Adore Beauty Group Limited (ABY) Earnings Call Transcript & Summary

Good morning, everyone here in Australia, and good afternoon for our U.S. investors. This is Tennealle O'Shannessy, CEO of Adore Beauty Group. Thanks for joining us to discuss Adore Beauty's results for the 2021 financial year. We will be referencing key slides from the investor presentation that was uploaded to the ASX this morning. Joining me on the call is our Co-Founder and Chief Innovation Officer, Kate Morris; and our CFO, Stephanie Carroll. This morning, I'll provide a business update before handing over to Stephanie to take us through the full year numbers and balance sheet. I'll then be joined by Kate and we'll provide an overview of our operational highlights, strategy and outlook for the year ahead. And we welcome questions at the end of the presentation. I'm very pleased to present our first full year results as a listed company. We have delivered record revenue, profit and customer numbers, outperforming both our half year prospectus forecasts and our guidance. Revenue increased 48% over the prior year to $179.3 million, driven by a 39% increase in active customers to 818,000. Our performance in FY '21 was boosted by multiple record trading days throughout the year. Pleasingly, retention continued to perform strongly, and we saw returning customer numbers increase 64%. Gross profit margin improved 1.2 percentage points to 33.1%, underpinned by product margin expansion. These record top line results demonstrate early signs of the operating leverage this business can achieve. And as part of this result, we also delivered record profitability with EBITDA increasing 53% to $7.6 million. We are well funded for growth with $29 million cash as of 30th of June 2021 with no debt. The key messages we'd like to share with you today are, firstly, Adore Beauty is Australia's market leader in online beauty retail. We are best placed to capture market share in a large addressable market and to benefit from the accelerated structural shift to online. Secondly, we are the online destination of choice for our customers and our brand partners. Our strong performance this year is underpinned by high levels of customer engagement, retention and satisfaction. In addition, scale benefits are enabling us to forge closer relationships with our brand partners through increased co-marketing support, optimized supplier plans and exclusive product and promotional support. And lastly, we are strongly executing on our strategic initiatives to drive long-term sustainable growth. I'll provide more detail on these initiatives later in the call. The next slide looks at Adore Beauty's market leadership and a significant growth opportunity. Beauty and personal care is an $11 billion market in Australia alone. We operate in the fastest-growing segment within that market with online continuing to benefit from structural tailwinds. Adore has a unique and compelling business model. Our integrated content, marketing and e-commerce retail platform creates a significant competitive mode. As you can see, Australia is still very underpenetrated in online retail in comparison to other markets. So while COVID has accelerated the shift from physical stores to online, we are still many years behind more mature markets such as the U.S. and the U.K. Lastly, we have a strong track record of growing faster than the market with a 3-year CAGR of 50%. We are profitable, capital-light and have a debt-free balance sheet, meaning we are well positioned to be the online winner and to take a disproportionate share of this shift to online. As I mentioned earlier, our record performance in FY '21 is underpinned by strong sustained growth in all customer metrics, including 39% annual growth in active customers. Of our 818,000 active customers, almost 0.5 million were acquired in FY '21 alongside continued high loyalty and retention rates from our existing customer base. Our customers are incredibly sticky and loyal and become more valuable each year as they remain with the platform, increasing both their basket size and their order frequency in subsequent years to create subscription-like rates of retention. The chart on the right shows we're continuing to expand our share of customer wallet with annual revenue per active customer increasing $13 over the year to $219. This growth is being driven by continued high customer retention and increasing average order value. The next slide shows our exceptional customer retention over the past year and our strong trajectory of both new and returning customer growth over many years. As you can see in the gray shaded section, COVID lockdowns drove a spike in both new customer growth and returning customer spend. Really pleasingly, as you can see, post lockdown, underlying growth in new and returning customer cohorts continue off this higher base. Now even with this strong new customer growth, the aggregated customer retention remains high at 61%. While both our new and returning customer cohorts continue to grow, the chart shows, in particular, the strong contribution of returning customers to revenue. Our returning customer base accounts for 62% of our FY '21 revenues. And pleasingly, our returning customer cohorts grew by 64% in FY '21. Retention is a key metric for us, and we have multiple strategic initiatives in place to continue to improve retention and the lifetime value of our customers. These initiatives include our continued investment in content as well as our new mobile app and loyalty program. We are executing on a growth strategy based on driving brand awareness, new customer acquisition and returning customer retention. We have a clear game plan. We set out to continue to win the market in our core segments. As market leader, we believe Adore Beauty is well placed to take a disproportionate share of the accelerated structural shift to online we have seen. We also continue to invest in capabilities that build strategic moats around the business and reinforce our defensive ecosystem. So think about headings like data and personalization, mobile app and loyalty programs, our own private label and brand awareness. In FY '21, we have delivered strong progress on the execution of these strategic priorities. We are ahead of our game plan. We invested in a national TV campaign and grew owned marketing channels to increase brand awareness to 58%. Brand awareness supports new customer discovery and acquisition as well as customer retention. We know from experience that when customers try Adore Beauty, they love her, so reaching the millions of customers who aren't aware of us provides us with a significant growth opportunity. Our newly launched mobile app and loyalty program are key to improving customer retention and the lifetime value of our customers as well as creating additional owned marketing channels. Both initiatives are resonating well with our customers, and more than 95% of our most valuable customer tier has already signed up to our loyalty program. We continue to expand our range authority, on-boarding 51 new brands, 7 of which are in the popular Korean beauty category. We are also piloting the men's adjacent category. This expansion will support new customer acquisition and growth in annual spend. And finally, we tested an Adore Beauty branded private label accessories offering, and we are on track to launch our first private label brand. I will share more detail on our FY '22 focus areas later in the presentation. I'd now like to hand over to our CFO, Stephanie Carroll, to take you through our record financial performance.

