Accent Group Limited (AX1) Earnings Call Transcript & Summary

Good morning, everyone. for joining the Accent Group FY '26 Full Year Investor Briefing. We will begin with a presentation by Daniel Agostinelli, Group CEO; and Matthew Durbin, Finance Director, followed by a Q&A session. [Operator Instructions] Now Daniel, over to you. Thank you.

Thank you, Ronnie. Good morning, everyone, and thank you for taking the time to attend the call today. Joining me on the call is our Finance Director, Matthew Durbin. We will now take you through the results for the 52 weeks ended 28th of June 2026 and a trading update for the first 7 weeks of FY '27. There will be an opportunity to ask questions at the end. FY '26. It was a challenging -- excuse me, FY '26 was a year of significant strategies -- strategic progress for the Accent Group, and we delivered against challenging macroeconomic backdrops. The consumer environment remained difficult throughout the year, and the fourth quarter, in particular, was materially impacted by the escalation of geopolitical tensions and a significant deterioration in consumer confidence. Notwithstanding that backdrop, our performance brands continued to grow. The Athlete's Foot, HOKA, Merrell and Saucony all grew. And we saw year-on-year growth for Skechers, Stylerunner and UGG. Nude Lucy delivered another record year of sales and profit. If I can now refer you to the operational highlights on Page 5 of our investor presentation, which was released to the ASX this morning. The key highlights include total sales, including franchisees of $1.6 billion, up 0.9% with total owned sales of $1.53 billion, up 4.7% on FY '25. Owned retail sales of $1.4 billion were up 4%. Wholesale sales of $172 million are up 10.8%. Vertical owned brand sales of $137 million, approximately 9% of total sales with improving margins year-on-year. 876 stores across Australia and New Zealand with 43 new stores opened during the year. Sports Direct opened at Fountain Gate and Chatswood Chase during FY '26 and 17 Athlete's Foot franchise buybacks were completed. Turning to the overview on Page 6. FY '26 was a year of significant strategic progress. I am pleased to report that the business delivered underlying EBIT of $105.3 million in a challenging macroeconomic environment. Under the portfolio simplification, we closed the loss-making Glue and OzSale businesses and exited the low-performing Herschel, Superga and Dickies distribution brands, removing approximately $17.8 million of losses on an annual basis. On the growth investment, we launched and expanded Sports Direct with 3 stores plus online now currently trading and continued the Athlete's Foot franchise reacquisition program with 17 franchisees acquired. On the cost and efficiency, we improved underlying cost of doing business by 80 basis points on FY '25 and completed a material support office restructure, reducing over 100 roles. And on the strategic direction, we released the 2030 strategic growth plan and developed a material cost-out plan for benefit in FY '27 and beyond. And finally, the 2030 strategic growth plan is progressing well. I will now hand you over to Matthew Durbin to talk you through the details of the results. Thanks, Matt.

