Dusk Group Limited (DSK) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Dusk Group Limited FY '25 Results. [Operator Instructions] I would now like to hand the conference over to Mr. Vlad Yakubson, CEO and Managing Director. Please go ahead.

Good morning, everyone. My name is Vlad Yakubson, CEO of Dusk Group. With me today is our CFO, Gordon Squire, and we welcome you to our FY '25 results briefing. FY '25 marked a pivotal chapter in Dusk's journey as we successfully launched the first phase of our rejuvenation strategy. With fresh, innovative product ranges and a significantly enhanced omnichannel experience, we've captured the imagination of both loyal and new customers. Under the leadership of our new management team, operational improvements have begun to reshape our business, driving momentum and reinforcing our position as a category leader in the home fragrance category. These early results reflect our commitment to growth, innovation and delivering exceptional value to our customers. Slide 4 shows the headline numbers for FY '25 results. Total sales of $137.8 million were up 8.7% on the prior corresponding period, or PCP, driven by strong contributions from product collaborations, a successful Christmas product range and successful trials of monthly fashion drops. Like-for-like sales were up 7.1% on PCP. Online sales were up 50.1% and represented 7.8% of total sales, a significant improvement on the 5.7% recorded in FY '24. Gross profit of $87.7 million was up 7.5% versus PCP. Gross profit percentage of 63.7% was 68 basis points lower on PCP as we responded to a highly competitive environment and tactical promotional activity to maintain market share. Underlying EBIT of $7.7 million was up 22.9% versus PCP. Note that underlying EBIT is unaudited pre-AASB 16 and excludes one-off restructuring costs of $0.8 million. CODB continued to be highly controlled in FY '25, with CODB percentage of 55.3%, a 110 basis points improvement on FY '24. This reflected significant improvements in store wage productivity that reduced overall wage expense. Inventory of $17.3 million was above $15.5 million at the end of FY '24, reflecting the cadence of new product ranges and ensuring we maintain appropriate stock levels to maximize sales. Pleasingly, our inventory remains clean and well balanced. Cash closed at $20.2 million compared to $20.8 million at the end of FY '24. I would highlight that we paid an additional $5.3 million in dividends during the year, including our first ever special dividend. The Board has declared a final dividend of $0.02 per share, bringing total dividends for the year to $0.12 per share fully franked. Slide 5 provides an overview of our rejuvenation strategy with phase 1 successfully completed in FY '25 and phase 2 underway. The turnaround is centered around 4 strategic pillars: talent renewal; product rejuvenation; the expansion of our customer base; and the delivery of an enhanced omnichannel experience. Turning to our FY '25 achievements. We welcome exceptional new talent across the business, bringing fresh energy and new perspective to our strategy, trading approach and brand positioning. This renewal has been instrumental in driving strong performance and setting the foundation for sustained growth and innovation. We reinvigorate our product, increasing the cadence of new innovative product offerings, impactful brand collaborations and a successful expansion in the Bath & Body category. We made good progress in expanding our customer base, increasing shopping frequency among existing customers and acquiring new customers, especially youth and male shoppers. This reflected multiple initiatives, including new and innovative product, targeted member exclusives and a revitalized brand identity. We also delivered a better omnichannel experience, resulting in strong performance across all channels. This reflected an enhanced digital experience that drove online trade, increased investment in content and digital marketing to boost brand awareness, site traffic and conversion rates. We also made changes that significantly improved our store productivity and launched our first AfterGlow trial. Phase 2 of our strategy is now underway and will focus on several key areas. Firstly, talent renewal will extend to our store team as we reset our culture with greater emphasis on sales skills supported by training and development programs and the refinement of our retail incentive structures. Secondly, our product strategy will shift to the rejuvenation and expansion of our core range. This begins in September with the relaunch of our largest core range, Signature Collection, which represents approximately 27% of total sales. Thirdly, customer expansion will focus on the alignment of marketing and product to attract youth and male customers. The launch of our new CRM tool will enable more targeted interaction with our customer base, supporting both acquisition and retention strategies. Finally, we'll continue to invest in our omnichannel experience. This includes expanding the trial of our new store concept, AfterGlow to more locations, reducing SKU width per store to declutter as well. We'll also enhance visual merchandising to reflect AfterGlow styling in top-performing stores in the lead up to peak Christmas trade. Our CRM will provide us with a single view of Dusk Reward customers across online and store channels. Turning to Slide 7 and our sales results. At the end of FY '25, Dusk had 150 stores, including 2 online stores, which was slightly ahead of 149 stores in FY '24. Total sales were up 8.7% as our rejuvenated product offering and better online execution delivered strong sales growth and market share gains. Like-for-like sales increased by 7.1% in FY '25 on PCP, with stores up 4.4% and online up an impressive 50.1%. We're particularly pleased with the successful expansion of our Bath & Body category, which now represents over 5% of the sales mix compared to 1% in FY '24. This reflects the strength of our new buying team, their understanding of trend forecasting and consumer behavior and the ability to deliver world-class Bath & Body product ranges. The category is attracting a younger customer cohort and provides these customers with a lower entry price point to the brand. Sales productivity gains were achieved across our store portfolio with improved sales per store and sales per square meter. New collaborations and fashion ranges performed well, offsetting the underperformance of core ranges, which are overdue for a refresh and priority for FY '26. Turning to Slide 8. The strong growth in online sales reflects investment in site experience and digital marketing that have driven higher traffic to site, improved conversion rates and better trading of the channel. Online sales of $10.8 million were up 50.1% on PCP, with online sales penetration of 7.8%, which exceeded the 7.5% achieved in FY '21 during COVID. This gives us confidence that in the medium term, online could represent 10% of sales. Click & Collect remains popular with our customers and accounted for 25% of online sales. As part of our ongoing commitment to enhancing customer experience, Dusk continues to invest in the growth and optimization of our digital channels. Our priorities in the online space include advanced data analytics to better understand behavior and drive engagement and customer personalization to improve conversion rates. In the second half of FY '25, we successfully trialed online exclusive products and promotions and intended to scale this offering further in FY '26. Turning to Dusk Rewards on Slide 9. At the end of FY '25, Dusk Rewards had 653,000 active members, with member purchase accounting for 57% of total sales. The total number of members declined by 3% year-on-year, reflecting the natural expiry of 2-year memberships acquired during the COVID period. However, the rate of decline has moderated. Member sales grew 8% on PCP with 24% growth in the second half, driven by targeted exclusives and member-focused events. In FY '26, the rollout of the Salesforce CRM platform will enhance the engagement both with our reward members and our broader e-mail database of 1.5 million customers. Slide 10 compares the average transaction value of Dusk members and nonmembers. Over the past 5 years, Dusk Reward members have consistently demonstrated higher average transaction values or ATV compared to nonmembers. In FY '25, members had an ATV of $55 versus $42 for nonmembers. The slight decline in the average transaction value in FY '25 reflects strategic shifts in our product mix, including the successful expansion of the Bath & Body category and the introduction of more accessible price points in our electronic diffuser range. While diffusers are becoming increasingly commoditized, our ability to grow unit market share in this segment demonstrates the strength of our brand, customer loyalty and execution in a competitive landscape. Looking ahead to FY '26, we'll continue to explore new product categories to grow basket size across both premium and entry-level price points. I'll now hand over to Gordon to take you through some of the financial results in more detail.