Thanks, Tennealle, and hello, everyone. As Tennealle mentioned earlier, the full year was -- the financial year was headlined by record revenue and record profitability results outperforming our half 1 prospectus forecast and our full year guidance. Revenue of $179 million was a 48% increase on the prior year and 1 percentage point higher than at the top of our guidance range. We recorded multiple record trading days as part of this result, including 2 in May, while we were not in lockdown. Gross profit margin increased to 33.1%, up 1.2 percentage points on the prior corresponding period and 3.1 points higher than financial year '19. Operating leverage is driving profitability with EBITDA of $7.6 million, a 53% increase on the previous year. As the prior year was quite an atypical period, it is beneficial to measure the underlying growth of Adore Beauty over a longer period of time. For example, if we look at the growth rate over a 2-year period for FY '21 revenue, underlying performance shows a compound annual growth rate of 57%. These 3 charts demonstrate, when viewed over the medium term, strong growth has been consistent and is continuing to underpin key profit and loss lines. The business was able to pivot and respond to macro events to achieve record financial results during the last year. Even before this period, as Tennealle has already mentioned, this business was already delivering long-term year-on-year growth. The next slide shows our profit and loss statement for financial year '21 versus the prior corresponding period. Record revenue was primarily driven by strong active customer growth, up more than 39% over the prior year and increased annual revenue per active customer. In addition to customer growth, customers are spending more on the platform with average order value increasing 1.8% on PCP to $102.03. Average order frequency remained stable at 2.1 orders per customer annually. Pleasingly, Adore has had a strong start to FY '22. FY '22 year-to-date revenue is up 26% on PCP, with the ongoing COVID-19 lockdowns in multiple Australian states boosting new customer growth and returning customer spend. As we move down the P&L, we improved unit economics. Gross profit margin of 33.1% was 1.2 points higher than the prior year, primarily due to product margin expansion driven by optimized supplier terms, brand funded promotions and a change in freight carrier. Increased operating costs reflect our investment in the business, particularly across people and marketing. We stepped up our marketing and advertising spend to drive brand awareness and aggressively acquire new customers during COVID. This investment includes a national above-the-line TV campaign, which increased brand awareness to 58%, up from 39%. While we have increased our marketing investment as a percentage of sales to 12.9%, we continue to recover customer acquisition costs within a year and are growing our owned marketing channels to effectively manage these expenses. Even with this increased investment, growing scale and operating leverage has driven record profitability with an EBITDA result of $7.6 million. The EBITDA ramp-up has been significantly accelerated due to the record revenue growth with most of the uplift dropping directly to EBITDA. We will continue with a disciplined investment in strategic priorities to drive growth. Turning next to our balance sheet. Adore remains well funded for growth with a cash balance of $29 million as at the 30th of June 2021 and no debt. Adore's business model is highly capital efficient and continues to be a cash flow positive business. FY '21 generated $4.2 million in operating cash flow. Disciplined management of inventory and payables is driving improvement in these metrics despite record revenue. A healthy balance sheet provides a solid platform to continue growing the business as well as the flexibility to pursue identified strategic growth initiatives. On Slide 11, we describe the focus of our strategy, both in the short to midterm and the longer term. It is a growth strategy. In the near term, we are investing in the business to capitalize on the accelerated structural shift to online and build on the positive momentum of the past year. To do this, we'll focus on sustainable top line growth, which means increasing share in core categories, expanding into new adjacent categories and launching our private label. We will continue to leverage marketing, promotions and brand awareness to acquire new customers, retain higher-value customers and grow average order value and frequency. This will be achieved through continued disciplined profitability and reinvesting to build competitive moats, including data-driven personalization and our mobile app. From an earnings perspective, we'll focus on growing operating profit dollars. Adore expects to maintain a 2% to 4% EBITDA margin in the short to medium term while reinvesting to drive above-market growth. Over time, we expect growing scale will increase operating leverage. We will focus on growing contribution margin percentage through scaling margin-accretive private label, increasing marketing ROI and forging closer relationships with brand partners. We expect this to translate to slowed investment in fixed costs and disciplined investment in the next horizon of growth, which will translate to growing operating profit percentage. As we have demonstrated in FY '21, we have multiple levers to drive growth in revenue and profit. We remain confident in our ability to continue successfully delivering on our initiatives. I'll be happy to take questions at the end of the presentation. But for now, I'll hand back to Tennealle.

