Adairs Limited (ADH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Adairs Limited Trading and Stores Update Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Mark Ronan, Managing Director and CEO. Please go ahead.

Good morning, everyone. Thank you for joining us for the call where we will provide a trading and business update in relation to the last 5 weeks whilst the stores have been closed and advise of our store reopening plan before we take questions. At the time of closing the stores, we advised that we would focus on continuing to support our customers via our online channels at Adairs and Mocka. The sales results over the past 5 weeks have exceeded our initial expectations and highlight the strength of our online capabilities as an omnichannel retailer. Against the same period last year, Adairs online sales were up 221%. Adairs Australian total sales were down 37% with last year -- when including store sales in the prior year. Mocka Australia sales were up 151% on last year through this period. And Mocka New Zealand recommenced online operations on the government moving to Level 3 restrictions last week with sales up 216% for the week. At both Adairs and Mocka, we have seen the growth come from increased traffic flow to the site, improved conversion and higher average transaction values. Over this time, Adairs has seen strong sales growth across all categories. Categories such as furniture and home decorator that are traditionally purchased through stores have seen substantial online growth. Adairs has also seen great growth in sales of Adairs Kids products with a focus on category expansion over the past few years and enabling customers to create a look that's contributed to strong demand during this period. Excitingly, over this period, approximately 30% of the customers shopping online in Adairs are new customers in that they were not members of our Linen Lover program or had not previously shopped online with Adairs. This provides us with a great opportunity to convert these customers into ongoing Adairs customers into the future. Mocka has also seen strong growth across all categories. We have benefited over this time with increased customer demand for storage and home office products. However, the strong growth achieved has primarily been driven by our good product, delivering sales through increased brand awareness and traffic to the website. We expect that this increased brand awareness will enable us to drive ongoing growth over the coming years as we further establish Mocka in the Australian market. We are pleased with the results over this period, which is a credit to the team's work over the long term, developing great product, strong brands, inspirational content and highly functional websites. Over the past 5 weeks, we have also been having constructive discussions with our landlords. Our discussions have focused on agreeing an outcome that see us share the impact of COVID-19 through both the closure period and the anticipated recovery phase. Where we have arrived in a mutually agreeable outcome, we will pay rent in line with these outcomes. As part of this process, we are reviewing our stores on holdover and we'll consider closing them if a mutually agreeable outcome can't be reached. These discussions are ongoing and are being undertaken on a store-by-store, landlord-by-landlord basis. We've applied for and understand Adairs will be eligible for the JobKeeper program in Australia. In New Zealand, we have received the Wage Subsidy for all Adairs and Mocka New Zealand team members. We applaud government wage initiatives that support businesses maintain team members by the relevant schemes in both Australia and New Zealand. As we advised when announcing the closure of stores, we would tightly manage our working capital. As part of this process, we have received strong support from our key product suppliers. These suppliers have worked with us to cancel, defer or hold orders to ensure that we actively manage our inventory position. I would like to thank them for their support over this period that has enabled us to reduce our inventory position by 5% as at the same time last year. Further, we are managing our inventory to ensure we are well placed in terms of seasonality and trading through an expected softer retail environment in the recovery phase. The work done on managing our inventory has assisted in keeping our balance sheet and liquidity levels strong. Given our current liquidity levels, sales results achieved, demonstrated ability to manage costs and the government assistance programs, we do not currently see a need for additional capital. In saying this, we acknowledge that considerable uncertainty remains and that our operating environment can change rapidly. We remain vigilant and prepared to move quickly if circumstances change. Excitingly, today, we can also announce a staged reopening of our stores. This will see us commence reopening stores this week with our initial focus being the larger format stores. We expect all stores to progressively open throughout May and June, having regard to the circumstances of each store and the relevant government directions. New in-store safety protocols will apply across all stores, including additional cleaning, social distancing measures, the use of hand sanitizer, customer number limits and contactless payments preferred. Stock density and layout within stores will also be reviewed to create more space and facilitate social distancing. Our staged store openings reflects our safety-first approach as we welcome back our team and customers into our stores. We will work with both our teams and customers to ensure we can provide them with a safe in-store shopping environment. We would like to thank the Adairs and Mocka teams, our suppliers and business partners who have all worked closely with us to share the impact of COVID-19 observed to date. There is still a long way to go. However, the actions and contributions made to date put us in a strong position to navigate this changing environment. We will happily take questions now.

