boohoo group plc (DEBS) Earnings Call Transcript & Summary

Welcome to the boohoo plc Q1 Trading Update Call. [Operator Instructions] Today, I'm pleased to present John Lyttle, CEO; and Neil Catto, CFO. Please go ahead with your meeting.

Good morning, everybody, and thank you for taking the time to join us for our Q1 trading update call. I'm John Lyttle, Group CEO of the boohoo group, and I'm joined this morning by Carol Kane, Executive Director; Mahmud Kamani, Executive Chairman; and Neil Catto, Group CFO. I'm going to take you through the Q1 update, and then we'll open up the call to Q&A. So in terms of group performance, and we'll start off with there first. So it will come as no surprise to you all that COVID-19 has continued to impact on all aspects of our business. I'm incredibly proud of how everyone within the boohoo family as well as our many partners have responded and adapted to these difficult and unprecedented circumstances. Throughout this period, our priority has been and continues to be the health, safety and well-being of all of our colleagues, customers and suppliers from around the world. With this in mind, I would just like to briefly remind you of all we have been able to achieve over the last 15 weeks. So we transitioned all of our teams to remote working where their roles does not require them to physically be in the workplace. For those remaining in the workplace, we have revamped our operating processes to ensure social distancing is in place, rigorously implemented updated health and safety guidelines and made sure we are following all government health protocols. Social distancing procedures within our warehouses are working efficiently, ensuring the safety of our warehouse employees. We have also been extensively engaging with local stakeholders such as MPs, council leaders and public health authorities to update and reassure them on our actions. As a group, we have a diverse supply chain across the world, and this has continued to operate efficiently with our teams in regular contact with all our suppliers. We have worked hard across the business to ensure the continuity of service in getting our products to customers, who have experienced minimal disruption to date. And we have provided full pay for colleagues in self-isolation and are in a fortunate position whereby we have not needed to take advantage of any government-funded schemes. So on to the results for the period. We are delighted to report a strong performance for the year-to-date. Revenues for the quarter totaled GBP 367.8 million, up 45% year-on-year, and we continued to take market share both in the U.K. and internationally. Trading, as you might expect, has been mixed across the quarter as a result of the impact of COVID-19 pandemic. We saw a marked decrease in the growth rate in mid-March and early April, but trading improved during April and May. Our strong performance has been helped by maintaining an excellent customer proposition during the quarter, which has ensured we are able to get the most relevant products to our customers quickly. You will have noticed from our release this morning that we are reporting group performance and performance by region only in our trading statements going forward. In the U.K., sales grew 30%, and our international markets took another great step forward with sales up 63%. For the first time, international revenues accounted for more than 50% of the group revenues, and we have delivered strong growth in our international focus markets, with Europe up 66%, U.S. up 79% and rest of the world up 22%. This strong growth across the board in our international markets demonstrates how our brands are appealing to customers on a global scale. Following the acquisition of the remaining 34% stake of PLT, at quarter end, we had 7 100%-owned brands. Growth was strong across these brands, reflecting our focus on the multi-brand strategy and growing share of wallet across our customer base. We had a great performance from our established brands boohoo, PrettyLittleThing and Nasty Gal, while our newest brands MissPap, Karen Millen and Coast continued to trade strongly and contributed further growth in the period. Karen Millen and Coast only went live in October, so it's still very much early days, but we are really encouraged by their contribution to the group so far, which has been ahead of early expectations. On to gross margin. Despite the uncertain backdrop, during the period, we have delivered a solid gross margin performance, up 60 basis points year-on-year to 55.6%. We continue to benefit from our test and repeat model, which allows our teams to back the winning categories and trends that have emerged through this period. Areas such as loungewear and athleisure have performed well as customer buying habits adapted to a stay-at-home lifestyle. And we've seen a great response to our social media content during lockdown, which has become more lifestyle orientated. While we're pleased with this start to the year, we remain cautious on our outlook for the gross margin, particularly given the potential for promotional intensity to increase as the high street reopens its doors. I'm also delighted this morning to be announcing the acquisition of 2 new brands. We are acquiring the brand and associated IP of Oasis and Warehouse. These are well-known U.K. brands which complement our existing brand portfolio and further strengthen our position in the womenswear market. As a group, we are really now dominating the youth end of the market. And through our multi-brand strategy, we expect to continue to gain share of wallet from our customers. Acquiring the brand and IP only at great value mirrors our approach to previous acquisitions of Nasty Gal, MissPap, Karen Millen and Coast. In line with previous acquisitions, the group will, in the coming months, integrate Oasis and Warehouse onto our platform, allowing both brands to benefit from the group's insight, infrastructure, supply chain and operating model. We have a strong track record of integrating new brands quickly. It took us only 8 weeks to relaunch Karen Millen and Coast last year, plugging in a whole new supply chain and reducing their lead times towards the rest of the group. The recent placing of GBP 198 million has further strengthened our position to make opportunistic acquisitions. And today's acquisitions are another great example of that. We continue to believe there will be further M&A opportunities arising and have finished the quarter with over GBP 350 million of cash. We are in a strong position from which to take advantage of these. Lastly, on outlook. We are feeling positive as we look ahead for the rest of the current financial year, and we expect to deliver another year of strong profitable growth. Revenue growth is anticipated to be approximately 25% for the current financial year, and we expect to report an adjusted EBITDA margin of 9.5% to 10%, both of which are ahead of current market expectations. Our revenue growth assumption assumes a small contribution from our newer brands acquired last year and today's acquisitions. We remain cautious given we expect an ongoing period of consumer uncertainty, likely promotional intensity in markets that we operate as well as continued near-term carriage inflation for some of our overseas markets. The guidance also reflects planned investment in both our established brands and in launching our newer brands during the year. We will continue to invest in our infrastructure to support future growth ambitions, and capital expenditure is expected to be in the region of GBP 60 million to GBP 80 million. The strength of our trading and operational performance in the period further underpins our confidence in our medium-term guidance of 25% sales growth per annum and a 10% adjusted EBITDA margin, which remains unchanged. So in summary, we've been busy. It's been a great start to the year. We've delivered strong growth, continued to take market share, acquired our option in PLT and are welcoming a further 2 brands into the group, meaning we now have 9 100%-owned brands operating on our platform. And with that, thank you very much for listening. And now we'd like to open up the call for questions.