Thanks, Daniel. Total sales, including the Athlete's Foot franchisees were $1.63 billion compared to $1.62 billion in FY '25. EBITDA was $278.9 million compared to $288.8 million in the prior year. EBIT before the noncash goodwill impairment was $82.6 million, above the midpoint of the guidance range of $79.5 million to $84.5 million provided in our trading update on the 4th of May. Before the $2.1 million of adviser costs relating to the Frasers Group takeover proposal, operating EBIT would have been $84.7 million, just above the top end of the guidance range. Underlying EBIT was $105.3 million. This is reported EBIT adjusted for $71.2 million of significant items, those being $17.8 million of losses from closed businesses, $2.8 million of restructuring costs relating to the cost-out program, $2.1 million of adviser costs and the $48.6 million noncash goodwill impairment. Underlying net profit after tax was $51 million with underlying EPS of $0.085 per share. Statutory EPS was negative $0.023 per share. Reported EBIT post the goodwill impairment was $34 million, and the statutory profit result was a net loss after tax of $13.8 million. The $48.6 million goodwill impairment is a noncash charge and the technical outcome of the company's annual goodwill impairment assessment, which involves forward-looking assumptions and the exercise of judgment. Importantly, the impairment does not of itself affect the company's cash flows, banking covenants, its ability to pay dividends or its day-to-day operations. Turning now to the operating review. Owned retail sales were $1.4 billion, up 4.4% on FY '25. LFL retail sales for the full year were down 0.5%, with half 1 up 0.9% and half 2 down 2%. The group added 43 new stores and closed 59 stores. The closures combined -- comprised of 22 Glue stores, Herschel and Superga stores, together with 37 stores across other Accent banners where sustainable rental outcomes could not be achieved. That 37 included 17 Vans stores as part of the brand's optimization program. So 20 stores closed in the normal course based on those sustainable rent outcomes. There was a strong retail performance across the Athlete's Foot, HOKA, Stylerunner and others and 48 Nude Lucy stores are now open with another record year of sales and profit for Nude Lucy. Wholesale sales were $172 million, up 10.8%, driven by HOKA, UGG and the addition of Lacoste. Vertical-owned brand sales grew to $137 million, representing approximately 9% of total owned sales with improving gross margins year-on-year. Now turning to the growth plan update. The key initiatives under the 2030 strategic growth plan released to the ASX on the 13th of May are progressing well. The plan targets at least $1.9 billion in sales and a 9% plus EBIT margin and 950 stores by 2030, built around 3 pillars of efficiency, evolution and expansion. On operating efficiencies, the approximately $40 million in gross cost savings program identified through to '28, representing a net benefit of $15 million to $20 million is on track. Of this, there's $30 million of gross savings and a net benefit of $10 million to $15 million that has been actioned for FY '27. Savings are being realized across support office teams, occupancy, retail teams, IT and marketing. And we have a significant number of AI-oriented projects that are being deployed to support further efficiencies into FY '28. These savings are structural in nature and are expected to persist and compound through FY '27 and FY '28. Looking at store portfolio optimization, we flagged that 102 stores are under review as they come up for lease renewal. With these renewals, this should support an EBIT uplift of at least $7 million by 2030 with a targeted FY '27 benefit of at least $2 million. The Athlete's Foot reacquisition program remains on track and is delivering incremental EBIT as corporate ownership increases. This program is expected to contribute around $14 million of incremental EBIT by 2030, including $6 million in the FY '27 year. The longest-dated franchise agreement expires in August 2029. On customer and digital, the company has more than 10 million contactable customers and 29 websites across the portfolio with continued investment in CRM, personalization and digital experience, along with AI tools being deployed to support customer engagement and marketing efficiency. Turning to Sports Direct. The Sports Direct continues to expand with 8 stores plus online expected to be operating by December 2026, and the continued rollout across ANZ in line with the retail agreement. Store rollout is on track with the plan laid out in the retail agreement with Frasers Group. The Sports Direct online channel continues to grow and the business traded well during the FIFA Men's World Cup period, providing a tailwind into FY '27. Management has continued to work constructively with Frasers' operational teams in building the Sports Direct business in ANZ in accordance with the strategic partnership agreement. Turning to new store expansion and brand growth. 43 stores opened in FY '26 were led by HOKA, Skechers, Nude Lucy, Lacoste and Sports Direct. The strong performance in brand portfolio and growing vertical brands position Accent well for FY '27. Note that in the May strategic plan, we called out a target of around 20-plus new stores, excluding Sports Direct to continue to open each year, and that remains in place. The Frasers Group strategic retail agreement, turning to Slide 12, continues to provide access to global brands, product and supply chain benefits. Online sales have outperformed our expectations and week-on-week sales in all stores have continued to grow as customers engage with the brand. Fourth store at Miranda was opened since year-end and 8 stores plus online are expected to be operating by December 2026. For the Athlete's Foot, 17 buybacks were completed in FY '26 with 28 franchise stores remaining. The TAF network is around 160 stores, comprising 132 corporate stores and 28 franchise stores. This is against 146 stores in FY '17. Results achieved from the reacquired franchise stores are bang in line with expectations. Dividends and trading update. The Board has declared a fully franked final