Lovisa Holdings Limited (LOV) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Lovisa Holdings Limited FY '26 Half Year Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. John Cheston, Global CEO. Please go ahead.

Thank you. Good morning everyone, and thank you for taking the time to dial in today. On the call today, you have our Executive Deputy Chairman, Mark McInnes; our Group CFO, Chris Lauder; and myself, John Cheston, Global CEO. As you are aware, this morning we published our half-year results to the ASX, and we would like to talk you through them now. I'll do a page turn through the highlights of the presentation, and we will then have to take questions at the end. If we first of all turn to Page 3, we will talk through some of the highlights of the year. I'm pleased today to present a strong result for the first half of FY '26, a true milestone for the business with sales exceeding $0.5 billion for the first time, which is again evidence of strength in the team, the product, and the potential of the business. Our store rollout maintained the momentum from the second half of FY '25, opening 85 new stores for the current half, taking the store network to 1,095 stores at half-year end. This allowed us to deliver strong growth in total sales of 23.3%, which included comparable store sales up 2.2% on the prior half year. As you will all know, we opened the first trial stores of our potential new global brand, Jewells, in the U.K. in June, and the results of the Jewells business are included in our first-half reported results for the full period. As Jewells is a strategic start-up, we will not be talking about it as part of today's results. And to assist with comparability with prior periods, we have presented underlying financials in our ASX announcement today which exclude the effect of Jewells on both the current and prior half year. So when I refer to underlying metrics on today's call, it represents performance of the Lovisa business excluding Jewells. Our underlying total sales were up 22.7% for the half year, with our underlying gross margin a real highlight at 82.9% for the half, up 50 basis points on the prior half year. We continue to invest in the cost structure of the business to support ongoing growth in stores and online, and the investment in the Jewells start-up phase. With all of this combining to deliver an underlying EBIT of $109.1 million, up 20.4%, and underlying NPAT of $69.6 million, up 21.5%, which has allowed the Board to announce an increased interim dividend of $0.53, up $0.03 on the prior year, to be paid in March. If we turn to Page 5, you can see the sales performance for the period that shows the benefit of our continued store network expansion with strong sales growth for the half year. Looking to our regions, growth was again strong in the European and Americas markets, with those regions providing the majority of new store growth. The APAC regions continue to be our biggest opportunity through a renewed focus on operational excellence with structural changes to our operations team now in place and starting to deliver benefits. I'll now hand over to Chris Lauder, our CFO, to talk through our financials.

Thanks, John. Morning all. If we turn to Page 6, underlying gross profit was $412.9 million at an 82.9% gross margin, up on the first half of last year by 50 basis points, which was achieved on top of the 170 basis point increase achieved in the first half of FY '25 and 220 basis points higher than the first half of FY '24. This result has been delivered from tight management of supplier cost prices, promotions, and our focus on keeping our inventory healthy, as well as improved performance in management of shrinkage across the business. We continue to focus on the efficiency of our inventory position and are very pleased we have been able to maintain our inventory in good shape. Turning to Page 7, I'll talk about profit. As you can see, we have again been able to deliver strong growth in both underlying EBIT and NPAT while continuing to invest into the business with a focus on service and management structures, technology, and supply chain to support our constantly growing business. As a result of all this, underlying NPAT was up 21.5% compared to the prior half year to $69.6 million, with higher interest expense and depreciation on store leases having an impact as a result of the ramp-up in new store openings in the past year and our constant focus on keeping our store network strong. This enabled the investment in the Jewells start-up phase, after accounting for which reported NPAT was at $58.4 million. Turning to Page 8, you will see that the cash generated by the business has again been a highlight. Cash from operations before interest and tax of $183.8 million for the half year, up 30.3%, reflecting tight management of our working capital. Cash capital expenditure for the period was $31.7 million, predominantly for new store fit-outs as well as store refurbishments and investment into new technology. Cash interest and lease payments were also higher than the prior year by half year due to the growth in the store network and higher borrowings and interest rates. Turning to Page 9, you will see that the balance sheet remains strong with a clean inventory position and significant liquidity available to fund growth. The solid profit result for the period and continued strong cash flow and balance sheet position has allowed the Board to announce an interim dividend of $0.53 per share, up $0.03 on the prior half year, representing a distribution of 100% of earnings. As we've said previously, the Board will continue to assess dividend levels each period end and determine the appropriate level of dividend based on profitability, cash flows, and future growth CapEx requirements in the context of prevailing economic conditions. I will now hand back to John.

