how many TAF franchises have you bought back so far? I appreciate you said there'll be another 10.

Yes.

And then just the materiality of Lacoste and Dickies, that would be interesting to know.

Yes. So in terms of TAF franchises, we bought 4, I think, in the first half, 5 -- sorry, in the first half, and we're planning to buy 10 in the second half, all things being equal, we'll get at 10, so that's 15. 5 in the back end of last year. So it's been sort of 20s or it will be 20 by June of the remaining 60 by the time we exit this year. And we've talked about the vast majority of the rest coming in FY '26, FY '27 with a tail in FY '28 and FY '29. So we'll start to see some quite significant benefits from that program, particularly as we get to the back end of FY '26 and the buybacks that we're planning then. What was the other part of the question, sorry, it was on…

Just Lacoste and Dickies, like how much material…

Lacoste and Dickies, look, we've talked about we'll start to work on those from the 1st of July in the case of Dickies, and the back end of the first half next year in relation to Lacoste. So I'm expecting a small amount to come through in FY '26 with the majority of benefits to flow into FY '27.

Our next question is from Shaun Cousins.

Maybe just a question maybe for you, Matt. Just in terms of the dividend, it fell quite a bit first half on first half. Can you just talk to us a little bit about how you're sort of seeing and maybe the broader thinking from the Board there around the dividend. And your cash flow was quite strong, just curious why the dividend was quite light.

Yes, that's a good question, Shaun. And I fully anticipated that might come up. Look, I think if you look at our payout ratios in the last probably 4 or 5 dividends, they've been high. The last 3 have been over a 100%. And yes, ultimately, that's not sustainable. Over the sort of the 3 years up to 18 months ago, we were getting some quite positive benefits from the TFA, the tax office [ TFE ] initiative in terms of expenditure on stores and other capital investment. That's now unwinding as we move forward. So I think the Board had a pretty substantive discussion about adjusting dividends to more sustainable levels. And if you look across our peers, 60% to 70% in the range, and it was 70% of our -- I'm going to say, pre-recurring items. So the Board has reiterated its intent to payout available cash over time. and that's what we're going to do. So hopefully, that gives you a bit of color on that. I don't think there's anything insidious in it and people shouldn't read that. I think it's a little bit of a readjustment to be honest, of what was a very high dividend payout ratios historically.

I can add a bit to that, Shaun. I've also been a little bit greedy, because I do want to go faster with expanding the footprint, as I mentioned. Currently, as of today, we have 8 key stores being refitted. They come at expense, but I think the benefits are going to be great from this effort. And they come with cost. I want to accelerate that, particularly in Platypus and Hype in both of those banners. And as you're probably aware, when you have a renewal, pretty difficult to go and get landlord contribution because you're a sitting tenant. So we're going to need more money to do that. But I think the end result will be great from an ROI point of view.

And maybe just some questions on the apparel brands, and apologies. Can you just talk a bit about -- if you've gone through this in more detail. But just on Glue, the 17 closures that you've announced, how many have been completed? How some of the ones that might not be closed -- or sorry, pardon me, as you exit the site, will you transfer to other brands? And then does this take maybe Glue to a more profitable position maybe in calendar '25 or fiscal '26? Just curious around how you see Glue and -- but just the progress to-date, please.

Thanks, Shaun. I'll take the first part of that, and Daniel might do a bit of color on the forward position. In terms of stores closed to date, it's 10 stores closed to date out of the 17 that we talked about. We closed 3 at the back end of last financial year and 7 in the first half. So there's 7 to go. Look, our objective in closing those underperforming stores was to get to a position where the balance of the stores were profitable, and we're confident that, that's on track. And yes, we'll close the balance of those 7 stores between now and June or shortly thereafter. So that's sort of the plan at the moment. And I might sort of hand to Daniel for color on what we think about forward position.

Well, right now, Shaun, we've got probably 3 to 4 stores that we're still working on. Once they leave the business, and these are legacy rents that we've been dealing with for a couple of years now, we're left with a business that will be profitable. And that will put us in a position to figure out, well, what does the business look like moving forward? Where do we move in terms of what we're going to look like moving forward? And until we get to that position, that is the total focus at the moment of getting the business to a profitable position. And thankfully, we're close to achieving that, albeit 3 or 4 key stores have to exit the business pretty soon.