Thanks, Vlad. Slide 11 shows Dusk's results on an underlying basis, which is unaudited pre-AASB 16 and excludes one-off restructuring costs, impairments and prior period adjustments. The following metrics for FY '25 is on an underlying basis. Total revenue was $137.8 million, which was up 8.7% on PCP. Gross profit increased by 7.5% to $87.7 million, and our gross profit margin was 68 basis points lower at 63.7%. Our cost of doing business, or CODB, was $76.1 million, which was up 6.6% on PCP, excluding one-off restructuring costs of $0.8 million. Costs were well controlled across the year, with CODB increasing by 1.5% in the second half compared to 11.4% in the first half. Dusk remains focused on a disciplined cost control approach, whilst ensuring key strategic initiatives with a strong ROI are fueled with the right level of investments. Noting these key P&L drivers, we achieved an underlying EBIT of $7.7 million, which is up 22.9% on PCP. We continue to operate an ROI-focused model with every new project or initiative to meet strict financial hurdles prior to deployment. Turning to Slide 12. We delivered strong growth in gross profit dollars despite a 68 basis point decline in gross profit percentage due to the heightened promotional activity and FX headwinds, largely offset by efficiency gains in our distribution channel and supply chain. Turning to Slide 13. We saw an improvement in CODB rates to 55.3% from 56.3%, which -- versus PCP, demonstrating Dusk's ongoing cost discipline. CODB dollar increased by 6.6% on PCP, mainly due to the higher employment and occupancy costs and additional investment in brand and marketing expenses. This also includes accruals of STIs versus 0 accrued in PCP. Dusk continues to demonstrate tight cost control with productivity gains partially offsetting inflationary pressures despite ongoing pressure from landlords and mandatory wage increases. Moving on to the financial position on Slide 14. Dusk continues with a strong balance sheet with closing cash of $20.2 million and no debt. This was $0.6 million lower on PCP and partially reflects the payments of an additional $5.3 million in dividends in FY '25, including the first special dividend provided further shareholder value. Inventory finished the year at $17.3 million. Productivity, which we measure using annual stockturn improved by 16% throughout the year. We remain focused on driving productivity throughout our stores whilst ensuring we have the right balance for growth. Inventory remains clean and well balanced. Our strong balance sheet provides flexibility to respond to growth opportunities and/or implement further capital management initiatives. The Board has declared a final dividend of $0.02 per share, bringing total dividends to $0.12 per share fully franked. I will now hand it back to Vlad.