dividend of $0.0125 per share to be paid on the 14th of September 2026. Total dividends for FY '26 are $0.045 per share, and this compares to $0.07 per share in FY '25. Compared to reported EPS before the goodwill impairment, the dividend represents a payout ratio of 78%, which is at the top end of the Board's target range of 60% to 80% of net profit after tax, excluding the noncash impairment, goodwill impairment. It remains the Board's intention to continue to pay fully franked dividends out of available cash flow with a target ratio subject to circumstances at the relevant time. Turning to the trading update and outlook. Total owned sales, excluding the loss-making businesses we have exited are up 3.2% for the first 7 weeks of FY '27. LFL sales for the first 7 weeks are down 2% on the prior year. And pleasingly, gross margin percentage for July was up on prior year. We're encouraged with trade in the first 7 weeks, which has improved compared to the fourth quarter in respect of both sales and margin tracking. The trading environment continues to be volatile in the opening weeks of the year, noting that sales into August showed further improvement over July. The performance sports category, including The Athlete's Foot remains resilient and has achieved positive LFL sales as has Nude Lucy. Sports Direct has performed well, leveraging the World Cup and week-on-week sales tracking continues to improve. Continued strength in sport provides high conviction with respect to the ongoing strategy to complete The Athlete's Foot reacquisitions and to drive the Sports Direct rollout. For FY '27, the company has a range of high conviction initiatives to drive EBIT growth. Leveraging off the FY '26 underlying EBIT of $105.3 million, the initiatives already underway as part of the 2030 strategic growth plan include $10 million to $15 million of net cost savings, this being approximately $30 million of gross cost savings net of inflationary increases. These savings have already been actioned for FY '27. There is an estimated $10 million to $20 million in gross margin upside from FX hedging, noting that the Australian dollar to the U.S. dollar is currently sitting around $0.71 and an estimated $10 million benefit from The Athlete's Foot franchise reacquisitions, store portfolio optimization and new stores. These growth initiatives in FY '27 were put in place to ensure the business could maintain an acceptable level of profit in a trading environment where LFL retail sales were up to low single-digit negative. Now I'll take you to the financials. Underlying gross margin, excluding the closed businesses, was 54.1% compared to 54.9% in the prior year. The currency movement year-on-year impacted the result by a further 40 basis points. The result reflects the trading conditions and the heightened promotional activity, a disciplined approach to inventory management in a low sales environment and the lower AUD. Underlying cost of doing business was 45.6% compared to 46.6% in the prior year. Meaningful cost savings were achieved in the year across support team, occupancy, IT and marketing, reflecting the company's focus on operating efficiency as part of the 2030 strategic growth plan. Turning to the balance sheet on Page 17. Inventory of $334.8 million was up on the prior year of $308.5 million. The increase reflects the timing of goods in transit of $5.8 million, The Athlete's Foot reacquisition program of $5.1 million, that's the inventory associated with that program. HOKA inventory increase of $2 million, Sports Direct of $9 million and Lacoste of $10.3 million. The remaining increase relates to wholesale expansion and the timing of new stock purchases. Aged inventory is clean and inventory remains well managed. Turning now to net debt and cash flow. The underlying business improved net debt by $8.6 million over the year to $91.4 million. The closed businesses had a net debt or cash flow impact of $10.2 million, reflecting the losses associated with OzSale, Glue, Herschel, Superga and Dickies. Strategic growth investment accounted for $39.5 million of investment, being $12.3 million for Sports Direct, continuing to utilize the $60 million in subscription funds received in May 2025 and $27.2 million for the reacquisition of 17 earnings accretive Athlete's Foot franchise stores, and this has been our biggest year of acquisition of Athlete's franchise stores to date. Net debt implies a leverage ratio of 1.18x, which is well within the Board's tolerance range for gearing and the company's banking covenants. As at the 30 June 2026, the company had $60.9 million of undrawn committed facilities and a further $64.2 million of at-call funds within its funding agreements. During the year, we completed our debt refinancing, increasing the total facilities by $102 million to $372 million on improved terms, including an improved margin and tenure out to December 2028. This provides a robust capital structure and the flexibility to pursue additional growth opportunities, including potential new distributed brands. Coming to capital investment on Page 19. BAU CapEx on new stores, refurbishments and IT was $32 million in FY '26, down from $42.2 million in FY '25. And this reflected the reduction in the number of stores, the number of new stores that were opened between '25 and '26. BAU capital for FY '27 is forecast to be about $30 million. That will be ultimately dependent on the number of new stores opened. The Athlete's Foot reacquisition investment was $27.2 million in FY '26. It is forecast at around half that level based on the acquisitions, the reacquisitions that we believe will occur in FY '27. There's more than 5 reacquisitions planned. And as we get into the remaining franchise stores, they tend to be the better performing ones. Sports Direct investment was $12.3 million in '26, that comprised of the CapEx, the working capital and the investment in operating the business. That amount is estimated to be $15 million to $20 million in FY '27. Combined growth investment in Sports Direct and The Athlete's Foot remains at about 50% of the investment mix in '27, with the BAU expenditure broadly constant. I'll now hand back to Daniel to wrap up.