And my final question is just around the 2 other apparel brands. Nude Lucy seems to be doing rather well. Can you just confirm that, that's sort of profitable and how we think about outlook there? And then Stylerunner, which is quite unique in terms of a female-focused sort of business, if you could just sort of talk a bit about if that's profitable and how those margins compare to the group?

Absolutely. Both businesses are profitable. Nude Lucy has been pleasing. I'm not sure if you've been out in market the last couple of stores, we've elevated our look and our fit-outs. Customers are responding positively. We have more stores to open in that business pretty soon. And we also have a new brand within that business that we make, design and have taken to market called NiLS, N-I-L-S. Positive stuff going on with that as well, together with expansion of products across that business. So very pleasing at the moment. Stylerunner, in my view, one of the most exciting businesses in the market. Yes, profitable. Once again, we are continuing to expand that footprint as well. We've just opened 2 stores in what we call test markets to see how far we can go with this banner. One of them is Macarthur Square in Sydney, a center that I wasn't sure what would happen there. It's been very pleasing. And the other one was in Werribee in Melbourne, both areas that were probably not on our radar and both seem to be in the profit area. So I'm quite excited about what's going on in there. Within the Stylerunner business, Shaun, we have a brand called ODE. Once again, we make design and bring it to market. Very solid stuff going on in there. So the real pleasing thing for me, although the banners are profitable, I think there's upside to come as we get this right. But more pleasing than anything else is that we've got a team that's really learning how to actually execute on all things Vertical, factories. Our learnings are just getting stronger and stronger by every range. And I would hope for those of you on the call that may visit and shop those stores that you're seeing, there's definitely a step-up from where we were only 2 years ago when some of this stuff was launched or 2.5 years ago.

Our next question is from Ben Jones.

Just a quick question from me on the brand performance that you've spoken to earlier. Based on the presentation those top performers you called out, looks like Skechers has dropped off that list versus the '24 [ Prezo ]. Can you just talk to what you're seeing with that Skechers brand versus the rest of the portfolio?

Well, Skechers is a powerhouse worldwide. You just got to look at their results internationally. It's super strong. It continues to be super strong. The business last year launched a shoe called Slip-ins. We had a jolly hold time with it. We're looking for what that replacement is. But all-in-all, we're very happy with Skechers. And in market, we've started to open some what we call mega stores for us or flagship in that DFO area. And these -- a lot of these are stand-alone stores in places we never would have opened some years ago, and they've been quite pleasing. So overall, I'm very -- I'm comfortable that Skechers will continue to do what we needed to do for our group.

And then just on -- you mentioned, obviously, new stores coming in the second half and a few refits and refurbs. Can you just talk to sort of CapEx expectations for the second half and moving forward?

So in terms of CapEx, we think that the levels will remain around where they've been, Ben, on balance. The mix of investment shifts a little from new stores into refurbishments, as you heard Daniel allude to with the work that we want to do with Platypus and Hype stores. But we're not expecting a big tick up in the overall CapEx spend. It's more of a mix shift, if that makes sense. So if you look at second half last year, similar sorts of levels are what's anticipated.

And then just one final question just on the distributed brands. You've, obviously, added Lacoste and Dickies, and it looks like you're doing a little bit more on the apparel side of things through that wholesale channel. How do you see that distributed brand portfolio growing? Is there a particular size or segment of the market that you'd like to be in or like to target a little bit more aggressively?

Well, Ben, we're always looking for what's next. The big thing going on in the trend space is anything mountain. I guess, if you look at a brand like Solomon, whilst we don't distribute it, we have very favorable terms, and we are the beneficiary, at least in Australia. Very strong sales from a brand like Solomon. There are other brands in market that compete with that. We would like to be the distributor of some of those brands, and they're just ongoing conversations. But we are simply following where we think the trends will be right for the next 5 to 8 years, 10 years. And brands like Lacoste are just solid brands in market. So we're quite excited about that. But in the main, we're continuing to focus on 2 areas. One is obviously the trend area, what's going on with footwear with the likes of even UGG, we've got UGG in the stable now, which has been really strong. And indeed, anything to do with sport. There's not that many sport brands out there that you can expand in terms of your Vertical distribution and be a distributor for those brands, but there's still some opportunities that I think will come our way as we continue to build the brand space. In our business, we've got what we call the moat brands. Internally, we call them the family brands. That's anything we distribute. I definitely see that -- well, I definitely feel that we will up the ante on all things in that area, and we're becoming quite a force with brands that we distribute in market.