Thanks, Gordon. I'll now turn to an update of our strategic priorities. Slide 16 outlines 4 levers that will grow, will drive growth in Phase 2: Product newness; refresh of our core product; a new store concept; and the realignment of our brand ID. These measures will result in an overhaul of significant customer-facing areas of the business, accelerating sales growth and engaging new and existing customers. The aim is to grow outside seasonal peaks and position ourselves for international expansion. Slide 17 provides some examples of our investment in above-the-line brand marketing campaigns in FY '25 to position Dusk as the go-to destination for home fragrance all year round. From product launches to street posters and digital marketing channels, these efforts have delivered favorable ROIs across traffic, new customer acquisition and digital revenue. Turning to Slide 18. We're encouraged by the early results from our AfterGlow trial following the refurbishment of our West Lake store in Adelaide and opening of our first CBD store at Queen Victoria Building in Sydney. Our primary objectives in redesigning our store format is to enable our product to shine, better align store aesthetics with refreshed and contemporary ranges, visually differentiate Dusk store in the market and drive improved commercial performance by appealing to a wider audience. Early feedback has been encouraging at both stores. We'll now expand the trial to more AfterGlow stores, refurbishments and new in FY '26. Slide 19 shows that AfterGlow represents a complete transformation of our storefront with major changes, including the introduction of digital screens, enhanced lighting, new floor fixtures and shelving. From a customer point of view, the product is much better presented to store less cluttered and more shoppable. Gross CapEx will be approximately $250,000 to $350,000 depending on store size and before landlord contribution. The next phase will be focused on testing in peak trading periods, refining our design and developing multiple tiers of AfterGlow for different store gradings. Slide 20 shows the encouraging early performance of our West Lake store following the conversion to the AfterGlow format. In the first 5 weeks, sales are up 49%, ATV up 17% and units per transaction up 24%. We're picking up new customers and are seeing exponential growth in new members as well as the rate of member re-signings. I would note that there are other factors driving the store performance with the relocation of the store within the center and a 30 square meter increase in store size. In late September, we will trial another AfterGlow store, which will provide a clearer read of the upside from the new concept. At Macarthur Square, the only change to store will be the redesign. Turning to the trading update and outlook on Slide 21. We've had a solid start to FY '26. Total sales for the first 8 weeks were slightly down 1.5% year-on-year as we cycled comps of 16% in the prior period. This reflected the launch of the highly successful Allen's Lolly's collaboration in the 1st of July 2024, which drove an uplift of 22.1% in July and 8.6% in August 2024. We have seen a return to positive sales growth in August, which was up 4.8% on PCP, making a strong recovery from a softer July trade. Our recent Willy Wonka collaboration launched at the beginning of FY '26 is performing well, particularly in the Bath & Body category, which now represents over 30% of our product mix and continues to resonate with younger customers. Our Beetlejuice collaboration went live last week and resulted in our highest-ever level of social media engagement. It has delivered above internal expectations. In the first half of FY '26, we'll expand the trial of our AfterGlow format to Macarthur Square in New South Wales with a further 2 planned in the second half of FY '26. Our store network optimization continues with 2 planned store closures and 2 new openings in the first half of FY '26. As we prepare to launch our most significant core range refresh in September, we anticipate some short-term margin impact in the first half of FY '26 versus PCP, but this is a strategic investment in long-term growth. We're optimistic that the upgrade in the quality of our fragrance and packaging will resonate well with our customers. We are also well positioned for the upcoming Halloween and Christmas trade periods with exciting new product ranges designed to engage both loyal and capture new customers. Looking ahead, we remain confident and optimistic about our business. The foundations laid in FY '25 has set us up for success, and we are well placed to capitalize on improving consumer sentiment and deliver continued growth in FY '26. I'll now hand back to the operator to open up for any questions.

[Operator Instructions] The first question comes from Allan Franklin with Canaccord Genuity.

Nice to see the updates. I had probably 3 questions, if I can. Just on the sell-through of the Willy Wonka range, if you can provide a bit more sort of detail. I appreciate Allen's had a very, very strong sort of July last year. Are we thinking Willy Wonka sort of extends through the balance of the first half and just sort of matches the sort of sales timing that you had in market with Allen's and just how to contemplate Beetlejuice? Is that viewed as a completely separate collaboration or within the same ranging?

Yes, I can probably answer that one first, Allan. And so first of all, to note, obviously, Allen's when we launched last year was the first collaboration we did in 2 years. So we're obviously cycling that. Allen's was bought for a 6-month trade period from July to December being the first half and Willy Wonka was bought for the same time frame. So we should look at it in a very similar format with that. As I said, we're very encouraged by what we're seeing in the Bath & Body category and using product collaborations as a lever to not only capture new customers, but introduce this category to the wider audience.

And just to add to that. Allan, just to add a bit more color around the timing, Allen's as well as Willy Wonka, the biggest sale period is July and August, and it starts to tear off from there.