Thanks, Matt. Before we take questions, I want to acknowledge the resilience of the Accent -- that the Accent team has shown in navigating a challenging year. The business has made and executed a number of difficult but necessary decisions, closing loss-making businesses, tightening costs and articulating the 2030 strategic plan and the benefits of those actions should start to show through in FY '27 and beyond. We are encouraged by the early trade from Sports Direct, including the opening of Miranda since year-end and the strong performance of the online channel. Our hedging position is expected to provide gross margin support into FY '27. Finally, I'm proud of the team who remain focused on driving profitable sales, tightly managing costs and executing our key growth initiatives. That concludes our presentation today, and we'll be happy to take any questions. Thank you.

[Operator Instructions] Your first question comes from Sam Teeger with Citi.

Can you guys hear me okay?

Yes, we can. Thanks, Sam.

Great. Now just look, given how difficult industry conditions have become after you provided guidance in May following the federal budget, well done on this result. It's pretty good. Yes, there's a unique situation here. On one hand, you have Frasers trying to take over Accent and their bidder statement contains some pretty critical things about Accent and the Board. But on the other hand, Accent still has to work in partnership with Frasers to roll out and execute Sports Direct in Australia. Can you give us your perspective and insight as to how the relationship is going and what you need from Frasers for Sports Direct to be a success?

Sam, we have Dave Forsey on our Board. And the relationship with Dave is good. He's currently in the country and visiting stores and obviously attended our Board meeting. And as per our agreement, we channel everything through Dave that I need to channel. And primarily, my team with Dave and Dave's team are working very collaboratively in regards to all things Sports Direct. Whatever else the Frasers Group wants to do is going to be a question for them. But from my point of view, personally, and this is the drive I've got with my team, we are focused on 7 or 8 different items that hopefully will deliver what -- or at least I'm confident they'll deliver what we're setting out to do in what we've advised the market. And I'd like to sort of give you a couple of those, Sam. So we've got Vans trending up. We've got HOKA absolutely firing. We've got Lacoste making good noises. Our cost control should see a significant amount of cost dropping to the bottom line. We've got FX going our way. We've closed Glue and [ MySale ] both drags on our earnings. Our TAF buybacks are positive and our TAF business being in that sports space is very positive with the team just doing some amazing things there. Our wholesale business is positive. And at the end of the day, the Sports Direct, we've now opened -- we've got another 4 or 5 stores to open by December 1. And if you go into those stores and if you ask yourself a question, have we shown up, we certainly have. Soon as we get more of those stores on ground, the marketing engine will be turned on, and that's why I feel confident with what's going on. So every other question to do with Frasers, I think, has to go to our Chairman or Frasers itself.