[Operator Instructions] And the first question is from Aneesha Sherman from Bernstein.

Congratulations on the results. 2 questions from me. First, on the 2 new brands, are you planning to maintain the brands' current wholesale channels, such as the major department stores as well as the direct-to-consumer online sales? And second, on CapEx, you've talked in the past about eventually setting up [ digitization ] infrastructure in the U.S. Given the very strong growth in U.S. market this year, have your plans changed on the timing of that CapEx? Do you expect to bring it forward?

So in terms of the 2 new brands and in terms of how we plan to [ renovate ], it's very similar to our acquisition of Karen Millen and Coast. So the brands currently were multichannel, but we will be taking that to pure, say, online only. So we won't be trading in the stores, but we may consider wholesale options as we do with our other brands boohoo and PLT. So for example, we sell those into ASOS, Shop Direct, et cetera. So a similar model to how we operate our other brands. In terms of U.S. infrastructure, we are looking at warehousing. We've spoken before about our current capacity, which has about GBP 2 billion of net sales. Further works we're carrying out on Sheffield and in Burnley get us in calendar year '22 to about GBP 3 billion of net sales. As you will know, warehousing takes time to plan, to build and to get operational. So we're just in the middle of finalizing where our next warehouses will be at the moment, and we expect to have that decision in the next couple of months, most likely overseas, and looking at 2 options. One is the U.S.A., and one is Europe.

Probably worth saying that the CapEx guidance of GBP 60 million to GBP 80 million is all centered around those big projects that John mentioned in Burnley and Sheffield. And so there's nothing in there for the overseas warehouses this year.

Our next question is from John Stevenson, Peel Hunt.

There's nothing like a nice quiet quarter to start it off. First question, could you talk a little bit about some of the sort of customer trends in terms of frequency, conversion rate and basket just in terms of how people have been shopping, obviously implication being a quite phenomenal level of sales performance over the last couple of months? And secondly, on marketing, can you give an indication of how you've led engagement to the extent that you've actually -- it's been through sort of social and content and the extent to which you've delivered marketing spend through the period as well, please?