Yes. Got you. Helpful. And then noting the commentary around the core Signature range, you do reference enhanced product quality, higher margins than the existing range, but you also referenced, I guess, a pressure point into the first half. Is that just because you're sort of moving older stock on? Or what's the -- given the take there?

That's a great question. It's obviously a significant portion of our sales. And as we soft launch early September, the Signature -- the new Signature, call it 2.0 throughout selected stores, and we ramp that up as we get through the half. We obviously need to exit the current Signature range at the same time. So we've got a very strategic view on it. There's been solid plans laid in the foundation of exit by region, by stores of how we do that. But we anticipate exiting the old Signature by the end of the half. So that may obviously have some sort of impact on trading margin as we exit the older range, and we bring in the new range.

Okay. Got you. Last one, just around the store refurbs and the new sort of test and learn. I guess 2 parts to it. I mean, what sort of period of time do you think you need to test and learn this in multiple different environments to get a better feel for, I guess, success? I know you mentioned you want to test it during a stronger sales period as well. And then when you look at your store network, maybe just reframe of the 140-odd stores, I mean, logically, if you do move forward with refurbs, how appropriate would it be across that network? And I guess, is it plausible that you could do 10 to 20 a year? Or is it very rough numbers you can sort of talk to in terms of how rapidly you could roll out if you got to that point?

Yes. Look, our new AfterGlow concept, we're very encouraged by the results. But it's a test in a couple of things, actually. It's a test of a new concept, and it's a test of -- we've slightly increased the store size, and we've moved to a location as a strategic view on the network portfolio of our stores. We've mentioned in the past that we see ourselves slowly transitioning to a lifestyle brand and being in the mix of right between the fashion brands and the home services areas in the center. And the first West Lake store after the concept tests all those. We continue to be really curious with the results that we are very, very encouraged. But there's a lot to learn. And to answer your question, we must see peak trade being November, December. We -- once we know that the store can handle the volume and we can see, a, the customer uptake, we can look at the store metrics, we look at the commercial side of the results post-Christmas trade. We'll have a much better view on how quickly do we want to roll it out moving forward. And I'll let Gordon talk about the store portfolio.

Yes. Thanks for the question, Allan. I think it's important to note, as Vlad said, it's only 5 weeks in. We're still in the early stages. We've really got to get a good read over the next 4, 5 months. I think in the start of the second half, we'd have a really good view on an outlook of what that store rollout plan could look like. The reality is long term, yes, if and when this works, we'd like to roll it out to more stores, but we've got to be conscious of the financial effect on closing 5 to 10 stores a year and what that means in terms of sales and profitability. So we're conscious of the CapEx investments. We're also conscious of not destabilizing our bottom line.

The next question comes from Garth Francis with MST Marquee.

Just to follow up on the trading update. You called out the performance of the promotional products. Can you give us a sense of just how the core has performed in the same period?

Yes, we can. From a trading update, we were -- the core actually held up decently well, including some of the other fashion lines that we've had at the same time. So even in July, we've seen positive sales results. The largest variable, of course, being Allen's and Willy Wonka in terms of the sales levers between the July and August period.

Terrific. And then just on the gross margin, you called out the 170 basis point impact from promotions and currency. Just -- and then the commentary just around the Signature range changeover. So is your expectation then just looking to the first half that the second half performance is a base for our thinking? And do you think you'll be able to improve on what you achieved during the second half?

So Garth, maybe I'll answer on the Signature component and let Gordon talk about the margin. It's -- first of all, we're very optimistic about our new Signature range. Not only are we extending some of the fragrances that we've been able to offer our customers. This is the most significant change from a product perspective that we've undertaken in recent years. So it's a very big part of our sales, an important one. We're also very pleased that we've been able to achieve better intake first margins and efficiencies with our supply chain. So I think that will materialize as time goes on. But as mentioned, we're rolling it out in selected stores throughout the first half as we start to exit the older Signature. But by the end of the half, we expect it to be live almost in the majority of our network. I think that's really important to note. With regarding the margin, I'll let Gordon comment on that.

Garth, thanks for the question. To answer your question around margin levels, the answer is no. The margin for the first half of '26 is not the exit margin in the second half. We're talking about a like-for-like comparison. So historically, which we see continuing, the margin in the first half is higher than the margin in the second half, and we see that continuing. Yes, there is an early effect on Signature, but it will start to normalize once the old Signature exits, which is really aimed for the end of the first half.

Terrific. And then I presume you would have had some tailwinds from freight and rectification of where currency wise for the second half, which would also be supportive.

Correct. So I think with -- obviously, we had a bit of pressure in the second half with rolling off our FECs and booking new. But the current FX is sort of somewhat stabilized around that 0.65. I think it's 0.654 as of yesterday. So new bookings is pretty decent for the first half of FY '26.

The next question comes from Akashdeep, private investor.

Congratulations on a good set of numbers. And I just got a couple of questions. First is like as we're taking new refurbishment, so I just want to know like how long does it take for refurbishment to complete from start to end? And like what will be the impact of -- on the sales if we go, say, like 5 to 10 stores a year?