[Operator Instructions] Your first question comes from Mark Wade from CLSA.

Mark, I'm interested to hear your thoughts on how the business is adapting to the change. Look, I know it's early days, but what do you envision is changing for good? I mean is it the products' country of origin? Stock rates, pricing, promo cycles, number of stores you've got, rent base, et cetera. And it kind of leads us to the appropriate capital structure in terms of the debt and the dividend. So what goes back to normal, what permanently changes?

Well, I think we're still -- I think we've got to acknowledge we're only 5 weeks in, and we continue to learn each week. That's one thing we're definitely seeing over this time. At this stage, we think this has accelerated the shift of consumers to purchasing online. So we see online as continuing to grow and grow faster than perhaps we otherwise appreciated. That will have an ongoing flow-on effect to our stores. At this stage, we don't see us necessarily changing our strategy. We continue to see that upsizing stores and the ability to showcase products and use those stores to showcase the looks and the way you put product together has definitely been something that our customers have missed over this time and has made us think about how we change that in a digital format and how we bring digital and stores together. So at this stage, I think it's still too early to actually call out long-term strategic and structural shifts in how the business operates. But we are definitely paying close attention, and we do think the one big thing is that this will have educated a number of consumers as to how to shop online, how it works, but it's also probably highlighted to us some of the strengths of that store network and how we can really play the 2 together to deliver a great customer experience going forward.

And do you think -- to follow on to that, Mark, do you think -- what's really going on inside the head of the customers? Are they really financially constrained? Or do you think they're just really ready to get back out there and get shopping once things reopen?

I think there's going to be an element of as stores reopen, there will be an element of people coming back into the store and excited to have stores reopening and come back and do their shopping. The question will be how that plays out into the medium term. I think we'll get an initial rush and then that might settle back down to what is more normal, and we will only understand what the new normal looks like as that period comes into being, and obviously, the longer-term impacts of COVID-19 on the economy start to become more visible at a consumer level. At this stage, we think the consumer has certainly been there, online proves that. And as I said, excitingly, we're seeing a whole bunch of new customers. So that gives us a good opportunity to continue to grow the customer base of Adairs regardless of what happens in the medium term. But I think we will see perhaps an initial rush, and then we'll see what that new normal looks like on the other side of that.

Your next question comes from Aryan Norozi from UBS.

First one for me. Can you please talk through the gross margin movements throughout the last few weeks, particularly in terms of discounting intensity and how that compares with where you were tracking in the first 11 weeks?

We haven't done anything unusual over that time, Aryan. It's largely business as usual. The promo plan has been the same. We haven't had to increase the level of discounting in order to deliver those sales. That's all being done on our standard marketing calendar.

And then the second one around rentals, I know you said it's still in negotiation, but are there any stores that you actually expect to be locked in an agreement, particularly given that once you're reopening these stores, they're actually paying rents on them now as well? Or how is that going to work out?

Well, we are -- as I stated in the announcement, we are actively working with landlords and they're getting closer to negotiating what that looks like. I think the good thing for us all is as we start to reopen stores, that provides some more certainty as to the time periods that we're dealing with, how long a store is closed for and then what does the recovery phase start to look like? So I think we can now start to work with the landlords to lock down a lot of our initial discussions on what sort of abatement is there for the period we're closed, and then how do we operate in a period where we're not sure what the sales levels of stores are going to be. So we've got to feel our way, nothing really to stand here and beat our chest. There's a lot done, but there are a number of discussions that are in a good place. And we think collectively working together with our landlords over the next 4, 6 weeks, we'll get there. As we stated in the announcement, where we have done the deal, we are paying the rent. And at this stage, we continue to hold the rents on those stores where we are not opened and haven't got the deal done. So ultimately, for us, it's all about working together with them. We get the deal done and then we can all keep moving forward with rent payments and the like following in line with those new agreements.

