Baby Bunting Group Limited (BBN) Earnings Call Transcript & Summary

Welcome to the Baby Bunting Group Limited First Half FY '24 Results Presentation. Your presenters today will be Baby Bunting's CEO, Mark Teperson; and Darin Hoekman, CFO. [Operator Instructions] And finally, I would like to advise all participants that this conference is being recorded. Thank you. I'll now hand over to Mark Teperson.

Good morning. My name is Mark Teperson, and I'm Baby Bunting's CEO. Thank you for joining us today as we present Baby Bunting's first half results for FY '24. Darin Hoekman, Baby Bunting's CFO is also here. Hello, Darin.

Good morning, everybody.

We'll be going through the presentation that was lodged earlier with the ASX, and there'll be time for questions at the end. Moving to Slide 4. The results we're presenting today line up with the preliminary numbers we released in January. For the first half, group sales were $248.5 million with total sales down 2.5%. Gross profit margin was flat at 37.2%, and we saw a cost of doing business come in at 32.9% of sales, which saw some deleveraging relative to the prior period. Group EBITDA finished at $10.6 million and pro forma profit -- pro forma NPAT was $3.5 million. A dividend of $0.018 per share has been declared, which is in line with the company's dividend policy, which is to pay 70% of pro forma NPAT. Moving to Slide 5. Baby Bunting has been weathering some challenging wider economic condition in the first half. Generally, our customers sit right within the demographic that is very much affected by cost of living pressures. New parents are facing mortgage or rent expenses that have increased significantly over the current period. This is in addition to the usual pressure many face in adjusting from double income to single income tendency for a period of time. There's also been heightened price competition in national brands across key hard good categories that drive foot traffic into specialty stores. And when we look at births in the last 12 months ending June 2023, there was a 4% reduction relative to the prior 12 months. When we look at indicators for second half births the Medicare 12-week scan data shows volumes up 1% in the first half of FY '24 relative to the prior period. Moving to the business performance. Our customers generally have the ability to choose the time they make large parts of their purchasing over their pregnancy. With cost of living pressures I just mentioned, we have seen this translate into customers being relatively more attracted to key promotional events during the year. The Black Friday and Boxing Day promotions were strong, with volume softer outside of these periods. When looking at the gross margin, it's been a solid performance to achieve a result that lines up with what the business achieved in the first half of FY '23, especially at a time of heightened price competition. In terms of the business' ability to manage working capital, there was a significant improvement in first half cash conversion, with free cash flow of $7.4 million and net debt finalized it finishing at $6.2 million, an improvement of $14 million relative to the prior year. Private label and exclusive products made up 46.2% of sales in the half, and this was primarily driven by an increase in private label sales, which finished at just under 10%. And our cost of doing business was well managed, finishing down $700,000 relative to the prior period, a pleasing performance given the current wage and inflation environment. It was up around 55 basis points relative to total sales. In response to these conditions, changes have been actioned. At the start of the half, an organizational restructure occurred. We are already seeing the positive impacts of that in our results today. We've changed the way we go to market. We have ramped up our investment in performance and social marketing, and we have started to change the key messages that we use to speak to our customers with a greater emphasis on price, speed and value. There's been a focus on inventory with a targeted management of lower productive stock lines. We are also making other changes to the structure. We've appointed a new executive responsible for customer experience and data and analytics. We've done this to elevate how we execute customer experience and utilize data and analytics across the business. With these changes, we have seen some green shoots. In particular, our new customer acquisition trend has started to turn positive over the last 3 months. New customer acquisition has a positive compounding effect in future periods as new customers to Baby Bunting spend a large part of their lifetime spend in their first 6 months. We achieved an 8% improvement in retail labor productivity in existing stores to counter the inflationary impact of wage increases that took effect at the start of the half. This year was a milestone for New Zealand with 3 new stores opening towards the end of the half. As we grow the store network, we move towards cost of doing business leverage in our operations. A factor that the team is very proud of is our Net Promoter Score. This is a high number already, and it moved up 2 points relative to the prior period, again, a great result. And finally, our marketplace is now run rating at breakeven. That's a good achievement with the marketplace going live in July 2023, it now has around 13,000 published SKUs. So all up, you can see that there's been a lot underway during the half to meet the challenging retail conditions head on. Moving to Slide 6. It's still early days in my time here, but in the first 4.5 months, I've covered a lot of ground. I visited a large part of our store network, and I've spent time with the team in New Zealand last month. It's been great getting to know our store and DC teams and see firsthand how much they care about our customers and our business. I've met with a number of our key suppliers, and I've explored other markets with some of our store development team to see the latest in retail execution. What I've seen has confirmed my view that this is a great business with opportunities available to further drive engagement with the next generation of customers coming through. As noted previously, despite the complexities of the current environment, there has been an improvement in our comparable store performance, and we've made meaningful progress in driving new customer acquisition. Baby Bunting is a clear leader in the category with a large total addressable market across both Australia and now in New Zealand. We are committed to innovating our stores, our range and our brand experience to increase our relevance and grow customer lifetime value, adapting to the new evolving preferences of our current millennial and future Gen Z customer. However, we approach this innovation with a mindset that balances the excitement of new opportunities with the prudence that the current economic climate necessitates. There are further opportunities for refinement of our go-to-market strategy and promotional activities to attract new customers and drive sales. As well as redesigning our store experience to maintain relevance and engagement, key part of our strategy involves enhancing our online fulfillment capabilities from all stores to improve stock availability and delivery speed. There is also an opportunity to expand our marketplace to bolster sales and range. We will also simplify our pricing strategy to build trust in our pricing and more easily articulate value. Furthermore, we're focusing on accelerating our private label and exclusive product offerings to improve margins. We will continue to focus on operational excellence to achieve ongoing productivity improvements. In New Zealand, we aim to contribute positively to earnings through store rollout and leveraging operational and supply chain efficiencies. As we look towards the second half of FY '24, we view it as a transition period, paving the way to FY '25. I'll now hand over to Darin, who will talk to some of the key financial slides.