Yes. Thank you. It's a good question. End to end from closing of the old site to opening the new site, it's anywhere between 3 to 4 weeks, depending on the store size and where it is, but closer to 4 by the time we've stocked out and being ready to trade, it's about a 4-week impact per store.

Okay. And -- all right. And another thing is like with the SKUs we are planning to discontinue. So like what are the key factors we consider to discontinue? Is it the sales? Or is it the margins? Like just can you throw some light on that, please?

In terms of the SKUs, in terms of the decluttering our business, we've got quite a lot of opportunity with the enhanced BI tools that we've got now to really understand where the profitability comes from by collection. So in every collection, there's the best performers and the lowest performers. What we're really focused on this year is cutting off the tail of every collection that doesn't warrant space in store. And that's usually based on the sell-throughs of product, the stock turn of product and how much, obviously, we've bought of it at the beginning. So we're really becoming focused on efficiencies with stock turn.

Okay. And like how much do you think that it's going to impact our working capital? Like is it going to improve it significantly? Or is it just going to be a minor improvement?

Yes. Of course, in the short term, there will be a working capital effect, but it's very short term. Once we bring in the product, it will turn over 2 to 3 months and start to normalize. So by the end of the first half, we should be in a very similar position as PCP.

Okay. Okay. And can you throw some more light on this new skill program, which has started, like you say that the more focus is on sales rather than operations. So is it like incentives are linked to what staff -- like how much sales of staff made or...

Yes. It's one of our key focus points that we're -- we're really focused on making sure that we're always customer first across the entire business. But the biggest focus we've got at the moment is attracting top talent to our business, and we've got a new Head of Retail that started with us late in the second half of '25. And what we're really driving now is the one single viewpoint, customer comes first. So we are continuing to analyze rewarding ATV, items per customer, membership sign-ups and sales versus our internal targets. And the new incentive structure that we're still fine-tuning, we'll continue to fine-tune until we're really happy with it and the feedback is really good is that the team get rewarded for creating moments that matter with our customers.

Okay. And how long has it been started for? And what is the impact on sales like per store based on this new program?

Yes. It started -- we started the trial in September last year, and we've introduced certain components of it all the way throughout FY '25. It's still in its test phase. And as I said, there's a couple of things we probably need to tweak getting into the peak trading period of '26, but we're encouraged and the feedback coming back from particularly our leadership team in the retail structure, which is that area manager, that state manager and store managers is very positive.

Okay, to say that. And so one more thing on costs. So what the initiatives we are taking to reduce costs down further? Because like there's a big difference between our gross margins and our operating margin. So we can like maybe what we're doing to like improve our operating margins further?

In terms of the gross margin, is the question around cost or the gross margin?

Like so not gross margins, but the costs. So what we are doing to drive that gross margins more to profitability at operating level and net profit level.

Yes. Thanks for the question. So we continue to take a cost disciplined approach across the business. And I think that's evident in the second half of '25. We've -- CODB grew 1.5% versus -- I think it was 11.4% in the first half. So if that's our exit cost approach, we'll continue to drive efficiencies across the business. There's still lots of opportunity. We saw some really good wins in terms of store productivity with wages. Yes, there are inflationary pressures that we face, but there's still good work to be had.

Okay. And so going forward, like the quantum of sales growth and cost will not be in mind. So the cost will be -- the growth in cost will be lower than sales growth, yes?

We don't provide guidance, but we certainly look to drive efficiencies in the business.

The next question comes from [ Benny Malt ], private investor.

I just had a question about the members. They're down 100,000 in 3 years. And what's your strategy to get them to grow in the coming years? And my other question was strategies for improving the second half, which seems to be a very difficult period compared to the first half, and it seems to be reoccurring year-on-year.

Yes. There's a couple of questions to unpack there. First of all, what you're probably looking at is a very different macro environment during COVID years, and the sales volume reflects that in the Dusk business. I think what we should be really focused on, which we talk about internally all the time is we've got 1.5 million people on our e-mail database. And as we continue to capture new customer cohorts, it might take a couple of times for them to shop with us before they sign up to a membership program that they feel there's real value to be signed up for. I think we're actually quite optimistic about the rate of decline in our members year-on-year as we start to cycle out of all those COVID sign-ups 2 years ago. So as we capture new customers, as we refine and we've said we're about to launch a brand-new CRM tool, that's really focused on personalization and having a real thorough understanding of the lifetime value of members, how they shop, when they shop, where they shop. As we continue to do that, we anticipate that the membership will continue to get stronger and stronger and stronger, and will also allow us to make a better decision to enhance our loyalty program, as mentioned in the past, in the second half of FY '26 to understand not just gut feel, but have the data and the knowledge with the CRM tool to make good decisions moving forward. With the second part of your question, which is being on the second half being tougher than the first half, that's quite historical with Dusk. That's not a surprise to us. Our -- as a leadership team, as a new exec team, this was our first crack at delivering the second half results. Now there's been highlights within the second half, and there's been lessons for improvement and opportunity. And I think as we continue to tweak our business model to become a bit more lifestyle rather than just being a couple of times a year being focused on the Mother's Day trade and Christmas trade, that's going to take years to eventuate, and make sure that not only are we attracting new customers to come and shop with us in the second half, but members continue to see a reason to look at us as a lifestyle choice and a gifting choice throughout the second half. That's not an easy transition nor is it an easy win. What we've done though to mitigate that is we've made sure our CODB is very, very tight in the second half, and we've demonstrated that really well in the '25 results. But historically, Dusk has been known for those 2 events, and we will continue to focus in, and we've got quite a few initiatives going in for this second half to try again to see if we can move the needle and entice our customers to shop with us.