And longer term, do you envisage turnover base rent as the bigger portion of the fleet in terms of your rental payments?

In some instances, yes. I think in shopping centers, it's going to perhaps become a bit more of the norm. It's probably less likely in the Homemaker space and it comes back a bit to horses for courses, and I think that's the tough part when dealing with a topic such as leases when you're trying to deal with the various formats that we operate within and how they will all play out over time. That's a little more challenging than, I guess, a sweeping statement makes over the top of them. But I think turnover rents, in particular, in those centers where there's a question mark over the Adairs store continuing in there and how that looks like into the future is definitely something that we're actively pursuing now, and landlords are working with us to consider how that would work for them.

And sorry, just if I can sneak one last one in. Just can you give us an idea around your committed pay results? And then you've obviously made some progress in terms of canceling orders, but what -- is that sort of materially different, higher or lower than what it usually is at this time of the year?

So it's Ashley. So it's largely in line -- slightly lower because we have reduced -- removed a significant number of commitments, but we're not behind in any significant way with our payables and we're not sort of pushing a whole lot of stuff down the road without agreement from our vendors and our suppliers who have been very supportive through this process.

Your next question comes from Aaron Yeoh from Goldman Sachs.

Just with regard to the…

Aaron, your line is pretty ordinary. We can't hear you at this end.

Hold on one second. Can you hear me better now?

That's much better.

Yes. Sure. Sorry. Just with regard to the online sales growth you're seeing, can you just give us a bit of color around how that has sort of trended over the last 5 weeks?

I'd say it's been pretty consistent over that time, Aaron.

Yes. Sure. And then with regard to your comments about your labor force qualifying for JobKeeper. Can you just provide us with some color as to how many staff you have in-store, how many of them would qualify for JobKeeper? And I guess as you reopen stores, is it fair to assume that your labor costs will be pretty close to -- will be fully subsidized through JobKeeper through this process as well?

As we're still working through exactly how many of our workforce will be eligible, so there's a number of criteria that we and they need to meet. But it will be the vast majority of our workforce. And given the average salary of our team members, we expect the subsidy to be meaningful. But exactly how much it is and how much of our weekly wages cost it covers during that period, we're still trying to finalize.

Right. Okay. And then just with regards to your inventory, I mean, what percentage of your normal orders that you actually managed to cancel? And relative to -- by the end of this year, what sort of levels of inventory do you think you'll be sort of carrying?

I think by the time we get to the end of the year, our stock levels will look similar, probably be a little bit lower, but yes, not anything significant because we will rebuild our stock and our order profile. Now that we are starting to reopen stores, we'll start to look at what that looks like in terms of stock requirements. Our whole strategy was designed with working with our suppliers to delay, defer and then choose when to bring -- to initiate deliveries or production. So we have control of that schedule now. And with the relatively conservative view of what we think the post COVID-19 world looks like from a consumer perspective, we can start to feed inventory into our systems. So I wouldn't expect our stock levels to be too different to where they would normally be by Christmas.

Yes. Sure. And sorry, one last question for me. Just with regards to gross margin, can you just comment on what your competitors are doing in this space with regards to promotions? And also, are there any large sort of big promo periods coming up for you guys?

Look, I think to be fair, most of our competitors have probably followed a pretty standard sort of promotional campaign over this time, be they the DDS guys such as Harris Scarfe, Spotlight, those sorts of guys have generally run a pretty standard promo campaign with their stores open. To those that are closed, we haven't seen significant changes in someone going harder than before. I think the one thing we all know in this category is it's a high/low category. So with that in mind, most of us haven't stepped up that discounting at this stage. And from what I've seen, I expect that potentially to continue as we roll forward into what is -- if you think about our next key promotional period will be June. That's our June sale period, and we'll see how that trades with everyone, either opening some stores or not all stores open and online and what sort of promotion, and I guess, depth of discounting we see through that June period.