John, it's Neil here. So on the customer trends, as so you can imagine with the growth that we've seen overall in the quarter, that you've got positive trends on -- across most of the KPIs there. So what we've actually seen is frequency being maintained, if anything, and in quite a lot of cases increasing [ marginally ]. And then what we have seen overall in the quarter is a trend whereby we've seen a lot of browsing behavior. So kind of "shopping for entertainment in lockdown" type of phenomenon, which has meant that you generally have quite high session growth, but the conversion rates are not so high. So those are the trends that we've seen. We've actually seen transaction values slightly higher than they were this time last year as well, but that's been a trend for a while anyway. But customers certainly -- have certainly been spending once they've adjusted to the kind of lockdown scenario and -- well, the walled-off period earlier in the quarter where they stopped for a while, they've come back and, you can see from the numbers, with a vengeance.

Okay. What sort of -- sorry, Neil. I just had to -- what sort of active growth have you seen?

Well, we're not disclosing the level of active growth, but we've seen good customer acquisition trends. And therefore, you can imagine that we're seeing good growth in our active customer numbers. And on the marketing question, Carol, do you want to take that one...

Yes, yes. John, I'll pick that one up. So it's very much the same picture that we talked about at the last kind of update that we gave. It hasn't been the big brand campaigns that you're used to seeing from the boohoo group. It has been a little bit more video content, social channels, working with influencers who are actually shooting from home. So it's been more of that, with an increase probably across social spend and digital spend. There's been some above-the-line advertising, but it's minimal compared to what you're used to seeing. So there's no real change there. It's really as we updated in our last kind of results.

Okay. Great. Does that mean that the sort of marketing spend is going to be less than we're used to seeing as well?

No. [ It's just a ploy to show ]. It's just a channel mix change.

But with 2 new brands.

[ Okay, so no ].

If only.

The next question is from Charlie Muir-Sands from Exane BNP Paribas.

Yes. I've got 2, please, and please accept my apologies for the background noise. The first one relates to the pattern of trading, and I appreciate that you probably don't want to be drawn on too much detailed granularity. But I just wondered that, as various markets have kind of unlocked, I wondered what your experience has been that's led you to what's an implicit quite significant level of conservatism around the growth rates for the remainder of the year. Are you seeing the sales growth sort of drop off in recent weeks as various markets in high street reopened or not? And then the second question was kind of related to Karen Millen and Coast. And I appreciate you don't want to be reporting brand breakdown on sales reports today. But I just wondered what your experience was vis-à-vis the fact that, clearly, they were historically multi brand and whether you think that some of the historic revenues those brands achieved on the high street as well as on their online channels was actually -- whether you're capturing some of that as well.

So on the pattern of trading, what we've described in quite a lot of detail, the pattern that we've seen through the quarter, so the initial drop-off and the recovery, and then -- and it's probably only a few weeks ago that we spoke to everybody where we said that trading was robust. But you can see from the overall numbers, though, it's been extremely robust in the final weeks of the quarter in May. And we've seen that momentum carry on basically. It's too -- it's really too early to comment on the what is happening during the release of the lockdown restrictions because what I would say is that, if you take the U.K., for example, it's been 2 days. And you can see from what's been reported in the news, that the high street stores have really been challenged in the way that they've come back from lockdown. So you're not seeing any impact there right now, but it's just too early to say. And that then brings me on quite nicely to the fact that we've been as ever sensibly conservative with the guidance for the rest of the year because I think we're still in that position where there's so much uncertainty that's been caused by the whole pandemic situation. But it's really, I mean, more than ever sensible to be conservative with the guidance for the rest of the year. So there's uncertainty around what the promotional environment is going to be like. So, so far, pleasantly surprised. It doesn't look like the high street brands are really going out with huge promotions, but we would definitely expect there to be quiet a competitive environment going forward. We've also -- I think that the government schemes have been great at cushioning the impacts for consumers, but of course, we'll see how that consumer environment gets affected for the rest of the year. So a lot of uncertainty there. Of course, if consumer sentiment is negative with a recessionary environment, we're very well placed as a predominantly valued suite of brands at the moment. If there's a switch to value, then we'll be well placed to benefit from that. But having said that, there's a lot of uncertainty around, and that's why the guidance is sensibly conservative as ever.