Thanks, Steph. I'll now take you through our key operational highlights for FY '21 and why we continue to be the online destination of choice for our customers and our brand partners. Our customer-led business model continues to deliver best-in-class levels of customer satisfaction with a Google Review rating of 4.9 out of 5 for more than 27,000 reviews. We offer the industry's best beauty shopping experience with an unmatched range, transaction experience and customer-led engagement enriched by data-driven personalization and highly engaging content. In FY '21, we continue to improve our customer experience to ensure we were there when our customers needed us the most. We extended same-day dispatch cutoff to 4:00 p.m., the industry's latest. And we were able to meet our 4 p.m. dispatch promise even during peak sales event period. We launched new courier partners in key lanes and added real-time delivery tracking through data integration with our logistics partner. Another key differentiator for us is our owned inventory and customer fulfillment center, which has enabled us to responsibly manage record volume increases and COVID challenges. As you can see, we have a formidable and distinctive customer service model that is very difficult to replicate. The next slide shows we are continuing to grow the lifetime value of our customers. We closely monitor marketing performance across channels and campaigns with the ratio of lifetime value or LTV to customer acquisition cost or CAC. This is an important measure for us to assess the success of our customer acquisition and engagement strategy. Here at Adore, when we talk about CAC, we include all advertising costs, including above-the-line spend for both our new and returning customers. LTV is defined as the cumulative contribution margin, which is gross profit, excluding bank and merchant fees. It's important to note here, this LTV is the actual value returns by the cohort in each period. This is not an estimate or forecast number. The graph shows our strong unit economics. For the FY '18 to FY '21 cohorts, the average customer acquisition cost in each cohort is recovered within 1 year, while the lifetime value continues to grow over time. By the fourth year, the lifetime value of our customer is more than 6x the acquisition cost. Over the past year, we increased our marketing investment to build brand awareness, acquire new customers and engage existing customers. This investment included an expanded national TV campaign, which increased brand awareness to 58%. Even with this increased investment in above the line, marketing as a percentage of sales was in line with expectations at 12.9%. Looking forward, we will continue to invest in a disciplined data-driven way to acquire new customers, given we believe these cohorts will deliver similar accretive benefits and lifetime value. Slide 15 shows how our owned and integrated content strategy is creating a loyal and highly engaged community. Over the past year, we have continued to grow our organic and owned marketing channels, which now include multiple podcasts and follower communities across Instagram, YouTube, TikTok and Facebook. Our Beauty IQ Uncensored podcast grew 273% in FY '21, has had 2.7 million downloads since launch and is consistently highly rated in podcast chart. In the last half, we also launched a second podcast Skincare School, which also went straight to the top of the chart. Skincare School featured a hugely popular sellout, best-in-class Adore Beauty-curated product pack. This showcases the opportunity to seamlessly integrate our content and e-commerce. Our investment in our owned content channels also serves to reduce our reliance on competitive and paid marketing channels and effectively offset marketing spend over the long term. Another owned marketing channel is our newly launched mobile app. As a reminder, our mobile app has been built in a content-first way and enables us to build a deep ongoing relationship with our existing customers, so that we can add value to their daily life, not just when they're shopping. Really pleased to share the app has been well received with a customer satisfaction rating of 4.7 out of 5 and is already driving higher levels of engagement, conversion and average order value. It Is also scaling well, contributing almost $1 million in revenue in July 2021. The mobile app provides us with a content-first owned marketing channel to engage, retain and grow the lifetime value of our customers. I'll now hand over to Kate.