Yes, that was all. I was just looking forward to seeing the Dusk members rise because yes, I have been following the metrics for this company for the last 3 years. And it's just been interesting. I have noticed that the second half has been hard for Dusk every year. So yes, that's about...

That's correct. Our focus is on maximizing the first half and making sure that we continue to do an outstanding job of the key events in the first half and continue to test and learn with opportunities to improve the second half performance.

Yes. Maybe there's some more offers you can do to get members in, in the second half and all that stuff.

Yes. Yes.

The next question comes from [ Peter Stuart ], shareholder.

My question relates to capital management. As a shareholder, I was very grateful to receive a special dividend at the first half, but that kind of pales into insignificance by the 35% fall in the share price to today since then. And I'm wondering whether much better use of capital if the share price doesn't recover, and it certainly hasn't looked like recovering today, would be a buyback, given that we've got this $20 million sitting on the balance sheet there, whether a buyback while the share price is low would help. And I'm not talking about supporting the share price, I'm talking about improving EPS, whether the best use of capital to improve EPS, and I'm talking statutory EPS here, would be to think about bringing on a buyback.

Yes. Thanks for the question. I think similar to sort of what we said in the Feb announcement, the Board have considered all options, whether it's buyback or special. And we felt for this year, it was the best decision in terms of capital -- early capital management to do a special. And just to note, we paid out $0.12 in full dividends versus $0.065 last year. So it's almost double. So we have provided significant shareholder value. But to take your point on share price, the reality is that the Board will continue to assess the capital management going forward.

As I say, the focus to grow the share price in the long term, statutory EPS needs to consistently grow. And I hear from a lot of companies that I invest in these underlying this, underlying this are doing very well. But at the end of the day, in the long term, the return on investment, return on equity and the growing EPS is what drives shareholder value in the long term. So if that could just be considered, please.

Yes.

Yes. Noted.

We have a follow-up question from Garth Francis with MST Marquee.

Can you just talk to what you're seeing at the CBD store at the QVB and early signs of the performance? Is that hitting metrics? And how do you feel then about targeting more stores of that nature?

Yes. I think there's a couple of things to talk about. First of all, the QVB stores obviously opened in early July for us. So it's early days. And what we are learning is that it is a very different customer to the -- what I would call a normal customer and the amount of time they're spending dwell time within the store is significantly shorter than what we're seeing in the rest of the business. But we're encouraged by the results. We continue to be curious on what's selling, and it's a 52-square meter space. So it's the first time we're trying to not only learn from a CBD location and how to process that customer transaction quickly and efficiently, but we're also learning about how to manage a 50-square meter space operationally, what works, what doesn't and has a really strong Jim Rohn return in that space. So early signs are good. We're encouraged by that. I think there's a number of other initiatives such as the DFO business that continues to do well. There is no other plans to open a CBD store because we again have to understand peak trade period in a 50-square meter space come Christmas. That's really our prize. But I think there's other opportunities in the DFO channel that we trialed one store that did really well that we are looking forward to expanding further.

Perfect. And then in the strategic section of the presentation, you mentioned setting up for international expansion. you just elaborate on that? And I mean, is this a 5-year plan or a 2-year plan?

Well, it's a good question. I won't provide the guidance on time lines, but I'll say this. I think Phase 2 is very significant to our business part of our rejuvenation program. We need to make sure that not only is our product range from a core perspective, stable and world-class, but we also need to make sure our systems, our people, our structure is well set up and sound and as measured by our results in the next 12 to 18 months to make sure that the results verify the strategy and the implementation and what we're trying to achieve. So there are certain hurdles we've all got internally that we're trying to meet to make sure that our business is fit to take our business model overseas. We've always said we are so proud to have a vertical business. We control our supply chain. We control what goes in and out. We control our fit-outs, we control our team. I think our path forward from a strategic growth point of view is becoming clearer. We've got good things going on with AfterGlow. We've got opportunity in 12 to 18 months to take our business further if we need to, but we've got to continue to meet strict hurdles, and we're very hard on ourselves in terms of metrics that we are set up well before we do anything else.