Okay. And can we unpack the outlook in a bit more detail? I appreciate there's language in there referring to an acceptable level of profit. But to help us understand it better, if like-for-likes continue at, say, a negative low single digit, is meaningful EBIT growth possible? What are you planning in FY '27 around like-for-likes?

Yes. So Sam, I think it's difficult to provide more color than what we've put in the announcement. There's a couple of factual things. So underlying EBIT was $105 million, and we've put that on purpose in the outlook statement because that's clearly a number which is last year and in the absence of giving guidance, which we're not intending to do and haven't done, that's a benchmark which is considered to be a reasonable benchmark. It's clear that we've got a range of valuable initiatives that have largely already been implemented or have a high level of certainty. And it's also clear that trade for the first 7 weeks at minus 2 comps remains challenging. We're pleased that margin is up. But -- and we've said that we can deliver an acceptable level with slightly negative comps. So whether that's less or more than last year, I think we've got a long, long way to trade. And let's see how margin and comp sales progress as we get towards November. And clearly, November, December and January are the biggest and most critical months. And I think it will be difficult to provide much more color until we get through those months.

All right. No, that's clear. And last one, assuming there's no change in the consumer based on what you've seen to start FY '27, how much of the $10 million to $20 million FX benefit do you think you will bank and won't need to be reinvested?

Yes. Look, I think that's a similar answer to the one previously. What we know is that the dollar is trading at $0.71. We also know that because we put it in the slide that our average achieved currency rate last year was $0.65 and our average hedge book going forward is $0.69. So what's in place today already is a hedge book that's a $0.04 improvement over prior year. And I've previously called out as a very general rule of thumb, every 1% is about $5 million of gross margin benefit. So if we get to keep all $0.04 of that, that's $20 million. And if we have to trade some of that away or more of it away, then that's what we don't know at the moment, which is why we've put a range of $10 million to $20 million. The other thing we've said is that we did achieve an increase in July in gross margin, which is positive, but that was inclusive as well of the currency benefits that we had available for July. The promotional environment remains intense and the trading environment remains volatile and the macro remains challenging.

Your next question will come from Sam Haddad with Petra Capital.

Just following on that from the last comment. So the gross margin uplift in the trading update is all FX. And can you give us a measure in terms of the basis point benefit you're seeing from that? I know it's only 1 month.

Yes. Look, Sam, it's too early to tell is the answer. Mathematically, a $20 million improvement from currency is more than 100 basis points of improvement and $10 million is less than 100 basis points. But I think that's as much as I can say on that at this point.

And just in terms of your outlook commentary, can you talk about the level of investment you'll need in Sports Direct because that I would think will still be a net negative in terms of level of investment versus where the platform is sitting at the moment in terms of profitability?

Yes. So in respect of Sports Direct, we've called out a range of total investment in Sports Direct in the FY '27 year of $15 million to $20 million. We are investing heavily in marketing in Sports Direct and indeed have some commitments in the retail agreement in regards to marketing. And as we're building the store base with that marketing investment ahead of the curve, I expect there will be a net cash outflow, net operating outflow associated with Sports Direct in this coming financial year, which is why we flagged that $15 million to $20 million cash investment.

And on an EBIT, would it be a net detraction of, what, $4 million to $6 million or something like that? Is that a fair in terms of...

Look, Sam, that's a reasonable estimate. It's a reasonable estimate.

Okay. And then on the TAF, just to clarify that, you called out $10 million benefit for the outlook there, but I remember it was $6 million in your Strategy Day. So I just want to -- I'm just a bit confused there. What's the difference there, which is correct?

Yes. So the $10 million is correct, and that comprises of 3 elements, Sam. So $6 million in relation to TAF, $2 million in relation to the store optimization program, which for fear of throwing around a gazillion numbers, that store optimization program was a total of $7 million out till 2030. And the FY '27 component of that is around $2 million. We're hoping at least $2 million, which bridges to $8 million and the other $2 million then coming in from new stores. So hopefully, that clarifies for you.