Thank you, Chris. So if we turn to Page 10, a quick update on store numbers. The key driver of future growth for Lovisa continues to be in our global store rollout. We finished the period with 1,095 stores trading in over 50 markets, with 85 new stores opened for the half year and 152 more stores trading than the same time last year. We remain focused on continuing to grow the store network globally and were pleased that we were able to maintain the momentum gained in the second half of FY '25 through the first half of FY '26. The strong base we have built in the European market allowed that market to deliver the largest share of new store growth for the period, with 39 new stores, and provides us with a very strong base to continue to expand from. In the Americas region, we were able to continue the momentum in our U.S. and Canadian store rollout with 18 new stores opened in the Americas during the period. We also were able to open 2 new franchise markets in Ghana and Reunion. Turning to Pages 11 through 18, you will see some images of our latest store fit-out concept which we call Series 5. We have begun to roll out to new and refurbished stores across the world this concept. The concept is designed to give a more refined and elevated feel to our stores and adds a new piercing studio store-in-store concept along with new elements such as digital screens. On Page 19, I'll talk to the trading update for the second half to date. Trading for the first 7 weeks of the second half saw total sales up 21.5% on the same period in FY '25, with comparable store sales for this period up 1.6%. We continue to focus on opportunities for expanding both our physical and digital store network, and our balance sheet remains strong with available cash and debt facilities supporting continued investments in growth. So to summarize the half year on Slide 20: We were able to again deliver strong sales growth for the period with store network growth combined with comp sales up 2.2% to deliver total sales growth of 23.3%. Our global expansion delivered 85 new stores opened in the period, finishing the half year with a total network of 1,095 stores. Gross margins were again outstanding at 82.9%, an improvement of 50 basis points on the prior half year, which was achieved along with a clean inventory position. This combined to deliver strong profit growth with underlying EBIT of $109.1 million, up 20.4% on the prior half year, and underlying NPAT of $69.6 million, up 21.5%. With our strong cash flow and balance sheet position allowing the Board to announce an interim dividend of $0.53 per share to be paid in March. We're pleased to be able to announce a solid start to the second half, with total sales up 21.5% and comp sales up 1.6% for the first 7 weeks. I'd like to thank our entire global team of over 7,000 employees for the outstanding work they are doing to deliver these results. And with that, I would like to thank you for joining us today, and we're happy to take questions. Just to remind you on the call, we have our Executive Deputy Chairman, Mark McInnes; myself, John Cheston; and Chris Lauder, our CFO, and any of the 3 of us would be happy to take your questions. Thank you.

[Operator Instructions] Your first question comes from Shaun Cousins at UBS.

Maybe just a question regarding the Americas. Sales per store increased well in the first half of '26, more than other markets. What's driven that increase in sales per store? Was it the U.S. tariffs driving higher prices with no volume headwind? Was it a stronger consumer, market share gains from Claire's, or just improved execution? Could you maybe just dig deeper into what's driving that performance there in the Americas, please?

Yes, for sure. Thank you. I think you've actually answered your own question, and I'm saying that with utmost respect. There is definitely a buoyant consumer. The consumer is out there and spending, and we're pleased for that. I think the team over there have done an exceptional job in terms of execution. There's been a big focus on that, and we've got a strong team who are delivering. I would really put it down to product excellence in terms of delivery of store standards and a buoyant consumer.

So it wasn't -- if I was to be unkind, it wasn't just all tariffs? Like that would be an inaccurate assumption?

Yes, that would be inaccurate.