Great. [ And in respect ] to the Karen Millen and Coast experience so far?

Yes. I think we're -- as I said, we're really pleased with the experience so far. Your question around are we getting some sales from the high street closure of those stores. I'm sure we are in terms of overall. But I think, again, just to remind everybody, we relaunched Karen Millen and Coast on the 1st of October. That was a soft launch at that point and then sort of got through peak, came into the new year and then came into COVID. So overall, we've turned around the supply base. 80% of the suppliers are new to Karen Millen. We've got them and everybody now working on test and repeat. Reactions are really pleasing. And in particular, I'd probably highlight the international reaction for Karen Millen and Coast. So -- and in particular, again, there I'd highlight the U.S. So again, a brand that we can take globally and one that will be a real key strength of the group going forward.

The next question is from Anne Critchlow, Societe Generale.

Just as a follow-up to that, could you say whether Karen Millen and Coast were and previously in the U.S. and how you developed the sales there? Was it marketing, for example? And then I've got a second question on marketing, whether you see opportunities for marketing to stay online and through social rather than going back to outdoor post lockdown or whether you need to move that outdoor.

If I take the Karen Millen one first, Carol. And then so the...

Yes. [indiscernible] marketing one, yes.

Okay, yes. So Karen Millen in terms of the U.S., I mean they had some stores in the U.S. and had a business level there. So we've really not done anything in terms of pushing sales in the U.S., and that's really pleasing in terms of when we do begin to push the button on marketing there. And the opportunity we see will be very, very strong for us.

So yes. So I can just answer the marketing one. I think it's important as a group, just like our test and repeat model, we have the same approach to marketing. And not all brands are in the same place in terms of brand awareness. So for example, bringing in new brands into the group just from October with Karen Millen and Coast and now Warehouse and Oasis and MissPap, we still have -- we'll be doing quite a lot of brand awareness pieces around those brands, which will mean some out-of-home advertising, TV, et cetera, et cetera. That's not to say that we won't be doing more of that on our other value brands as the market picks up. So I always approach it pretty much with an agile approach, is mix up the channel mix. Don't make it all digital. Don't make it all social. And have a varied marketing mix across the group. But as I say, different brands are at different stages of their life cycle of being online, and that's a very tailored approach for each brand.

The next question is from Adam Cochrane, Citi.

Two questions from me. First of all, with regard to an incredible performance to get all the products on the sourcing side and the warehousing side, were you able -- with other competitors, we've heard maybe canceling orders and things. Have you been able to get any more stock or better pricing, et cetera because of the external environment? And then secondly, on the costs of COVID, you talked about maybe air freight being a bit higher. Does it change with social distancing your warehouse throughput at all? And when you think about your guidance for the EBITDA margin for the rest of the year, I'm assuming that incorporates any COVID-related costs that you may be incurring. If that was to change, will that mean that there is some potentially more efficiencies you can get from your warehousing operation?

So if I address the first one first. So in terms of the warehousing, I think very early, in the early days of the pandemic, we identified the warehouse has been a really critical operational part of the business that we needed to get right. So that was really one of our first areas that we put lots of new ways of working, processes, increased hygiene levels, et cetera. So we were onto that as almost like our first step. So I think we were ahead of the curve of maybe some of our competitors. And you'd see from our service promise right through the pandemic we've been pretty much on our normal service right the way through. So it shows the early work paid off very quickly and the implementations we did there. From a sourcing point of view, look, we've got a very strong supply base. And we're very, very close with our suppliers across all regions that we source from. And clearly, as our competitors were canceling and equally, shall we say, maybe not as fast on payments, kind of factories have workers and they need to keep working and they need to get paid. So I think, in particular, if you look at our 14-day payment terms, we were very attractive in the period. Number one, we were continuing to place orders. And number two, we were paying. And number three, we weren't canceling.