Yes. And just on the brand owners, are they starting to put prices up as they launch new products in terms of the entry -- starting price point on the back of the old price inflation backdrop? And what are you doing in terms of that in terms of managing your gross margin? Are you passing it on to consumers? And what's the customer response been to those price increases?

Sam, there has been some of that. And where we've had to increase prices resistance is not obvious. And I dare say that we will see some prices going up, yes. But right now, it's minimal silhouettes that we've seen go up.

Okay. And just finally on your lifestyle banners, how much -- what's the sort of delta between like-for-like on your performance versus your lifestyle? Are your lifestyle still the major predominant drag? And any color around the level of drag from lifestyle?

Look, I'm not going to sort of go into detail on that, Sam. You can read through that our -- again, our comps for the first 7 weeks are down 2% and we've said that the sports category is positive. So mathematically, the lifestyle category is going to be worse than 2%. And I just think that reflects the challenging environment in that sector at the moment.

Your next question will come from Chris Wootton with Frasers Group.

Can you hear us?

We can.

I do have quite a few, but obviously, in the interest of time, I will just stick to 3. The first one is probably for Matt. Why do you think holding your discount rate flat on the goodwill impairment assumptions is correct when market conditions, including rising inflation and the base rate are deteriorating? And following on from that, your EBITDA growth has also increased year-on-year when, again, the same point, market conditions are deteriorating.

Yes. Thanks for that, Chris, and reasonable questions. So we feel as though the discount rate that we've had historically has been at the conservative end of the range. We have in-depth discussion with our auditors about a reasonable range, and they take an independent view of that range as well. And given historically, we feel that, that range has been at the more conservative end, we didn't feel that there was any need to change that this time around. In respect of the 5-year growth rate that we've applied for impairment testing, we feel as though the business is at the bottom of the cycle. There are also a number of initiatives. I'm going to call them in our control and not requiring capital investment, including the cost-out initiatives, including the improved currency rate, in particular, that we feel it is reasonable to have a growth rate. I'll say for those of you who have delved into the depths of the notes, that growth rate is 2.2%. And previously, it was 1.6%. And we feel as though 2.2% is still a very reasonable position given all of those initiatives.

I suppose on the discount rate, that seems like moving the goalpost to suit potentially. And on the EBITDA, again, it's the classic hockey stick, which we all know and love in the accounting world. So I still think those assumptions are quite punchy. And I guess we will see what happens. My next question is EBIT margin related. So we talked about an EBIT margin of 9% plus in your 2030 plan, but it's actually gone backwards this year. How do you reconcile still getting to that 9%?

Yes. Thanks for that question. So again, there's a couple of elements. And the most significant of those is the currency. So we put a chart in the back of the pack that shows what's happened to margin and currency over the last 3 or 4 years. And you can see there is a strong correlation. And I think, again, going back to some of those numbers I referenced with Sam earlier, with the Aussie dollar sitting at $0.70. In fact, its very long-term average, by the way, is about $0.70. That's a straight-out benefit, assuming we don't have to trade it away of more than 100 basis points at the gross margin level. And on the other side of the coin, we've taken out $30 million in gross cost savings in FY '27, and we've targeted for a net benefit of $10 million to $15 million after inflation, and we've targeted a further $10 million for a net benefit of $5 million in '28. I'll add that we're well progressed identifying where that next $10 million is going to come from and we're going to get amongst implementing that between now and May next year. And frankly, if conditions remain where they are, we may well need to go harder into the cost base. We're not ruling that out. And if we need to, we'll do that. So if I look at those elements and then I look at the underlying margin without the loss-making businesses, you can relatively easily bridge to a number that's high 8s or early 9s. I hope that makes sense. And again, that remains to be seen, but we're doing our very best to make that happen.