Good morning, everyone. I wanted to talk briefly about sustainability and diversity today because they are really important to us as a business as well as to our customers and our brand partners. We committed to reducing our environmental impact and future-proofing our supply chain. 100% of our packaging and void fill is recycled and recyclable. We're eliminating plastic bubble wrap, while optimizing our packaging sizing has enabled us to reduce our cardboard usage. We offer our most popular products in jumbo sizes to reduce packaging and our customer fulfillment center uses 100% green power. We're also working with our brand partners to eliminate unnecessarily -- unnecessary product plastic wrapping. On diversity and inclusion, our progress and ongoing work here covers more dimensions than just gender. But today, I'd like to call out that as a business to mostly see our customer base, we lead the way in representation for women in leadership with a woman co-founder, majority women on the Board and 82% of manager roles held by women across the company. So now to our strategy and growth outlook. Beauty is a very resilient category, even in times of downturn or a global pandemic. Over the past year, we've benefited from what used to be known as elliptic effect, although today, it is more like the skin care effect. It's a category where consumers engage multiple times a year to repurchase, particularly in skin care, where we index very highly. Consumers use these products every day and consider them an essential. Beauty and personal care is a large and growing addressable market, $11.2 billion, as Tennealle mentioned earlier, and growing at a CAGR of 3.8%. Now while online sales in Australia currently account for 11.4% of the total market, it is growing much faster with a forecast CAGR of 26% between now and 2024. And within this market, Adore has approximately a 13% market share and we're well placed to increase this over the coming years. We continue to benefit from structural tailwinds, including the accelerated shift to digital channels and the impact of new digitally native millennial and Gen Z consumers entering the market, and these consumers are continuing to increase their purchases in this category. And globally, we're seeing accelerated growth in segments of the market where Adore is particularly strong. This includes premium products where Adore indexes strongly, which is growing 88% faster than mass and skin care, which is our biggest category. The way we think about Adore is more than just an online store. So traditionally, retailers have only focused on the fulfillment element of the transaction, just making products available for purchase. But Adore's unique content element means that we also own the destination for discovery. So we started heavily investing in content 5 or 6 years ago, and that's meant that we've been able to move past just offering convenient replenishment. We can also introduce our customers to, as we say in our podcast, the product they didn't know they needed. Through our expanding media network of podcast, videos and blog posts, we use content to educate, engage and entertain our customers. So to our brands, we've become a marketing partner, not just a distribution channel. Slide 21 outlines 3 pillars of how we're thinking about our growth strategy. A range authority will continue to drive new customer acquisition and expanding share of wallet. Adore's diverse brand portfolio covers prestige department store brands, professional sell-on and clinic brands and niche brands as well as masstige. Adore's focus on providing an exceptional online transaction experience and best-in-class customer satisfaction will continue to translate to growth in new customers, improve conversion rates, retention and lifetime value. And we also continue to invest in our marketing platform built on content and data. We are building a loyal, satisfied customer community through data-enriched personalized engagement. We're leveraging our online market leadership position to pursue a growth strategy and capture the lion's share of the shift to online. Beyond this, our strategic priorities will also lay the foundations and to position the business for sustainable long-term growth. We'll continue to build on the strong momentum established in recent years to unlock new addressable markets into the future. In the short term, our market leadership ensures we're best placed to capture market share as online penetration in Australia approaches the U.K., the U.S. and China. Our focus on increasing brand awareness and expanding our owned marketing channels will further position us here. Longer term, we see significant additional addressable market opportunities through expanding into adjacent product and service categories, new business lines and geographies as we position Adore Beauty to be the Beauty discovery destination. Our work on private label and geographic expansion into New Zealand as well as our current adjacent product category expansion into fragrance, wellness, sex and men positions us for this. I will now pass back Tennealle to talk through our focus areas for FY '22.