And then on the costs side of things around distribution costs. You've got 2 elements there, as you pointed out, that we've then implemented the social distancing in the warehouse. And on the throughput side of things, we've managed to keep throughput going through the whole period. And that -- it was slightly affected in Sheffield for a while. But again, that operation recovered very quickly. That's not been as much around social distancing as around absence rates, which have subsequently returned back to normal levels. So social distancing in itself has not been materially impacting the throughput. And I think we're quite fortunate in both operations that we've got plenty of [indiscernible] capacity right now. But obviously, with those absence rates, et cetera, you get an increase in costs. And also on the distribution costs, we've seen higher costs from our distribution partners, particularly overseas, so mainly actually on the overseas routes. The distribution costs have been relatively consistent within the U.K. and Europe. But in the far away markets, we've been paying extra to secure capacity on freight transport. So that's led to an increase in distribution costs, but what we've seen in the first quarter is that those have been mitigated by the fact that we've had lower returns rates from a different product mix. And as we've alluded to, we've seen quite effective marketing in the lockdown period as well with the performance marketing. So for the -- in regards to the EBITDA margin for the rest of the year, again, we're anticipating that some of those factors could change, and there's a lot of uncertainty around that going forward. So it's likely that the distribution costs will remain elevated, but there is -- the fact is that returns rates could return to more normal levels if that's what happens with people's activities when -- if they're going out more, et cetera, after lockdown restrictions are eased. So again, you've got that conservatism there that if -- distribution costs continue at that rate, but we don't see the continuance of the other positive mitigating factors like the returns rate. We've also seen a strong gross profit margin in the quarter as we've seen a bit less markdown because we've had a very, very fast stock turn as we've been chasing the stock rather than having a lot of stock that we have to mark down. It's been the opposite scenario to that.

So is it fair to say that the 9.5% to 10% EBITDA margin guidance, at the low end of that 9.5% is if some of these costs were to carry on and the 10% would be if they were to fade away?

Right. Exactly. Yes. And also, you've got to think about the gross margin performance as well. I mean we're in great shape coming out of the quarter, into the next quarter because we've got a very lean stock position. We've got lots of newness coming through, but we also think that there's a good possibility that it will be a very competitive environment out there.

The next question is from Simon Bowler, Numis.

A couple from myself. Firstly, with regards to return rates, is it purely kind of a product mix impacts that you think has been impacting return rates? Or have you seen any other changes across kind of the most kind of staple normal products that you have been selling? And then secondly, it may be too early to ask the question, but as you know, I get paranoid about these things. Can you share a little bit of color at this stage around kind of the warehouse plans? Will -- I mean, at the moment, you've got 2 warehouses effectively. 1 is with boohoo. 1 is PLT. How is a single warehouse overseas going to look? Is it going to have a long tail across products across all of the brands or be specific to any single brand?

So on the returns rates, firstly, we were conscious 6 weeks ago that people may have more difficulty returning products in lockdown. But as we've gone through the last few weeks, we think it's pretty clear that the main factor in the lower returns rates has been the change in the product mix because the increase in kind of more basic athleisure wear and loungewear, et cetera just have lower returns rates generally.

Okay. Great. And then on the warehousing side? [Audio Gap]

The next question is from David Holmes, Bank of America.

It's just a quick one on the acquisitions you've made today. Can you just talk a little bit how you intend on positioning those brands and how they give you something different to what you already have?

Yes. I can take that one. So if you think about the group of brands we have today, we're very covered off in the value proposition with PrettyLittleThing, boohoo, MissPap and Nasty Gal. And then last October, launching a -- more premium brands with Karen Millen and Coast on occasion wear. So where we see Warehouse in ASOS is actually bridging that gap into the middle market, Warehouse being very fashion led, I think, current years; and Oasis also fashion led but with also a lot of classic inventory as well. I think the first job in hand is to make those brands more relevant to consumers today than maybe they have been in recent years. So really, it's covering up and it's plugging that gap that we've talked about when we talk about a Topshop or a Zara. It's a higher price point than our value proposition but a lower price point than our premium collection as Karen Millen.

The next question is from Alvira Rao of Barclays.

Two for me. I know you no longer disclose this, but can you give us any color as to how each of the brands performed during the period, if there's anything in particular to call out there? And second, on further M&A opportunities, can you talk about what types of categories, brands, geographies this might be focused on?