Thanks, Mark. We're on Slide 7, which gives a bit more detail on the company's sales performance and some relevant drivers. Our comparable store sales trend has been improving with Q2 comparable sales now above those in Q1. And over the period since Boxing Day to now our comparable store sales are around 3% lower for the last 8 weeks. Q2 saw the acquisition rate of new customers turned positive at 6.6% for that quarter. And since Boxing Day that trend has continued positive. We saw price deflation of around $6 million during the half, mainly across car seats and prams, a specialty retailers discounted national brands to drive foot traffic. Unsurprisingly, customers are also economizing. We see this in the volume of price beats, which has increased for smaller value items and also through a clear gravitation towards sales events. With regards to the store network, we added 4 new stores across Australia and New Zealand on top of the 7 stores that opened in FY '23. Late in the half, we closed Camperdown located in Sydney. In terms of channel performance, online, including click and collect, grew by around 10% to be more than 22% of total sales. A factor driving this has been an increase in the number of stores enabled for online fulfillment. This has increased from 29 active stores at the end of Q1 to be 37 stores now. Turning to gross margin. At 37.2%, gross margin finished at the same level as the prior corresponding half. This was a solid result in the current environment. There's a few moving parts that sit under this number, which are described in the slide. Private label and exclusive products sales are also part of the margin story, and PLEX now sits at around 46.2%, up from 44.4% in the prior corresponding half. The business also made the decision to undertake some targeted clearance of slow-moving stock during the half to improve our capital efficiency. This was done in a considered way while it had around a 50 basis point impact to gross margin, it was an important contributor to our cash performance in the first half. They will continue to be a focus on productivity of inventory in the second half or efficiency will enable us to invest in newness as well as better utilizing space in our stores for more brand and product-led experiences. Slide 9, cost of doing business. Despite the significant inflationary pressures all retailers are facing on their cost base, Baby Bunting delivered a $4 million reduction to its underlying cost of doing business. The highlights were a $2.7 million reduction in administration costs and productivity savings in retail labor of $2.4 million, which more than offset the 5.75% inflation in wage costs. At the start of the year, we announced a target of $6 million to $8 million in annualized savings in our cost base. We are on track to deliver around $6 million of this. In the second half, we will see further cost reduction from closure of one Sydney store while savings realized from no longer distributing printed catalogs will continue to be reinvested in social and digital marketing drive, customer acquisition and trading volumes. Turning now to the P&L on Slide 10, which has seen the 2.5% sales decline manifests into a 12.6% reduction in EBITDA. Depreciation and finance cost increased from $4.2 million to $5 million for the half, primarily driven by PP&E depreciation from the 11 new stores added to the network over the last 18 months. The tighter management of inventory also kept our average debt down for the half, which helped moderate the interest rate increases, which have flowed through over the last 18 months. Our group NPAT of $3.5 million is comprised of AUD 4.9 million NPAT, down 28% year-on-year and a loss in New Zealand of $1.4 million. The New Zealand loss includes a $300,000 impact from new store establishment costs incurred late in the half with those 3 stores opening in November and December. Looking to the balance sheet on Slide 11. Balance sheet reflects a significant improvement in Baby Bunting's working capital position year-on-year as inventory holdings in particular, will manage to align with the business' sales profile. The $14 million inventory reduction was achieved despite the addition of 4 new stores opened, which added around $4 million to our inventory balances. New stores also have the effect of increasing right-of-use asset balances and lease liability provisions. We continue to retain plenty of headroom in our $70 million borrowing facility and bank covenants. Moving to the cash flow statement on Slide 12. Looking at the cash flow, the business has executed well to defray the decline in earnings and deliver a significant improvement in our operating cash flow, up nearly $13 million year-on-year. Our cash conversion ratio was 121% of earnings for the half. Restructuring costs of $1.1 million related to the organization change at the store support center in July plus costs associated with the closure of one store. One-off costs and capital investments in relation to our transformation slate are now mostly complete. With the last league of implementation, the time and attendance system to be completed in Q3's financial year. I'll now hand back to Mark, who will talk to current priorities.