Thanks, Kate. FY '22 is focused on growing our market share and cementing our online market leadership. We have demonstrated strong execution of our strategic priorities. And this year, we will continue to focus on building out our range authority, including launching our first private label brands in skincare and hair care. We will continue to improve our online transaction experience, using data-driven personalization to deliver a highly engaging and relevant experience. And lastly, we will continue to invest to build the competitive moat that is our content-led customer engagement platform. We will scale and embed our mobile app and loyalty program to grow retention and lifetime value, and we will continue to grow our brand awareness and expand our owned marketing channels. Outlook for FY '22. Importantly, the business continues to benefit from the structural shift to online and the ongoing retention of new customers added over the peak COVID period. We experienced record growth in FY '21. And pleasingly, FY '22 has started strongly. FY '22 year-to-date revenue is up 26% on the prior period with the ongoing COVID lockdowns in multiple Australian states boosting new customer growth and returning customer spend. We continue to monitor the COVID restrictions closely. However, given the uncertainties in the operating environment, we, like many others, this reporting season are not providing explicit guidance for FY '22. Adore has a strong track record of delivering growth over more than 2 decades. We have consistently delivered strong revenue growth and are growing faster than the market. A dedicated and passionate team are executing a clear and robust growth strategy to cement our market leadership, and we believe we're well positioned to capture market share in a large and growing market, benefiting from structural tailwinds. Adore Beauty expects to maintain a 2% to 4% EBITDA margin in the short to medium term while reinvesting to drive above-market growth. As the business grows in the longer term, we expect scale benefits to increase operating leverage and to deliver further EBITDA margin expansion. It was great to take you through our first set of results as an ASX-listed company, where we've delivered record growth and financial performance, exceeding guidance and prospectus forecasts. Before I finish, I'd like to quickly remind you of Adore's market leadership and our significant growth opportunity. Adore Beauty is the online market leader in a large addressable market that's still very early in the online adoption curve. Our unique sustainable business moat provides us with a significant growth opportunity. Our strong performance is underpinned by high levels of customer retention and satisfaction, even with the strong increase in customer volumes. We remain the online destination of choice for our brand partners and loyal customers. We have a clear strategy we're executing strongly. This strategy will cement our online market leadership position and position us to capture market share. As the business grows, we expect scale benefits to increase operating leverage and to deliver further EBITDA margin expansion. Thank you all for your time today. I'd also like to publicly thank all of the Adore Beauty team for their passion, their customer focus and their dedication and resilience as we have navigated these uncertain times. Rapidly scaling any business is not an easy task. This team has done an amazing job on executing the road map on dealing with what has been a significant increase in customers and orders. Kate, Stephanie and I will now take questions. I'll hand you back to the operator to put them into the queue.