Our next question is from Garth Francis.

Could I just ask on the product that gets sourced, how much of that is actually U.S. dollar exposed? So for your third-party brands, do you purchase that in AUD? Or is that also U.S. dollar exposed?

Thanks, Garth. I'll take that. So we've previously said that of the total product that we buy, around 60% is U.S. dollar exposed and 40% is not U.S. dollar exposed. So the third-party brands that we buy and the big ones of those are New Balance, Nike, Adidas are not currency exposed. So we get a margin. However, our distributed brands and our Vertical product, that is currency exposed. Hopefully, that makes sense.

And then just maybe some more color around the store opening profile. Skechers, you didn't mention in that. They're at a significant store count number similar to Platypus. Does that mean you're also slowing your intentions there?

Not so much slowing as we speak at the moment. In some of the refits that I've mentioned of stores that are closed, once again, we are expanding the size of Skechers. Indeed, it's a worldwide drive by Skechers, and we're simply following the DNA of what they're doing worldwide. You'll start to see many of our stores expand in the current footprint purely because of the product offer that's going on. In terms of new stores, that whole portfolio has got very, very little stores, I think, of any that are not profitable. So it's just a strong business. But in the main, we are pretty focused on growing the footprints of many of our current banners as we simply feel there's more in it as we expand the products we offer to customers within them.

To add to that, Garth, there was 10 new stores opened in Skechers in the half. I mean, you can see that in the presentation, and there's certainly still a pipeline of Skechers stores coming. New Skechers stores.

Yes.

And then on TAF, I understand the conversions are happening, but do you see growth in that banner just given you're potentially going to be having another sports offer in the future?

Well, I won't comment on the future sports offer, but we definitely see growth in The Athlete's Foot. It has been a very, very strong banner for us. Everything in sport that we have in our business is working strongly at the moment. Yes. The quality of that execution that we've got in TAF is strong. And we feel as though we've got a very strong position in that sports footwear play and don't see any backing off that. There's extra stores. We have talked about as we acquire the franchisee network as well. There are centers and demographies that we haven't opened TAF stores in historically out of respect for our franchisee relationships. And as a corporate owner, we would see opportunity to fill out those demographies. So we can't talk positively enough about how we're feeling about TAF at the moment.

And then just in terms -- you've renewed Merrell and Timberland. Are there any other distribution agreements that are coming up for renewal or specific brands in those agreements that are coming up that we should be aware of?

No, they're all out 3 to 5 years at the moment, Garth. So -- and yes, we've previously talked about our longest-term agreement, which exists with Skechers. Our other longest-term one is with Hoka, 2 of the strongest brands in the portfolio, and they're both out beyond 2030 at the moment. So yes, that's all pretty positive.

Our next question is from Wei-Weng Chen.

So I guess my question is, how do we get customers out of this cycle of being promotionally focused? Is this that a question that's kind of bigger than Accent? Or are there things that you guys can do in a meaningful way?

Good question. We grapple with it every morning when I look at the results of our margin. But there is an uptick, though, which is good. We're starting to see a little bit of backing off on it. I think it's a bigger issue than just Accent. I think it's worldwide in footwear. You just got to look at results from almost anyone in footwear. To be honest, I don't really know the answer. We are simply meeting the market. Our competitors have been on sale a lot. And we can choose to hold margin and price, and simply lose market share. And at this point, we've taken a decision to compete. However, if in some of our banners, particularly Athlete's Foot, Hype, where you're talking about very high elevated products within our segment, the discounting is -- I guess, the competing is a little bit less. It's in the middle where some of the issues are. And I just think once this cost of living sorts itself out a little bit, I think that's when we're going to start to see -- almost the whole industry of retail start to go back to -- back to absolute full margins. In our apparel businesses, particularly in Nude Lucy, that doesn't seem to be an issue at all. We're not competing with anyone there and someone in the main. So I don't know the full answer, Wei, but we're on it every day. That's for sure.

And just confirming, like when you talk about margin pressures, you are just mostly referring to footwear and not apparel?