Yes, no, that's fine. Maybe just secondly, just on Jewells. Thank you for the disclosure there. Were the losses in the second half of '25? How do we think about them relative to the first half of '26? Just in that I got the size of the Jewells losses wrong, they were bigger than I thought. I just want to get a better understanding there of maybe where the second half of '25 might have been. And just more generally, what's the path to reducing losses in this business, please?

Yes. I mean, we look at Jewells as a modest investment to potentially find a second global brand. And if you look at the market cap of Lovisa at $3 billion, I mean that's how we should look at it, and that's how we would urge you to look at it. A modest investment to potentially give us a second global brand. We're not going to give any color at the moment in terms of what the second half looks like. We've obviously been experimenting with that brand. We've been refining the product proposition, we've been refining our pricing and all of the things you would expect us to do. But we've called it out as we would expect to give you the clarity of where we're at, but it's a pretty low cost to hopefully give us a second brand. And in due course as we progress, obviously into the second half, we'll obviously give you more color in terms of where that potential new brand is going.

And sorry, pardon me, maybe just to clarify, what were the losses in the 6 months ended June '25? The history. Just can we compare them? Are they the same as what you did in the 6 months ended December '25, or is it -- just if you've got that reference point, please?

They were pretty insignificant because the brand didn't commence trading until early-mid June, that was when we commenced trading. So there was a little bit of OpEx in terms of salaries and team members, but it was not particularly significant really.

The next question is from Sean Xu at CLSA.

Based on my calculation, your global comp sales has materially slowed down from the 3.5% printed for the first 20 weeks of the first half to a negative 2.1% for the last 6 weeks during the holiday trading period. Could you please give me some color on the reason why and which regions underperforming the last 6 weeks of first half '26, please?

Yes. I mean, we don't give comp sales by region. We've obviously called out the headline comp sales and we've called out the first 7 weeks. I think we would say in AUSPAC, we've introduced some new team members. We're excited about the new product which is dropping down now. So there's been a lot of effort and focus on product. Early sales that are coming through on new products are exceptional, so we're excited about that. And we felt it was necessary to make some changes in our retail teams in the AUSPAC area, and we've done that and those people are onboarded and are delivering. We're not in the business of making excuses, but I think if you follow the market, in the last 7 weeks there's been unprecedented weather issues in the Northern Hemisphere, particularly the snows in the U.S. and particularly the snows and the ice and the terrible conditions in Europe and the U.K. And as you well know, there is also a timing issue with Chinese New Year. I mean CNY fell yesterday this year, whereas it fell at the end of January last year. So there's a little bit of noise in terms of weather and a little bit of noise in CNY. But we're doing what we can do in terms of what we get paid to do, which is product and retail execution, and I'm pleased to say that that's what we're focused on.

All right. Can I please do another follow-up on the impact from Claire's exit today, specifically the U.S. and U.K. market? Is there any incremental sense of sales uplifting you can see from Lovisa within the overlapping catchment when Claire's closed their shop?

Yes. Look, we focus on our sales in terms of what we take in terms of LFL by store and in total. You know what, we're not desperately working on is, are we seeing an uptick because of Claire's going? From our point of view, Claire's is an opportunity in many of the territories because if they're going and they have a piercing business and we have a piercing business, we can obviously take that market share. As you probably know, in the U.S. some of the Claire's stores have been saved, they didn't all go. And up until only a few weeks ago in the U.K., Claire's was still trading. It's only been in the last couple of weeks that they've announced that they are officially going back into administration. What we do on a weekly basis is do a store sign-off. We're being selective about the Claire's sites. Some of the store sites were good, some of the rents they were paying were too onerous. So we are being very selective in the sites that we're taking as we see the opportunity to take market share away from them.

But if you asked us, John, it would be true to say that the Claire's opportunity is real and emerging in those markets based on when they're closing. And those opportunities are coming our way. But as John quite rightly says, we're being very selective about the property deals because one of the reasons they went into administration in those markets is that they paid too much rent for poor locations.

The next question comes from James Wilson at Macquarie.

Just firstly on Australia and New Zealand, it looks like revenue per store fell about 8% in the first half. Are you able to just give us some color on how much that was driven by closures for refurbishment of those stores and maybe if you're seeing any competitive dynamics emerge there that could be a drag on that number, such as Harli and Harpa?