[Operator Instructions] The first phone question today comes from Apoorv Sehgal from UBS.

Congrats on the result and the trading update as well. My question is about the trading update, so it's 26% growth, and that's comping to your strongest months on record from last year. Am I right in saying that the comps should actually get easier into September, October with the lockdowns likely to remain? And your sales dollar number is actually getting smaller and moderating in September, October last year?

Thanks, Apoorv. I'll take that one. So look, I think we're very pleased with the strong start to FY '22. As we mentioned, the year-to-date growth of 26% is comping off what were particularly high month. So July and August for us, if you think back to this time last year, Victoria was in a hard lockdown. So Adore did see strong growth in those months. Reflecting back, I think Slide 5 in our investor presentation provides a really good indication of how, I guess, the COVID lockdowns tend to impact our business. And what we're seeing is that same elevation in terms of new customer numbers and returning customer spend that's driving that 26% performance year-on-year.

Okay. That's clear. My second question is on EBITDA margins. You're sort of indicating 2% to 4% margins over the short to midterm. I just wanted to check, what sort of time frame are you referring to there? Like should we be thinking about the next, call it, 3 years being in that 2% to 4% margin range as you're reinvesting in the business?

Yes, I'll take that one. Thank you, Apoorv. Yes, I think that, that actually -- that is what we would be saying, is about a 3-year range is the midterm. That's correct.

Okay. That's clear. And just one final question for me, please. Just on gross margins. A pretty nice uptick there in the second half. If I do a backfill of 33.8% gross margin in the second half is 32.5% in the first half. What have you changed in the last 6 months? And is that second half gross margin number the right way to be thinking about gross margins heading into FY '22?

Yes. Good question. So in terms of the difference between half 1 and half 2 of FY '21, in half 1, we were working through changing our freight providers, and we didn't have -- which had a cost saving in gross margin. That -- we didn't have the full half impact of that in FY '21, and you will see that come through in the second half of FY '21. Also, there's a timing element in terms of when rebates get paid. So more paid in half 2 than half 1. In terms of the way we look at it from an ongoing position, I think where we've landed at the end of the year is right to say that we won't -- it's not going to decline at all. We will keep those gross margin improvements that we've made.

The next question comes from Danny Younis from Shaw and Partners.

Tennealle, Stephanie, Kate, well done on a fantastic year with the IPO and the great result. I've got a couple of questions, please, and they're pretty much follow-on from the previous questions. So in terms of the gross margins, can you break out -- that improvement of 120 bps, can you maybe break out the 3 separate buckets of contribution in terms of supplier terms, the brand funding and the freight cost? Because a lot of other retailers are talking about the freight costs increasing not incrementally but significantly and having an impact. So that's the first question, please.

Thanks, Danny. No, we haven't split out those particular lines. But what we did, we actually had a saving in freight, and that's because we changed our freight provider in 2 of our key lanes in New South Wales and Victoria. And at the same time, we were able to deliver a better customer experience in terms of delivery. So from our element -- from our perspective, we didn't have an increase in that line. It actually went down. And then we have, as stated, as we've said, we've had a stated goal to improve our margin through supplier terms and brand funding, which is what we've done.

Okay. And maybe another one for you, Stephanie. So in terms of the EBITDA margins, that 2% to 4%, I'm trying to get an indication of the mix shift of those OpEx levers into FY '22. So should we see M&A or marketing and advertising continue to incrementally increase from 13% of sales to, I don't know, maybe 15% and employee come down and other come down?

Yes. So let's start with other. Other, we don't see that, that would materially change from where it's been. If we look at employee, we will continue to invest in our strategic priorities, so that will be additional people, but not materially additional people. We've already done that build out of our key personnel, so we don't see that, that would materially change. There will be an increase, but it will not be material. And then as you rightly say, is that the increase will come in marketing and advertising. And that is through if there's returning to more normalized levels in marketing and advertising, and there's more competition and there's also a rate increase that's coming through. So that really is where it's coming from. We will look to offset that -- sorry, look to offset that. We're looking to offset that through our own channels. And obviously, we see increase in mobile app as well.