Your next question comes from Jo Little from Morgans.

Just on the inventory side of things, which was a good result. Just how are you thinking about -- I think you've already answered a little bit of this, Ash. But just this Christmas, just remind us on when you'll make the call on how hard you go and the working capital requirement to take the punt on a new season?

Well, we haven't got a specific date because we haven't really opened our stores yet. But I think the approach that we're taking is one where we will do everything we can to avoid stock being -- or having too much stock. So we will rather chase it and manage margin and promotion activity than risk carrying too much stock, and therefore, having excess stocks running through the season. So we're taking a view that it's going to be -- we're going to be in recession-like environment, and therefore, planning and budgeting on that basis. And if we're wrong, depending on when we get that wrong, we may be able to chase stock for Christmas. But if we can't chase the stock volume, then we can certainly manage our margin to deliver a great result. But the most important thing is we do not want to get ourselves into an excess stock position because that burns profit and cash.

Okay. And just back on the rent, just the few retailers talking about this recovery phase. Can you just give us a bit of a feeling of -- in your discussions, how long that recovery phase is over? And there are all these agreements, so they just thought agreements being kind of, I guess, agreed to and then you'll revert back to the original contracts in place post this recovery phase?

Yes. So I think depending on the store and the landlord, those recovery phases that we're looking at 3 to 6 months. And it all depends, I guess, on what the initial phase and how we work through the closure period as well. So 3 to 6 months is the period that we're thinking of as a recovery phase. At the end of that time, then we would expect that we will likely go back to the base rent and all the other terms of those agreements. However, in saying that, what always happens in times when things aren't trading as well as you'd like, if that is the environment we're in, then there'll be ongoing conversations with landlords at that point in time. But for the time being, what we're trying to do is manage the next 3 to 6 months with the landlords and together with them and then we see where it goes from there.

Yes. Okay. And is it fair to say, Mark, just those upsized stores, are they just on the back burner for the next 12, 18 months?

No, I wouldn't think so. Jo, I think we -- where we want one and where we can come to an agreement that we're happy with, we would continue to look at upsizing in centers where that opportunity, we think, is a must for the taking. And the landlord -- and ourselves can come to that arrangement with that upsizing happening because I don't think we should step away from our strategy of larger stores in the right centers supporting the online business, and I think we've definitely seen that over this period. The combination of stores and online is a powerful combination and there's, no doubt, challenges when you go to an online-only business. So in thinking about how we do that, we will continue to look for those opportunities with the landlords to make sure that we take advantage of them well. Potentially, there's good deals to be done and space incentives because the last thing we want to do is delay that 18 months and find that we don't have a whole bunch of opportunities that -- or we've missed a whole bunch of opportunities. In saying that, I don't think we're going to go out there and do 30 of them. It will be well-managed and measured approach. But there's plenty of centers where we think that opportunity is there and it will be there now, and this might be an opportunity to jump ahead on some of those.

Okay. Great. And just, lastly, sorry, just on the balance sheet, that net debt figure, so that was obviously lower than your last update. And I think at the time, we kind of said online will -- the cash flow from online will suffice to pay all the other bills and then we had payables on top, which, Ash, you're saying is, I guess, not dissimilar to what you would normally expect. Is that way your way of kind of saying -- like should we expect net debt to be significantly different to that number at 30 June?

Well, I mean, online has exceeded our expectations. So that's really what's driving the increased cash position. I think -- yes, we'll need to see our stores reopen to form a view on exactly where it will land, but I would expect that we will be able to -- we're hoping we'll be able to continue to improve our cash position as stores come online because obviously our purchases have largely been set and won't be -- won't need to change too much with online now with stores reopening.