Look, it's fair to say that we're definitely reinvesting in our fleet of stores in Australia and New Zealand. So that's a fair comment that we did have some time where stores were closed pending refits into our Series 5 store concept. And Series 5 concept is being rolled out more here in Australia and New Zealand than in other markets, because of course our business is mature over here whereas in some of the other markets we've still got stores that have only been open a year or 2 years. So there is something in that, I would agree. Look, we have competitors everywhere. Mark and I were in Italy and Spain and the U.K. 2 weeks ago, and when people talk about competition, there's competition in our category everywhere. So we have to deal with that, we have to navigate that. I think what Mark and I talk to is, have we now got a team that we're confident in terms of retail execution in Australia and New Zealand? And we have. Have we made changes to our product lineup? Yes, we have. Is that product coming out and hitting stores now? Yes, it is. And are we confident in that product and those team of people that we've hired? Yes, we are.

And just another quick one. In terms of the revenue contribution from Jewells over the half, are you able to give us a little bit more color on that? Appreciate you've given us some helpful disclosures when it comes to EBIT and NPAT.

Yes. I mean we're -- you can calculate it from the presentation. What -- as John said earlier, we're not going to be talking about Jewells' performance in the presentation because it is just a -- in the start-up phase. You can work it out from the [ indiscernible ].

Okay. And sorry, just one more from me then. Just on those Claire's closures and the locations that have come up for grabs after some of those stores have closed. Are you able to tell us what the number of Claire's locations you guys decided to open in over the first half was? Like what percentage of say net new stores or the raw number came from former Claire's locations?

Look, the number is increasing now as opposed to in the first half. There were some. There were some, for sure. I don't have the exact number with me. But we look at it site by site, location by location. I mean, some of the Claire's -- I mean Mark said this, but some of the Claire's stores were in poor centers, and some of the Claire's stores were in poor locations within good centers. So we've been very selective. We've not taken this approach of "There's 50 available, let's take them all." We're being very selective. But certainly we are on our sign-offs, signing former Claire's sites off on a weekly basis, and we believe that momentum will pick up in the forthcoming half.

The next question is from Sam Teeger at Citi. Please go ahead.

Look, I think when you strip out Jewells, delivering over 20% earnings growth is a really strong result here, so well done. I want to just talk a bit about the rollout. How come the business has moved away from providing updates on store numbers in the trading update? Some of the research we did suggested January was a softer month for rollout. I know rollout is never linear so we shouldn't extrapolate it, but how confident are you, you can open at least 64 net new stores in the second half like you did in the first half?

Well Sam, it's John. We're confident. We're confident. We didn't not announce it for any particular reason. As Chris always says, there's always a bit of lumpiness in January. We opened, as you've seen, a significant number of stores with growth on the previous year in the last 6 months. That momentum continues into this 6 months. I definitely wouldn't read anything into that. As I've said, January is a bit lumpy, and we got a lot of stores away back in September, October, November, and into December. But we are feeling very confident about the rollout for the next 6 months and beyond. And beyond.

Okay. And just on Jewells, I don't want to go into the details because I know that's commercially sensitive at this point in time. But clearly looking at the share price, the market doesn't like the investment. So maybe if you can just share with us how patient you're going to be with Jewells given how significant these losses are at this point in time?

Mark. Do you want to take that, Mark?

Yes, and look, it's a great question, Sam. Look, I might quote Jeff Bezos, if that's okay, Sam. The worst that can happen is our operating margins will go up. The best that happens is we find a second global brand that can rival Lovisa in terms of store numbers globally and market capitalization globally. So in that sense, there's no downside.

Appreciate that, but like if you're still making these types of losses in a year or 2 years or 3 years, at what point do you think enough's enough, let's stop this for now and we can revisit this or another concept in the future?