Great. And maybe a more broader question. Just 3 new buckets that you're investing in, private label, the mobile app, the men's category. Can you maybe touch on the sort of key metrics we can look forward to that you're expecting to hit in the next 6 to 12 months across those 3 categories, please?

Yes, certainly. So I can have a go at that one, Danny, and then I'll hand over to Kate to talk through private label. So if I look at mobile app to begin with, just as a reminder, we launched mobile app back in December and what we did there was a soft launch. So we've spent the last 6 months working very closely with our customer feedback to integrate and improve that mobile app experience. We're really pleased with the results we're seeing with the app, so we're seeing an uplift in engagement, conversion and average order value. That's given us the confidence to move into a stage, which we're calling a more hard launch. And what we mean by that is we're now, I guess, actively promoting that mobile app and encouraging our customers to download. And so what we expect to see over this financial year is the continued scaling of that mobile app. So in July, as an example, mobile app delivered $1 million in revenues. We would expect to continue to scale that as we look to transition more of our customers into using that platform, given the benefits we're seeing in terms of engagement and conversion. The other one that I think you touched on was adjacencies, and in particular, men's. So men's for us is a category that we have been experimenting or piloting with. So what we've done in that space is we've launched some additional brands. We've had a look at how we can optimize the experience for men's on our sites through how we categorize on the site. And then you also might have seen that we launched another podcast that was focused specifically to our male audience called Mr. Beauty IQ, that's focused on the 101 or basics of skincare for men. So we're seeing really strong engagement with that category, and we would still consider that very much in our pilot or experimentation phase, but we're seeing some really positive signs there. And I think the last one you asked was on private label. I'm going to hand over to Kate to take us through that one because that's her baby and she's very excited.

Thanks, Tennealle. Yes, so look, on private label, we had a successful pilot in the accessories range, which we launched prior to Christmas last year. Now that's obviously just a fairly small and niche category for us, but that was a really good test. So we'll expect that there will be more impact in terms of private label once we start launching and scaling our stand-alone brands in core categories. So the first of those to come is a skincare brand, which we'll launch well sometime between December and February. We've had just a couple of delays, COVID-related, with getting packaging elements, things like that in from overseas, but that is otherwise all on track. So that's very exciting. We've also been able to use the capabilities that we're building out internally to expand into a few other sort of curated areas. So the best-in-class skincare school pack, I think, is a really good example of a multi-brand curated product that utilize our private label capabilities. We've got some more things coming up to Christmas, which I can't share yet because it'll spoil the surprise, but there's a few nice sort of things around gifting for Christmas. And then we have our second stand-alone label with the hair care brand, which we'll launch sometime next year. So with those sorts of private label brands, we're planning for them to be both revenue and margin accretive in the medium term, but they will take a little while to scale. And we also see some really good future growth opportunities there in terms of international expansion, direct to consumer.

Excellent. And if I can sneak in one more quick one. Just on the 3T loyalty program. I know it's early days yet, but does your -- is there a material difference already between your Level 3 versus your Levels 1 and 2 loyalty programs, please, in terms of average order values?

Yes, certainly. So let me -- I can take that one, too, Danny. So this is one that is much earlier stage. So just as a reminder, we launched this one late March, but we feel very happy with early performance. So we've had very strong member sign-up. And to touch on the point you're getting at there, probably most pleasingly, we've had over 95% of the most valuable customer tier sign up. So really strong engagement with our most valuable customers. But our focus for now is continuing to scale up the sign-up of those members. But also, we've been experimenting with how we can use that database and look at much more targeted engagement with this audience. So in the last half, we've also trialed virtual events, including things that are more education focused. So as an example, we did a fragrance master class. We've also been collaborating with our brand partners to look at more brand-specific special events. So we did run a SkinCeuticals master class in the period. Both of those events were extremely popular with that top-tier customer base. And then probably just to round out on loyalty in Phase 2, so we'll continue to scale up for this financial year. And in Phase 2, we're also looking to add opportunities around delivering subscription capabilities. So whether that be subscriptions linked to routine-based samples or trial-based boxes as well as auto replenishment, we see that as a key lever that would be the expansion of that loyalty program strategic priority.