I suppose let me pick up -- you started with talking about the currency. And if you can predict the currency rates, Matt, you're in the wrong job, and you can pick my lottery numbers, frankly. So I would be more conservative on them personally. Okay. And then I've got one final question. Free cash flow. So as far as I can tell, free cash flow is negative and net debt has increased. So wondering how you can justify continuing to pay dividends when that is the case.

Yes. So if I exclude our loss-making businesses and then look at the investment that we've made in The Athlete's Foot and in Sports Direct ahead of the curve, I acknowledge in this year with those investments, operating cash flow was negative. That's a fact. There's 3 things moving forward that we feel as though are going to be very supportive of the dividend. And those are the cost-out again that we've taken and the impact that, that's going to have on earnings. So the operating cash flow in the coming year. And as you can see in next year, lower investment required in The Athlete's Foot, and we'll start to get benefit coming in from that. So look, the dividend consideration is an important one. We've also said at the Board that we're going to pay out 60% to 80% of profit after tax. And over time, that's a very sustainable ratio.

Your next question comes from Chami Ratnapala with Bell Potter.

Hopefully you can hear me.

Yes, we can.

Yes. Well done getting through that tough year and seems like reasonably a good start to the year, irrelevant of the trading conditions at the moment. Maybe 2 questions from me. You did talk to a level of improvement in August for a few retailers. We have seen this. And that's even as, I mean, GP margins are getting that benefit from FX. But maybe could you talk to the key drivers here and maybe as a bit of an outlook into the key trading period, which categories are showing a bit of the improvement?

Yes, Chami, July -- we started to feel a little bit of momentum in July in some banners, particularly in anything to do with sport. As we've been calling out for a while, it continues to be very resilient. And August, again, was -- whilst challenging, positive, and I think a lot of it's got to do with just simply some new products that have come to market, although I maintain that innovation still seems a little bit weak. But certainly, there's been an uptick, particularly with 2 brands for us. One was ASICS, one was New Balance, and that's been quite solid for us. And I guess I tend to wait for the P&L to make any decision. That's when decisions are made. And this cost control and cost reviews that we've done are really starting to show benefits for us in terms of earnings. But there certainly has been some sort of momentum shift. And I can't go as far as saying it's fantastic and we're punching the air, because we're not. But there has been a bit of an uplift in just a little bit of momentum across the businesses. But Athlete's Foot continues to be very resilient.

And then just on an underlying level, excluding FX, how has the promo impact on the GMs been versus last year for the start of FY '27?

Yes. Thanks, Chami. So when you can see that promo certainly had an impact in last year. And I would say that, that's sort of continued at a similar level of intensity. As we get further and further into this year, that's already in the base. So the unknown is whether it ramps up more as we get towards November, December and January with tight macro, that's certainly a possibility. But I wouldn't say the promotional intensity has abated at all at this point. So hopefully, that helps. I think the consumer is still chasing value. There's no doubt of that.

Perfect. If I can squeeze in one more, just on Nude Lucy. I think verticals are growing at 7%, assuming that Nude Lucy must be growing much faster. Just could you talk to basically the performance in that division?

Yes. Look, Nude Lucy has been really, really strong in terms of its performance. And mathematically, you're absolutely right. It's -- we had a lot of stores annualizing this year, which was great and positive both last year and into the first 7 weeks in Nude Lucy. So we've also got some other things going on, which I'll throw to Daniel to talk about.

Yes. Further to that, we've certainly learned a lot through the journey of Nude Lucy, and we've got an amazing team that run that business. The product innovation has been great. And obviously, the most important people being our customers are voting positively. On other good news that I'm certainly excited about and my team are, we will officially -- we've got a few stores open with a new business called ODE, which is O-D-E, and we will very shortly launch a website. The brand is performing exceptionally well within the Stylerunner business, and it's the same story as Nude Lucy. We trialed a couple of stores just as pop-ups, and they've been solid. And we officially will open at Warringah Mall and Miranda and potentially a third store, all before December 1. And the new product pipeline looks terrific. And it's obviously enjoying what others in that vertical space enjoy, which is the much higher margins, but very exciting for us.