Thanks, Darin. Moving to Slide 14. On this slide, we set out some things that the business needs to do today to stabilize performance and prepare the way for future growth. The immediate priorities can be grouped under the areas of trade, productivity and customer experience. For trade, we're changing the way we go to market. We believe these changes are starting to deliver. In particular, with new customer acquisition, we have transitioned from digital catalogs to a more integrated social and activity-led promotional cadence. This will enable us to better leverage our data to be more relevant to our customers, improve targeting at different parts of the funnel and drive better returns from our ad spend. We are also driving market share growth in New Zealand through scaling of the slow network. Again, this will deliver better operating leverage and move us closer to positive earnings contribution from this market. In terms of productivity, we're focused on inventory, and we've spoken to our efforts on targeting inventory optimization earlier. Operational excellence refers to efforts looking at the processes in our business and ways to simplify and improve them. Shortly after joining in October, we kicked off this program and brought in outside retail experts to review process and identify areas for improvement. Our tooling and business processes are engineered to support our previous ways of working. For example, our catalogs. We are transitioning away from these processes to enhance our speed to market and improve efficiency in our operating model. This is not about wholesale revisions to structure or investing significant amounts in new systems, but by achieving incremental improvements to optimize performance, we can help set the foundations for better results today and scale the business further on its existing cost base. Finally, for customer experience, the immediate focus is on omnichannel fulfillment. By early Q4, we expect to have all Australian stores enabled for online fulfillment. We are beginning to see the benefits of this. This will enable us to open all inventory to sale online, provide better stock availability and improved fulfillment for our customers. It also helps us to better mobilize less productive inventory before taking markdowns. I note that in New Zealand, each store has been set up for online fulfillment from day one. The loyalty program redesign is a key part of simplifying our pricing strategy and improving customer experience. Our pricing architecture is complex. We have a loyalty program that provides rewards based on spend. We have a price beat promise. We have high low promotional pricing and low price every day offers. The layering of these elements in our price architecture hampers our ability to clearly articulate the value we provide to our customers every day. We are looking to achieve stronger cut-through with customers. Removing the spend and own feature of the current loyal program is the first step in this process. Other benefits will be introduced as we continue to focus on growing customer lifetime value by providing great value for our customers every day. We expect these areas of focus to have impacts across sales, margin, cost of doing business and customer experience. They are our immediate priorities as we work to transition the business in the current economic environment and position it for the future. In addition, we're building out our capability platform. We've appointed Ciara McGoohan to the combined role of Chief Customer Officer and Chief Data and Analytics Officer. Ciara is joining us from Afterpay where she is the Vice President of Customer Science and Strategy, it will head up our data and analytics, customer care and social and marketing teams. We're looking forward to starting in mid-March. We've also commenced work on reimagining our current store design. This will focus on providing a more engaging customer experience. I expect that we'll start to deploy the updated design to future stores in the next financial year. Our marketplace will also be an area which we seek to expand the range in our core carries to further drive value from our investment in that platform. Moving to the next slide. Our goal remains to return to being a 10% EBITDA margin business. Our plan to do so will involve an elevated focus on the customer. We need to adapt to the evolving preferences and behavior of millennial and Gen Z parents. The way Gen Z engages with brands and their values are different from previous generations. While the fundamentals remain the same, we can reshape the experience in stores to better reflect the parenting journey from pregnancy to birth and postpartum to [indiscernible]. We will better harness the power of our pager and technology. The expansion of our data and analytics team is core to this. Baby Bunting store network is a great asset. I like to think of it as one of the force multipliers in our business. We need to strengthen the role of physical stores in an omnichannel ecosystem. We also will explore different store formats for different catchments and demographics. For example, smaller stores in locations that are better suited to how parents are shopping post birth. Private label and exclusive products needs to expand to help grow margins. We will also carefully consider potential investment opportunities to accelerate this expansion. And there is still a lot of growth potential in core and noncore high-margin categories. We need to focus on providing great value and communicating that value to our customers. I am full of confidence about the opportunity that lays ahead of us. I'll close with the trading update, Slide 16. As stated earlier, trading conditions continue to be difficult. In the trade since Boxing Day up to the 16th of February, total sales were down 1.4%, comparable store sales are down 3.2%, our new customer acquisitions are up 3.4% and online sales are up 14%. Our next store will be Maroochydore with handover expected to occur late in the financial year and this store should open in the first quarter of FY '25. In terms of the year ahead, we're seeing progress with our recent initiatives with positive trends, but we acknowledge that cost of living pressures affecting our customers are unlikely to abate in the short term with economizing likely to continue. In these conditions, we won't be providing full year guidance at this time. What we will do in the face of challenging economic conditions is to continue always to focus on consumers and how we can optimize our market-leading position to meet their needs and deliver for our investors. Thank you for your attendance this morning. We will now open the line for questions.