Great. And then just on the CapEx, that was down on last year. I appreciate that there were fewer store openings during the period. But with the refurb cycle, I mean, if you've got a 5-year lease term, 150 stores, you're looking at probably around 30 stores that need to be resigned. You mentioned that AfterGlow would be a considered approach. And then you've also mentioned the CRM as part of Phase 2. Is that a CapEx spend or an OpEx spend? And should we expect to see CapEx increase materially from this year?

Yes. Garth, I'll take that. Just breaking out that into 2 questions. The first question, if we -- on average, if we roll 30 stores a year, that's not an indicator for us to say let's turn 30 stores into AfterGlow. Just mentioned on one of the questions before, we will take a measured approach. It's still early days in terms of concept efficacy. It's only been 5 weeks. Yes, the results are promising, but we need to get through a peak trade period like Christmas. We'll probably have a better view and assessment early in the second half. And then just to shift to the other question in terms of CapEx. Yes, there has been a fair bit of intangible investment, one being the CRM, but other is we still continue to invest in our website. So we launched it in July '24, but there's continuous investments in terms of improving conversion, efficacy, et cetera. So there is an intangible -- material intangible component to that, yes.

And Garth, just further to that about AfterGlow concept and we've put it in the presentation that we -- the true test for us, and we're really looking forward to it because the numbers are very encouraging is the Macarthur store. That's not a relocation nor is it a change in store size. That is literally just a change in concept with all other factors being equal. So we're obviously expecting that sales run rate to normalize, but we're very encouraged by what we're seeing.

And then just can you -- the closures and the guided 2 closures, 2 openings. Is that -- can you just give us a sense of the -- where are those closures happening? And are those underperforming stores? Or is it just -- what is the nature of that?

Yes, I can take that. Look, one of our strategic initiatives that we're doing is obviously continued renewal of our property portfolio and making sure that the network remains profitable. And so we often look at our bottom 20 stores, even if they are profitable, we don't want to be just profitable. We want to make sure that all our stores are highly profitable. So we always naturally want to recycle the bottom performing stores and introduce some bigger engines to our store portfolio mix when the opportunity arises.

Yes. Just to add flavor, Garth. Obviously, even if the store expires in the first half, we're conscious that we get peak revenue and earnings through the Christmas period. So we would somewhat try and delay closures in the first half versus the second.

Are you targeting urban areas or you mentioned you're waiting on CBD, but will those be more urban than regionally focused?

It's a combination of both.

Yes. There's no segregation.

Yes. Okay. And then just on the sourcing front, I mean we haven't chatted to that specifically, but have you seen any benefits to your -- from your suppliers in terms of how U.S. tariffs may have impacted volumes through factories, have you managed to increase your buying?

Yes. Look, interestingly, I traveled to China early in the year, and I did some Southeast Asian factories as well. The large majority of them have found ways to negate all the tariff discussions from multiple strategies. So I would say that we haven't seen a positive impact because of the tariff situation. What we have seen a positive impact is new suppliers that we've -- our sourcing team has been able to find. We've been able to negotiate better terms with our existing suppliers. And I think the wins are largely coming as a result of outstanding work within, not because of the tariff introductions.

The next question comes from Richard Wilkins, private investor.

Just firstly, I'd like to say that I agree with one of the previous callers about the use of cash to buy back shares when the share price is low. I think it's on the ball. But my question is more about -- I'm from the northern suburbs of Melbourne. I've noticed you've got Glow fit-outs in Northland and Greensborough, but places like Epping and Westfield Plenty Valley, you still got the old legacy format. I know you've spoken a lot about AfterGlow and how promising it is. But we've still got a number of stores with the legacy format. I'm just wondering how many of them have we still got? And are they going to be changed anytime soon to either Glow or AfterGlow?

Yes. Thanks for the question. I mean legacy stores, which is the first format, we've got -- it's in the teens, at circa 15 stores on legacy. So it's -- although you've seen 2, I don't think if you extrapolate that, that's a lot over the country. And it's all dependent on lease renewals. Once the leases come up for renewals, we assess the viability of the store. And although we might keep the store open, if it does really good bottom line, we won't necessarily just change it because it's a 3 -- you don't get landlord contributions when you do a lease renewal. So it's got to hit the financial metrics to change the store format and not just change it by default.

That's all I had. As I said, I agree with the caller before that -- I know we've spoken about things being -- looking good, and we're optimistic about this and optimistic about that. But the thing is the profit hasn't changed from last year. I just wonder whether the best use of the cash is to buy back shares whilst the share price is low. I got to say I agree with that. So that's what I like to say.

The next question comes from Anthony White, Private Investor.

It's a solid presentation. I just want to get my head around a little bit more of the qualitative aspects of the last year. So with the Willy Wonka, it looked like there was a bold step away from normal customers and normal targeting. It's different from other collaborations. Could you just -- probably one for you, Vlad. Are you able to talk us through what you were trying to achieve out of the Wonka collaboration? Was it for the younger customers? And what was the -- did we see benefits out of that?