[Operator Instructions] Your next question comes from Grant Saligari from Crédit Suisse.

Mark, you've commented on how strong the online sales are and many commentators are basically saying they don't think things will go back to normal. So I'm just sort of intrigued to understand your thinking of reopening all the stores if online stays at quite an elevated level. And if online does continue to be sort of double maybe what it has been in the past, how will you manage the cost base of the stores to keep them profitable?

Yes. Well, I think our commitment at the moment is where the stores and we have a lease, we will obviously look to reopen those stores. As I mentioned there, if we can't come to arrangement on the holdover stores, then that would potentially lead to a different outcome. We still think there is a -- strategically, there is a combination of store plus online that we think wins over the long term. Regardless of how strong online is, we've seen the customer, in particular, miss our store team and the ability they have to help them put together the solution, which, whilst we are working on a number of ways to potentially do that digitally, I think the customer will still want that interaction with a team member when it comes to -- and the ability to touch and feel the product and actually put it all together. So we don't think there's a world where -- at this stage, we don't think there's a world where you run it as a, let's say, an online-only business to go to the extreme, at the other end. So as they continue to -- as we continue to see what happens over the time period, we'll obviously look at what stores are doing and make sure that we can manage that cost base accordingly. And that we'll obviously look at both the 2 key metrics in there being rent and wages. And should we not be able to manage that cost base accordingly, then we would look at how we better manage our portfolio of stores and what the portfolio of stores finally ends up looking like. But I think over the short term, we think that the first step is to open the stores and start to get a real feeling for how that works. We think there is a definitely requirement for a store network to support the online business. But that store network needs to be profitable, and I think as a business, we've always focused on the profitability of the stores. We don't open a bunch of stores for them not to be profitable. We don't have unprofitable stores within our network generally now. There's very few small exceptions to that rule. But depending on how this impacts those ongoing sales in-store, that will also impact how we consider what that right profitability metric is for a store to maintain its spot in the portfolio.

It's going to be interesting time working through that. I guess just thinking shorter term, can you expand on the social distancing measures that you will have in place in-store, particularly sort of limitations on number of customers and any additional costs you're going to be wearing in-store while you implement those measures?

Yes. So we will -- as I've mentioned in the announcement, social distancing, we will limit the number of customers that can be in any store at a particular point in time. So we've worked through those, and I think it's fair to say we've taken quite a conservative approach to that to ensure that we can help customers manage social distancing in store. The 4 square meters is fine as a general rule, but when you start to put fixtures and tables and everything else around a store, that probably leads to the simple calculation, suggesting there'd be more customers in there than perhaps we're comfortable with. So we have worked through what that looks like. We'll provide hand sanitizer for customers as they come into store. We'll provide reminders around the store as to the 1.5 meters. Our team are working through how they work on serving customers in what is generally a more interactive customer approach that we have. The guys are working on how we do that and how we work with them, how we get more product out of packaging to assist customers being able to see that without necessarily needing the team member to be quite as involved in moving stock around with the customer whilst in the transaction, plus enable a bunch of other ways of shopping, such as call the store and allow them to put together the order for you and come and just collect it. So encouraging customers to think about it in other ways and how we allow them and enable them to shop during this period. But largely, social distancing is an education piece to our team and a reminder piece to our customers whilst they're in-store with additional signage. We don't think it comes at a significant cost. If you thought about it in comparison to prior periods, normally, we would have posters and all sorts of marketing peripheral that would go into stores over the course of this time, and we've dialed that back and upweighted the approach in some of these social distancing and other measures that will be in stores, such that we don't think it's going to be a material cost change. It's in the way that the stores operate in the short term, but it will be interesting to see how it hangs together with the -- and that's why we're opening a small amount of stores this week and are really adopting that safety first, test and learn, let's understand how it works. Let's get the feedback back from the team and then we'll continue to evolve that as we open more stores over the course of May and June.

So will you have a person on the front of the store counting people coming in? Is that sort of...