[Operator Instructions] And your first question comes from the line of Tom Camilleri from Wilsons.

Could I just please ask a question on the gross margins. It looks like private label now heading in the right direction at just under 10% of sales. I guess does that imply in a normalized environment, like gross margins in the business are materially higher? And can you just help us with the, I guess, the quantification of the impact of competition in the period on those hard goods?

Tom, it's Darin. I think that the private label contribution, the margin presented is the -- our first half margin is a good reflection of where things are at the moment in terms of our overall margin performance. The traction in the price deflation, I should say, on the -- those key categories, really defray the benefits that we saw coming through from sort of lower sea freight year-on-year. If you'd like to restate the second part of your question, that would be helpful.

Yes. I guess are you able to help us quantify, I guess, the impact that you're feeling from the increased competition in those key categories. So you've got the 50 basis points of the impact from clearance activity. In terms of the basis point impact, can you help us quantify what the remainder is?

In the order of -- I would suggest in terms of -- yes, I mean, we -- there was -- it was all -- the contraction in all sort of flow straight down to the bottom line. But certainly, it has had an impact.

Yes. Okay. That's great. And then a quick follow-up question on the cost of doing business. It's a pleasing result on the store costs, which annualizing at about $1.5 million per store. Do you have more to go there by the way of cost out and optimization in the strategy that you flagged? Or do you see the main cost out opportunity now predominantly in the admin cost lines of our overhead?

I mean our stores are pretty much running at an optimized level, right now. And in terms of our store support center, the changes made there are by and large all being executed. What the future looks like for us now is really around making sure that we are managing our cost growth relative to our sales profile, and we need to get back on a positive trend with regards to sales growth. That's really the play.

Yes. Okay. That's great. Did you say any, I guess, sales or revenue impact from that store optimization program because it was pretty significant?

What we did there is we had -- we look at our stores based on a transactional cohort basis. And we had existing stores that were running and at a more productive than other stores in the similar transaction cohort and was actually about sort of losing the productivity of our performing stores up to equate to those that were already performing at a more optimized level. But that's really where that one came from in terms of the efficiency there. So we're pretty happy with how that's source of tracking through at this stage.

Your next question comes from the line of Rachael Harwood from Macquarie.

First one, just kind of a follow-up question just on competition. Could you maybe just talk a little bit more about this just in regards to where you're seeing this come from? Is this largely online, in-store and what categories this is impacting the most?

Thanks for the question. We've seen competition intensify in some of the key areas of nursery essentials. So particularly around car seats, prams, cotton furniture, which are the essentials that new parents need to buy as they embark on their pregnancy journey and an approaching birth. Certainly, we saw post November and leading into Christmas and intensification of price competition in that space and across those 3 categories, and that's continued early into the new year.

That's right. Makes sense. Just another question, I guess, just around New Zealand, ramping up in New Zealand. Could you maybe just talk to how you're seeing the performance, particularly in terms of brand recognition, competition and any commentary around profitability in this market?