Yes. Thanks, Anthony. Great question. As mentioned, generally speaking, our strategic approach with collaborations is to acquire either a new customer to our business or be able to introduce new products to customers in our business. So Willy Wonka particularly was -- it's quite an nostalgic brand with the movies and so many things that have happened throughout the years. But what we've tried to target is development -- continued growth in home fragrance, such as candles, but we've also strategically tailored the range to a lot of Bath & Body youth products. So -- and we're very encouraged by that. Over 30% of our sales mix in Willy Wonka is in the Bath & Body Personal Care category mix. So it's been very clear that we've been able to introduce another new customer, slightly younger than we've historically had to the Dusk brand. In one of our strategic pillars, we often talk about that Dusk, the ability to become a lifestyle brand involves capturing not only unisex male shoppers, but a younger cohort of customers and Willy Wonka has been able to provide us with that.

Great. And just with the core range, what has informed -- sorry, the new core range, what has informed the decision-making behind the fragrance changes? So has the -- are we looking at sort of like the collaborations that you've done on recent events? Or has it been informed by the last couple of years of what popular fragrances there has been? Or is it just sort of new packaging?

No, it's definitely not. So being such a significant portion of our sales and probably, as I said, one of the absolute for us, one of the highlights, but an opportunity to rejuvenate such a big part of our business is we've taken the absolute customer favorite fragrances, and we haven't changed those. So what we have changed as a Signature range is the upgrade of not only just the packaging, but the vessel. We've also -- even if it was -- let's for argument's sake, was a vanilla caramel candle, we've intensified the vanilla caramel fragrance within that candle that we think our quality of product is far superior than anyone even close to our price point. On top of that, and that's been done through data, that's more than 2 years of history because the Signature range has been in our business for years and years and years and years. It's actually underpinned the Dusk core program for almost since the beginning. But the secondary part of that is then the buying team working with our fragrance houses and understanding what are the trending fragrances in the market, what's happening overseas, listening to our customers through feedback to our online channel, asking and searching in our online store for certain fragrances, taking that into account and working with our suppliers to understand what the world has got to offer in the best fragrance that we may potentially be missing, and we've added that into the new Signature range. So the good news is that the customer favorite Signatures will return and amplify it so they'll look better and even smell better and last longer, but also we'll introduce some new fragrances to see how that resonates with either a new customer cohort or the existing customer being excited by something different in their favorite range.

All right. And just got 2 more here, if you don't mind. You've got the multiple collaborations that are coming through now. How many collaborations are you aiming to have per year? Or is it just sort of as needed basis?

No, it's not as a need basis. We have a yearly calendar on collaborations, and we strategically place them at important times of the year or times of the year that we want to test and learn or try to capture a new customer. So for example, Beetlejuice launched last week. It's clearly intended for the pre-Halloween season. And as we mentioned, it's performing above expectations. It's been really well received. And again, to highlight how strategically we're trying to become that lifestyle brand and capture a wider audience, the Beetlejuice range is quite different to a strategic Halloween range or the traditional Halloween range. The fragrance profile is different. The look and feel is different. So we've got a couple more collabs to come. They're exciting. They're strategically placed throughout the year, and we're really looking forward to innovating again in these categories as the customer gets through the year.

Beauty. And just a final one. Just on the Wonka activation QVB, that was a pretty interesting setup. So hats off to the marketing team for that. But I was just wondering the intent behind that and if we can expect to see more approaches that are similar to that?

Yes. We -- I mean, that's -- first of all, it's the first time ever the Dusk brand has been able to not only just do an activation of that magnitude, but secure a prime location in the Queen Victoria Building in Sydney. That was outstanding, led by our CMO. What we've tried to do, again, is expose the brand to new customer cohorts and activate the QVB store at the same time that was downstairs. So there was a bounce-back offer to help customers discover our store downstairs. But again, it was all to do with fragrances. So if you did visit, and for the people that did visit, they'd be able to smell their favorite fragrance and be able to clink either QR code or get a voucher as a bounce back to our site to be able to experience our brand moving forward. We do think we're looking to do a couple of them a year as significant brand undertakings to grow the brand ID and the brand awareness. And it's been very optimistic. Customer has to provide their details to receive a free sample, for example. So we're able to capture new members as part of that.

There are no further phone questions at this time. I'll now hand it back to Mr. Yakubson for closing remarks. Please go ahead.

Thank you all for your time this morning and for continued support. These are exciting times at Dusk and our FY '25 achievements as well as our plans for this year would not be possible without the incredible team we now have in place. This is evident when you look at the depth in our product, online trade that is nearing COVID highs and our ability to go from concept design to roll out of a new store format in 12 months. I'd like to thank our team, both in our support office and across our stores for their dedication, passion and hard work. Their commitment is the driving force behind everything we've achieved. As we look ahead, we remain focused on delivering innovative, on-trend and affordable product solutions paired with an exceptional omnichannel experience. They are confident in our direction and are proud to be growing Dusk as the leading destination for home fragrance, whether for personal enjoyment or gifting. The future is bright, and we're just getting started. Thank you.

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