The next question comes from Elijah Mayr from CLSA.

Congrats on your first full year result. Good to see. Just a couple from me. Maybe if we could just start with the fourth quarter '21, obviously above your expectations. Could you maybe give us a little color on the key delta in that outperformance? I mean lockdown didn't really come in until late June. Was that enough to sort of drive that outperformance? Or was it a couple of those key sales events you discussed earlier in May?

No, I'll kick off broadly, and then Steph, I'll get you to cover off the details. So Elijah, we won't be making specific comments about months in detail. But what I can say is, and then Steph will go into this in a little bit more detail, we're really pleased that as part of that result, we saw multiple record trading days in May. And I guess the call out there would be that those trading -- record trading days were delivered at a time where we weren't in lockdown. So that just really, I guess, calls out the sustained growth in new customers and returning customer spend that we continue to see as we transition out of the COVID lockdown.

Thanks, Tennealle. I don't think I've got too much more to add to that in terms of the shape. And you can see from Slide 5 in terms of where it was and we've got -- we've had good very loyal returning customers that occurred in quarter 4.

Yes, that's fine. And then maybe just going on to, I guess, that lockdown impact and the guidance. We've got 26% year-to-date growth at the moment, I guess, the difference largely from this time versus last year, New South Wales being in lockdown as well. Is there any difference in consumer behavior you can call out between the lockdowns this year versus lockdowns last year in terms of maybe purchasing patterns or how consumers are actually responding during this lockdown?

Sure. I can have a go with that one. I think we've shared previously that what we tend to see quite quickly once the lockdown comes into place is that elevation in particular of new customer growth numbers, but then also just the returning customer spend. And lockdowns tend to show for us on platform a pretty predictable range of consumer purchase behaviors. And so what we tend to see at the start of lockdown is an elevation in those purchases that relate more to, you might call it, the bulk of the stock-up buying. So whether it's shampoos, conditioners, skincare products, some hand sanitizers. But quite quickly within the category, what we see is as lockdowns continue for an extended period of time, our consumers very much transition into a phase where the focus is for them on self-care. And so we see an elevation in our core categories, like skincare and hair care, but also some strong purchase behaviors around categories that relate more to self-care. So at-home devices, whether it be hair dye or nail kits, so some of those categories continue to perform strongly while our customers are in lockdown. So we see that fairly consistently. We saw that in the lockdowns last year, and we've seen a similar pattern of behaviors, both in Victoria and New South Wales in this later stage of lockdown.

And then -- and following on from that, any changes or at least material changes to order value and frequency versus last lockdown?

No material changes. So we continue to see, I guess, a similar elevation as what we -- as what we've shown historically as shown on Slide 5, but nothing materially different between the lockdowns that we saw last year and the ones we're looking at right now.

Yes. Understood. And then maybe if I can just squeeze one more in. And just referencing, I guess, that slide on -- that graph on Slide 5 and just how post lockdowns, obviously, has put your returning customers dipping. Is there anything that you've learned from coming out of previous lockdowns that you could maybe apply this time around now that we're in a position where we've got sort of at least a bit more of a line of sight on when and how we're going to roll out a lockdown that you could maybe retain more of those new customers? Is there anything that's maybe been put in place that you can sort of drive that retention a bit higher is a bit more clear?

Look, I think we've shared retention remains one of the most critical metrics for us, and we're really excited. It's a stated strategic priority. What we're focused on in terms of our content is very much geared towards retention. I think the 2 things that we're most excited about as we're looking into FY '22 is the positive impact that we'd expect both our mobile app and our loyalty program to have on those levels of retention. So you'll see us focusing on that as a key metric and a lot of the work that we do is looking at how can we continue to engage our returning customer cohorts in a way that is provide education, entertainment and engagement and encourages them to think about us as the beauty destination and the point where they start their beauty shopping experience each time. So we come into this set of lockdowns, I would say, feeling very confident and in a very strong position, taking a look at those priorities that we've put in place that we believe will positively impact retention.