Sure. So I mean, I'm very pleased with our New Zealand performance to date. I've actually been pleasantly surprised by the brand reception that we have had. We've had a very strong opening and initial results. Notably, as we went into the South Island with our Christchurch storm, the brand is clearly well known from its Australian origins, but I think what is most notable about the way we have shown up in that market is with the format. So New Zealand, whilst has a lot more independent competition, our competition is far more niche and focused in specific areas. So Baby Bunting showing up with large format stores, 1,500 to 3,000 square meters, has enabled us to showcase a very broad range for the New Zealand customer that they have never frankly seen before all under one roof.

Yes. Great. That's helpful. Just last question from me before I jump back in the queue. Any changes, I guess, in terms of the competition of products that are in that high low versus Best Buy pricing on the strategy?

Sorry, would you mind restating the question?

Yes. No. So I guess first half '23, there was kind of an increase in terms of that Best Buy pricing, the number of products that were in this kind of pricing strategy? Has that shifted at all in this half? Or does it remain kind of relatively stable?

I think what Best Buy really talk to is pricing that sort of sits outside of the high-low regime. That's by and large, remained consistent year-on-year. So no real change to that element of our pricing hierarchy.

Your next question comes from the line of James Bales from Morgan Stanley.

I just had a couple of questions from the priorities that you outlined on Slide 14. Maybe firstly, on inventory. You've sort of highlighted that as an area for further improvement. It improved in the first half. How much do you think is left to go? And how do you see the timing of that?

Now, James, I'll take that one initially. The -- there's not -- in terms of materiality, look, it's not -- we're not foreseeing like a significant impact on margin, that's where the question is leading at this stage. We sort of went pretty hard on some items through the first half. This will continue to evolve and it will be guided to a degree around how we think about the in-store brand experience and bringing categories to life. So we'll be working through an iteration of our in-store design, and that will inform where our sort of inventory profile wins going forward.

Okay. So I mean it looked like if you had take -- strip the clearance activity out of the gross margin for the first half, you would have been at 37.7% instead of the 37.2%. What margin is realistic?

We're not providing forecast. We're not providing sort of a forecast or outlook on gross margin at this stage, James. But you can look back to where we were historically. We got to a plus 38% gross margin in FY '22. And that was when shipping rates were at all-time high. So over a period of time, we are absolutely focused on lifting the gross margin from where it is today. I don't know if you want to add anything to that, Mark?

The only comment that I'd make just in regards to the work that we're doing around inventory in addition to what Darin has already mentioned. In the phase of the sales trend that we are seeing, we are making sure that we are really disciplined on the productivity of our inventory. So this is not about necessarily identifying aged inventory issues that will require massive markdowns to clear. This is about truing inventory levels in addition to moving through small amounts of underproductive inventory that we are positioning or repositioning the business for future trade.

Okay. Got it. And then one of the other things that you called out on that same slide was the changes on the loyalty program. I guess what are you trying to achieve there? Is it about like-for-like sales? Is it about just the simplicity of pricing? And what should we expect the loyalty program to look like and the outcomes to be once you're through the process?

Yes. Thanks for the question. Principally, as I covered off in the notes previously, we do have a complex price architecture. The loyalty program is at the bottom of the funnel effectively of delivering some of that value. And of all of the pricing mechanisms, it does create the most friction with customers from a feedback perspective. That's not to say customers don't value us. It's just to say that where you have got a minimum spend threshold or category exclusions that the program can or cannot be used on that creates some friction with customers that at the end of the day, is ultimately not what we're trying to achieve. So in looking at how we simplify our overall price architecture with a clear view of trying to enhance and increase the way that we demonstrate value to the customers. This is one of these early -- this is a friction point that we wanted to remove in the transaction. We still wholeheartedly believe that loyalty is fundamental to the business's ongoing success and our ability to grow lifetime value, but we're looking to replace that with other means of delivering value to the customer.

Your next question comes from the line of Sam Teeger from Citi.

Just on the trading update, it has revealed that trading has been softer outside the key promotional periods. And I'm just wondering how easy to think it's going to be to evolve the promotional calendar particularly if your competition remains very committed and invested in Black Friday and Boxing Day?