No. I don't believe that will be necessary. We will if we find that we are getting close to those customer numbers that we have put in stores. But in most cases, we don't believe that we will need to be managing it that tightly. And in particular, in our Homemaker stores, which is where we're obviously starting, we'll have a lot more space to enable more customers to be in store. I mean, if you're talking about some of the customer numbers, it would be unusual for those stores to have those sorts of numbers of customers in there at the same time, subject to a few key trading days of the year and the like, which we're not in that sort of time frame now. And I think, generally, customers are taking a more conservative approach to going out there and shopping. But we will step that up and we already have a plan to step that up if we find that we need to better manage the ins and outs of customers as stores reopen.

Your next question comes from Aaron Yeoh from Goldman Sachs.

I think you pretty much answered the question I had, but I just wanted to clarify, just with regards to your release and your comments about looking to be sort of fully reopened by June. Is that the case? Or should we think about it as being sort of more -- a bit more flexible, just depending on how you progress with the initial store openings? I guess I understand the sort of longer-term strategy around omnichannel. But I guess from a sort of -- from the strategy, I guess, of managing cash near term and in the context of your very strong online growth, I guess, would it be, I guess, a bit more sort of cautious that they're concerned if you just open a portion of your stores rather than sort of commit to opening all of your stores in the near term?

Yes. It is a very flexible approach that we're adopting, Aaron. We have -- our aim at this stage would be to try and open all stores by the end of June, subject to being able to provide a safe shopping environment and a safe environment for our team to operate in and obviously our customers to shop in, but also then thinking about that more logically around government directives, traffic incentives, all of those things will play into how we open and move through this reopening phase such that we've put, I guess, a stake in the ground to say that we'd like to have them open by June, but that doesn't mean that we'll achieve that outcome dependent on what else happens. And I think the one thing we all know is that over this time, the last 5 weeks, we're learning more each week and we will no doubt adopt that same test-and-learn approach to how we reopen stores. And that's what you're going to see from us. We'll have selected stores open. We'll start to open some stores in shopping centers to understand what's happening in that space and how do we best manage the health and safety aspect, but also then what's happening from a trade aspect in those stores and making sure that both elements, the financial element and the health and safety element, are being considered as we look to continue to roll out the store opening plan. I think at the end of the day, the flip side of that is strong online is terrific. But if we do manage to go through the JobKeeper program, the incremental cost of wages in the store is not high and then is quite well subsidized by the program. And ultimately, there is a rent commitment there that we're negotiating with landlords on anyway. So if you think about the 2 biggest costs of the stores, one is going to be there almost regardless of whether the stores are open or not and needs to be negotiated. And one of the plans for us is how we work with our landlords. No doubt, they want stores open to help make sure that we start to rebuild traffic and shopping centers to a manageable level given the social distancing and the other requirements that we're all trying to work within. And we just need to work through both of those elements as we head towards June. So we expect to, but that may change over the coming period and that will only be done based on the learnings that we get over the next few weeks as we open the first batch of stores.

Your next question comes from George Batsakis from AustralianSuper.

Just a question on rent. Have you actually signed a new lease deal in stores in the last 5 or 6 weeks? And have you achieved the permanent reduction in rent on those stores if you've renewed the lease?

No. We haven't done any new deals over the last 5 or 6 weeks. They've all been -- the deals we've struck have all been in relation to this period and generally in stores where we have a long lease term remaining on that store. So it's part of our process and that's why this will take some time, but store by store, where we're getting towards the back end of that lease. It's definitely a world where as part of the negotiations, we're considering: does the store form part of the store portfolio; we think, going forward, would we sign a new lease; would we get a permanent reduction now and look to bank all of that into the same conversation. But at this stage, we haven't signed any leases that are new over the last 5 weeks. We've held on and we've got a few offers sitting there, but we will continue to work through those over the coming months.

And just one other question. Where you've had those discussions with landlords about rent relief in this period, is it a permanent reduction in the rent? Or is there a catch-up rent payment to come in a couple of months' time?