Correct, correct. With the exception of Glue, where we've been doing a bit of clearance. But yes, I mean, in Stylerunner and Nude Lucy margins are strong, and yes, we've got a bit of a unique position. So we are talking about footwear. And lifestyle footwear is distinct from sports footwear.

And then on Like-for-Like, can we get an idea of what your comp was at the end of first half when you did 1.8%? And then maybe what about the remainder of the second half? Do they get harder or easier?

As we get into the fourth quarter, they get a little bit easier. So this period last year, the first 7 weeks that we're cycling last year was either negative or positive 0.7%. I can't remember which, sorry…

That was negative.

Negative, yes. So we're cycling that. And we were cycling, yes, slightly positive in the November, December period where we're at 1.8%. And as we get into the back end of this half, it sort of comes away a little bit. So, yes, I'm not sort of seeing anything in the prior period that doesn't say that positive comps should continue, all things being equal, to be honest.

And then Nude Lucy U.S., I know that was kind of you dipped your toes there. How is that going?

Very early days, but somewhat positive. We've only really -- we haven't really put any marketing dollars into that market, simply launched a website and appointed an agent over there who's been selling to wholesale customers. Whilst the numbers are not huge, they're strong enough for us to say we should continue. And product is landing into those stores as we speak this month. That will determine what we do next and how we go forward there. So not much more to report than that. We still haven't really turned our mind to, well, should we go and really invest in marketing and do all of that stuff until we see how the market accepts our product. But the -- particularly the independents, and there are some pretty strong independents that have picked up the brand, that's been very positive for us to-date.

And then last one, Frasers' question, but maybe from a different angle. Is there anything you can say around what it won't be? Like will any options be kind of necessarily capital light? Or will there be options where you might need to deploy additional capital?

Yes. Look, again, I'll refrain from making any comments other than what we've already put in the announcement. Thanks, Wei.

Our next question is from Sam Haddad.

Just on the -- [ question on ] business line again. We've previously spoken about what like-for-like you need to maintain to avoid deleverage. At 2% or thereabouts, is it fair to assume there is a bit of deleverage? And therefore, those initiatives that you've called out like in terms of the efficiency initiatives that were done last year, I think it was $6 million to $8 million annualized benefit. Is that simply going to be absorbed all by the deleverage and not hit the bottom line?

I'd hope that it won't all be absorbed, Sam. So we've talked about a neutral comp setting in the absence of cost initiatives being 3% comps. So 2% comps with some annualization of those initiatives, I hope that we can still get a bit of leverage coming into the second half. But clearly, to your point, it's less than the 3% we've talked about as the neutral setting. So yes, it will unwind some of what we might have expected to achieve in a percentage growth.

And you also spoke last time about other -- the big initiatives more over the FY '25 to '27 years, and you're going to give some further color on it. Is there any update on that? You're moving forward with those other initiatives?

No other color on that yet. There's other things we're working on. And yes, but let's get to the full year results and deal with those then.

And just to clarify again on your hedge position. So looking at Slide 16, you achieved $0.67 in the first half. Is it fair to say that, that means if your spot rates at $0.64 and you're 30% hedged and you start to get some exposure as you move into first half '25, there's a 3% -- $0.03 headwind? Is that right, in the first half of '25 or its FY '26?

That's mathematic. Yes, into FY '26. That's mathematically fair based on where the currency has been sitting. Yes.

And we've previously said that it's about a $3 million to $5 million impact on EBITDA per $0.01 or EBIT.

Yes. $0.01 is $5 million unmitigated, over the course of 12 months.

Yes.

Yes.

And just a quick last question on NiLS. How is that going in Nude Lucy? Is that -- has that been received at a higher price point in that banner?

Very positive, Sam. I'm quite excited about it. Early days, our second range is about to hit. It looks fantastic. She is voting positively, which is wonderful for us. And the beauty of it is that the ASP, the average sale has moved up, moved the whole business up a couple of bucks, which is good. So it's positive at the moment and we really haven't done much -- well, we've certainly done a lot, but we've launched it in stores, and she's voting with a yes, which is wonderful.

[Operator Instructions]. We have no further questions. I will hand the call back to Daniel for any closing remarks.

Simply, thank you all for your time. I know everyone's flat out. And thanks again. Have a great weekend.