I can answer on categories in terms of where the focus has been during the period. So I think we've pretty much outlined again and again the success of taking a brand that was very much value brands that were very much [ like ] going out and festivals and all that other stuff and transforming those brands through the period into loungewear and athleisure. Co-ords, nightwear essentials are all -- were the real strong outperforming categories during the period. However, as the weather warmed up in recent weeks, we have seen a return to more fashion propositions, which is encouraging, even while we've still been in lockdown. Again, it's still on the casual side, and it's been crop tops, cycling shorts, hand-dyeds, slogan tees, smock dresses, florals, all performing well. And then if you look at our premium brands, they've really still been selling dresses but in more relaxed shapes. And there's been some very strong fashion trends around voluminous sleeves and bottle necklines and so on. But I think the overriding message here is, I think, with our supply chain and our test and repeat model, we can get most categories to work. And I think the very strong message that needs to be delivered really is we're so agile [ within ] whatever fashion and whatever relevant [ as ] to make sure that we have it. For with COVID, if it's prolonged to -- into the end of the summer or we're out of it and we're back into party lines, we'll just be chasing whatever is relevant to the consumer at the time.

We're back on the line, by the way, now, John and I. Just we did get cut off [indiscernible].

Next question is from Szilvia Bor from Credit Suisse.

Two for me, please. Firstly, would you be willing to offer any comments on current trading into June? And I know it's very recent, but have you seen any kind of change in terms of traffic from the store openings earlier this week? And the second question is on sustainability. I appreciate this has been a busy period, but many sources are highlighting that the customer mindset might be shifting towards sustainability faster than we have previously anticipated after the pandemic. Could you talk about what progress are you making? Or could you highlight any recent milestones on your sustainability journey?

So just quickly on current trading. Like I've just said, it's too early to see. And what I'd say is that the high street retailers in the U.K. haven't got their lockdown restrictions eased quite so readily. They're opened up, but I don't think they're going to get to volume in the 2 days that we've seen. In other markets, we've seen continued strength but can't say -- thoroughly say much about what's happened in June other than that. And then on the sustainability side, [ John ]?

I mean, obviously, sustainability, even though it's been a busy period, we continue with our strategy, which is in effect that we want our ranges to be sustainable, ethically sourced, recycling, et cetera. So we continue on that journey. So even though it has been a busy period, that strategy has continued as normal. Nothing new to report in the period, in the quarter in terms of milestones reached outside of it's a key focus for us. And the industry is changing, will change, and we plan to be part of the groups that lead that change.

Next question is from Ben Hunt, Investec.

Apologies if these have already been answered. My line got cut off at one point. But one question for Neil. You've mentioned you've got a leaner stock position. Are you actually able to give us a number where you are year-on-year in terms of inventory. I think you started the quarter with quite high levels, yes.

Okay. Yes, go ahead with the next question...

And then the second question, are you -- there's quite a big acceleration in the U.S. Are you able to give us any more color on which brands were driving that? I presume it was predominantly driven by Nasty Gal. Those are my questions.

Yes. Just on the stock position, we're not going to disclose what the stock position is, but we've had -- we've -- it's been really a race to get inventory at different times through the process as the supply chain has been disrupted. Now the supply chain is getting back to more normal levels. And happily, that coincides with as the competition is coming back into the market. We've really been surviving with less inventories than we would ideally like. But now -- but it's been effective, as you can see from the numbers, we've been able to compete against the competition, partly because of the -- we've still had a great range of products but also because we've had a great -- we've kept our service levels same through that period. But now that competition comes back, we're building up that level of inventory. So what I'd want people to think is that we always turn our stock very quickly. And while there's been a period where we've had probably super low levels of inventory, I'm sure that we'll be back to a more normal position at the half year, and that's the steady state that we should be thinking about. And the acceleration in the U.S. has actually been across all of the brands that we are having because we're very small in the U.S. market, and there's a lot of market share to take. And we've seen a good performance from Nasty Gal, as you point out, but also boohoo and PrettyLittleThing. So all the brands are very small over there in terms of market share. So a long way to go. And I think that's what you've seen in the performance during the last few months. I think there's been a helpful factor for our business in that the high street stores have been closed, of course. And we're seeing some good customer acquisition numbers in the U.S.