Yes. Thanks, Sam. Look, it's certainly one of the things that we're focusing a lot of attention on at the moment, noting the current macro conditions and the squeeze that that's putting on our customers, a few things that we're looking at. As conditions hopefully improve in the future, we do see that will kind of ease or probably spread out the concentration of sales that we are seeing in key promotional events. But one of the things that we're going to achieve with some of the inventory productivity pieces is driving more newness into our business to attract customers outside of the key promotional events. So as you would appreciate, servicing all parts of the market, whilst many, many consumers are very focused on value and cost of living pressures, there are other parts of the market, which are constantly seeking out newness and innovation in this category. So we do see it as part of out the key strategy in the short term to help defray some of that concentration as macroeconomic conditions continue. And hopefully, as we see that ease up, we expect to see customers probably return to more of a normalized trading pattern, notwithstanding the fact that customers are always seeking out value. So again, to the prior question that was asked in the previous point, our ability to articulate that value on an ongoing basis to customers becomes increasingly more important.

Got it. And just how do the comps evolve in the PCP, In fact January now, but from here for the rest of the half, what are the comps like you're cycling?

Sam, so over the half, they were nearly 7% in the prior year and with a significant deterioration in June of the prior year, which drove that number down.

Got it. And then you talked about doing a store redesign. Mark, right now, you've been to a lot of stores. What do you feel is the key thing that stores are lacking right now? And how much would you be budgeting for a refurb?

Thanks, Sam. I know we're still very -- we are early in this process, but very clear to me is just how we engage and how we engage with customers, firstly, and how we bring the category story to life in a more meaningful way. I would characterize our stores at the moment as being very functional and rational in terms of how we display and merchandise stock across the business. There is an opportunity to do a much better job of guiding consumers through that early journey and taking out a lot of the stress and anxiety of entering the category for the first time. Those insights really come as a reflection of some deep qualitative research that we did with customers early in October when I joined, really seeking to understand the part of the business that they really like and the parts of the experience that they found confronting or that we could improve upon. So you'll certainly see that as part of the new store design and environment. I think also just reflecting on the way that our current customer is a millennial. In the next 3 years, that will transition a little bit more meaningfully into Gen Z being a more representative share of our customer cohort. That gives us plenty of time to kind of evolve the in-store experience to be more engaging, reflecting on their purchasing behaviors. But also to -- as we touched upon in the presentation, elevate the way in which we execute omnichannel cross-functional retail, so leveraging our stores as part of an enhanced digital offering to attract those customers.

[Operator Instructions] And you've got a follow-up question from Tom Camilleri from Wilsons.

Just quickly on the stores. So the next one is expected in Maroochydore and you've got to pause, I guess, in the rollout run rate in the second half. Can you just talk to us about, I guess, the dynamics there. Is that just based on site availability? Or are you rethinking, I guess, the strategy or where you go to market physically?

Tom, it's store rollout in [indiscernible], and we've glad we've had a network plan in [indiscernible] for a long period of time. We know where we want to know each one of the future catchments, and it's around when that availability comes up, it can be -- there's a number of factors that determine that they're outside of that control some of the time. So just need to be patient. So we had -- we opened 5 stores in the first half last year too and the second 4 in the first half of this year. We know where we want to be. It's just around the bright side and making sure that the economics are attractive to us for the opportunity when they will arise.

Your next question comes from the line of Edward [indiscernible] private investor.

I was just wondering just in terms of the inventory questions that you've had, just as a follow-up on that. I'm just interested to understand if you have sort of a target level of inventory as a percentage of sales or inventory days? Like still seems pretty elevated from what I can see, just generally versus history and just generally versus the sort of retailers that tend to have much lower levels of inventory even in the specialty category?

So historically, Edward I'll take that call. Our outside turns right now range between 3.5% to 4% per annum. A key part of the strategy and our key success platform for us has been having the widest range in store. Over time, I would say that our inventory profile has increased purely on the back of CPI for the number of SKUs that we carry and the stock depths that we carry hasn't necessarily increased. So really, what you're talking about is you're talking about, well, why is our inventory line up relative to historic levels, speed through store rollout. And we are only marginally above 50% of the way through our store rollout. Then going into New Zealand, we opened a supporting DC they're carrying additional safety stock to support the stores in that area as well. So they're really the elements that have driven the increasing inventory over a period of time.

Okay. Okay. That's fine. I just -- maybe just another, if I can squeeze in another question here. Just in terms of the comp sales. Just wondering if you can provide some color on the transaction growth versus deflation. Can you break that down? Or is that not possible?

Well, we've called out the deflation. We don't call out what our transaction profile, our average transaction profile looks like, although our average -- I can say that the average basket size has been impacted by the economization of consumers on top of the price deflation we've seen in those core categories.

And that does conclude our Q&A session for today. I would like to hand back over to Mark and Darin for closing remarks.

Thanks very much for joining us this morning. We look forward to updating you again at the full year.

This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.