No. It's a permanent reduction for the period of closure. So there's a real rent abatement. And then question as to how much of that rent abatement and the agreed new rent for the period were closed, some of that may also be deferred. So there's an abatement plus potentially deferral, and then obviously the work on the recovery phase as we work that preferably to a percentage of sales-type approach in arrears with the landlords that we're talking to so far.

Great. And just one other question on rent. These typically have 20%, 25% of stores up for renewal in any one year. What's your feeling this year? Are you going to see meaningful reductions in rents -- permanent reductions in the rents as those leases come up in this period?

Depending on the store, but yes, I would think so that there's a number out there that we would expect to see good reductions on, remembering that our occupancy cost as a percentage of sales sits at 11% to 12% now. So we've managed that number tightly in the past. So -- but we do believe there's a number of stores there that are either in holdover or coming up to the end of their lease where, in working that through, the team here have identified the number we're prepared to pay going forward. And we're negotiating on that number now to make sure that we get the right rent to support the store network into the future. And the strategy also hasn't changed significantly from what we've been seeing over the last 2 or 3 years, which is shorter-term deals on shopping center stores to ensure we create flexibility in the store portfolio such that we minimize the long lease tail and it provides us the greatest opportunity to be flexible as we see the shift in consumer demand or consumer trends into the future.

[Operator Instructions] Your next question comes from James Casey from Baillieu.

Can you hear me okay?

Yes. Good. Thanks, James.

Just -- can you just talk through your dividend payout ratio, just what you're targeting there for the full year and what you're thinking about there? And then perhaps what a targeted gearing structure may look like over the next 12 months to 2 years.

I think, as Mark said before, we're 5 weeks in and we're very focused on doing everything we can to have a strong balance sheet. The Board hasn't considered -- reconsidered dividends since they took the decision to cancel the interim dividend. It is something that we'll look at over the next month or so. But I think for now, we need to get our stores reopened, understand what a new trading rhythm looks like, think about what that means to H1 next year and then work through what we'll do from a dividend perspective. But certainly, our objective is to get all aspects of our business back to a normal routine as quickly as possible.

Okay. And just a targeted gearing structure, would you -- have you thought through what that may look like going forward?

We'd look to get it back to where it would normally be with our debt-to-EBITDA in the 2 and under range and progressively look to reduce that. Obviously, we've got commitments with Mocka earn-out, which we've got very clear sight of next year. So if we took us back to where we were before this, that's where we're aiming to get back to as quickly as possible.

Your next question comes from Timothy Arbon from Intralink Wealth Management.

Yes. Just a question in regards to the online sales and whether or not this might improve the likelihood of either online, dispatch in-stores and/or click-and-collect options within the stores?

Yes, it's a good question. We're considering both of those options and working through the back-end requirements as well as, obviously, there's a significant amount of front-end work to do on click and collect. One of the challenges within the business is the volume of product that is available online generally greatly outweighs that, that is available in a regular store. So customer behavior and customer experience when they get to the checkout and realize that only some of those items are available to be picked up at their local store. And the project that we're doing in a -- to enable us to move all of our warehousing into one location that continues in the background whilst we work through this period certainly helps enable us to offer a much better customer experience at the front end with that click-and-collect optionality in terms of ensuring we can get the product to that store if it is not there in a short time frame for the customer. So it's definitely something we are considering and enabling all of that stock to obviously be available to online customers as well. And we expect that, that will be something that we develop over the short to medium term as we build out the online capabilities as well as obviously maintain that store network.

[Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Ronan for closing remarks.

Thank you, everyone, for your time this morning. And obviously, it's an exciting day for us as we start to reopen the stores, and it will be very interesting to see how that change in consumer behavior occurs over the coming period. And no doubt, as I've said many times on the call, we'll learn a lot over the next 6 to 8 weeks. But thank you for your time this morning.

That does conclude the conference for today. Thank you for participating. You may now disconnect.