Our next question is from George Alex Pilakoutas of Numis.

I might just repeat Simon's one from earlier. I think you could help me with regards to early thoughts around managing international inventory pools. And then also I had just a couple of questions in terms of the brand acquisitions and the kind of price-to-sales that you seem to be paying for brand seems to be coming down. Do you think there's less competition to acquire brands in a post-COVID world? And then finally, along similar lines. When looking at further acquisitions, should we think there's kind of a -- should we be looking at similar-size deals given complexity around warehousing and fulfillment and kind of potential execution over the next few months? Or do you not see kind of a limit to the size [ there ]?

Okay. So yes, firstly, on the point about warehousing with multiple brands. And I think the question was how's that going to happen if you have a new warehouse, whether it's international, most likely. So I think my answer to that question is that, with multiple brands, we have that flexibility. And if you look at the operation in Burnley, we have multiple brands in the same warehouse where the inventory is stored all together, mixed in for the multiple brands, but the automation knows exactly how to deal with that inventory. And that's quite efficient. So that's how if we have a third warehouse in an international market, we'll be quite able to cope with all of the brands in the same warehouse. But similarly, if we wanted to have them in separate warehouses, well, it will be a similar level of efficiency. On the M&A side, is there less competition to acquire brands? No, I don't think there is. I think there's actually going to be quite a lot of competition to acquire brands. So while I think in terms of strategic one retailer acquiring other brands as we have done, there may be less competition from that area, but you've always got competition from private equity. And we've seen quite a few private equity deals go through in the recent months, and I'm sure there's going to be competition there. I think it's a question of the right buyer for the right brands and a fit there is where -- is really what it's all about. And for us, it's where we can add value to brands by being part of the group. And that point is relevant when you talk about further acquisitions. Are there likely to be similar deals to what we've done in recent times with Nasty Gal, Karen Millen, Coast and Warehouse and Oasis, which have been in distress of some sort? And we do think there will be distressed brands that we can definitely add value to and reinvigorate, but there could be more of those type of deals but also maybe some more established brands as well because -- but we -- I think the key factor is that we'd have to see very clearly the plan and where we can add value for those brands post acquisition to create real organic growth from then.

Our next question is from Aneesha Sherman, Bernstein.

Just another quick one, please, responding to a comment that Carol made about the agility of buying model. As your portfolio grows internationally, obviously, you have to pay more attention to things like regional trends, weather patterns as well as a slightly older demographic and different aesthetic with the newer brands. Can you talk about how you're planning and managing assortment internationally and across brands as the portfolio grows and what investments you're making to make sure that you're current in managing the assortment across all of those different target demographics?

So in terms of managing the -- sorry, Carol. Go ahead.

No, no. You go ahead, John. You go ahead.

Okay. I'll start. So in terms of managing, at the moment, it's quite straightforward actually because it's one part of stock going out to all of the regions. Clearly, for example, we have some seasonal differentials. So as an example, Australia [ summer and winter ] versus Europe and the U.S.A. So that's one that we plan in. But effectively, the best sellers tend, like 99% of the time, to be best sellers across all markets. What you see underneath the bonnet of that is probably just different preference and rate of sale on color, on size. Or it could be seasonal timing in terms of when seasons kick off. So today, it's not very difficult to be able to manage that. The extra complexity comes when we have the international warehouses and we're managing multiple parts of stock and trading as fast as what we are today and then the countries that we source from. So as part of the exercise as we plan the next warehouse and the international warehouse, it's just as big a part of the planning as building the warehouse as it will be in terms of how we trade and how we manage our parts of stock. Is that physical? Is it more AI? Is it changing our sourcing? Clearly, in different countries and regions, there are different duty, import duties, as well. So getting all of that right is absolutely key, which we're working on. But we're very confident, with the right planning, we can overcome all of those. We won't be the first retailer to have an international warehouse.

And there is no further question. I hand back to you for any final remarks.

That's it from us, guys. As I said, look, we've had a really busy quarter. We're really, really pleased. Thanks, everybody, for joining this morning, and catch up with you all soon.

This is now concluding our conference call. Thank you for all attendees. You may now disconnect your line.