I think that's a fair question. I think the Board and John; myself; and Chris, will be very sensible when it all comes to that. We're looking at, daily sales, daily metrics, store profitability, all those types of things you would expect us to look at. But the way you should look at this, Sam, is this is a trial for a second global brand. If we're successful, obviously this is how Lovisa started, right? If you go back to when Brett first started Lovisa and then when he floated Lovisa in 2014. If we find that second global brand, well that's outstanding from an overall company perspective in all the markets we operate, nearly 1,100 stores. If it doesn't work out the way we want, our operating margins are what they are reported today, and they're going to go up. And you should expect us to be sensible about that, Sam.

Okay. All right. And just the last question for Chris. Just given how much currency volatility we've seen recently, maybe if you can just talk us through how currency has impacted the first half result and how we should expect it to impact the second half result both on a translation and a sourcing perspective.

Yes. I mean -- and 2 valid points, Sam, in that the sourcing tends to go the opposite direction as the translation impact. So -- and a big chunk of our revenue and profit is denominated in U.S. dollars now. So there's a lot of natural hedge going on in amongst all that, and different exposures offsetting each other. So there's a bit of upside in terms of exchange rates year-on-year for this half. You guys can look at the rates comparatively between the periods and work that out. What it will look like in the second half and going forward remains to be seen. Obviously some of the rates from a translation perspective have gone against us in recent times, but others will not move by as much. So -- and when say the AUD versus USD strengthens like it has, then on the sourcing side that gives us a benefit. So they'll all net out in the wash and be what they will be. We're not going to call out what that might look like for the second half specifically, but it's a good call out.

The next question is from Garth Francis at MST Marquee.

Maybe we could delve just into that sales growth component, Sam highlighted the FX move. It seems like there's also as you're opening new stores, you're getting an uplift as well. Is that as a result of the stores, the mix component where the stores that you're opening are better than the ones that you have historically?

Look, I think we're incredibly selective about the sites that we sign off. We're pretty ruthless in terms of the expectation on in terms of the return on investment that we demand from these stores. And I think it's fair to say that we have been pretty good in terms of the store sign-offs in the key markets that we know are very profitable and have got a big runway. Being very selective about the location of the site and very demanding in terms of the ROI. And we've been negotiating hard with the landlords to make sure we've got compelling deals. So I would take it as a positive the fact that the stores we've been signing off have been very accretive.

Terrific. And then just maybe on gross margin. In terms of the -- was there a one-off benefit just related to better sourcing from the Claire's closures? And is that something that you -- that new pricing deal that you've established, do you feel like that's something that will hold into the second half?

No. I wouldn't read anything into the Claire's demise in terms of giving us better sourcing. I would prefer you to look at it in terms of good product, good buying, and what we haven't got caught up in is buying business and heavy discounts and heavy promotions. I mean, you can see the margin growth of 50 basis points is a pretty impressive number where we've seen this around the world retailers have been discounting heavily to buy the business. We've not got caught up in that. We're focused on product, good negotiations with our vendors, and doing as limited promotions and offers as we need to. But I would see it more to do with a good focus on product and buying than anything to do with economies of scale because of Claire's demise.

You mentioned shrinkage which you've not pulled out before. Is that a significant problem in the prior period that you've managed to mitigate?

Look, we always have a focus on shrinkage. We're a global business in 50 markets. I mean, we have to have a very close lens on shrinkage. And we've made very significant improvements in terms of our shrink results, and we're very pleased with those, and we see those continuing.

The next question comes from Allan Franklin at Canaccord Genuity.

Just hoping to have a quick look into employee cost growth and the other cost growth. Maybe to just disaggregate that a little bit please. Just the extent to which there's store growth at a store level? Can you sort of define maybe change staffing or remuneration structures at store levels? The extent to which the investment into team structures maybe behind us, please?

Yes. I mean, the investment in that salary wages line, most of the growth there is driven by the new store rollouts. Obviously every new store you roll out, you've got to staff it. Yes, we make changes to staffing levels and the like on an ongoing basis to try and optimize service levels. But there's not a consistent program across the world that's impacted on that number. It's just normal day-to-day management of labor. Obviously, inflation in wage rates has an impact and pushes up the hourly rates around the world, and we've had to mitigate that. But we're happy with how we've been able to do that through the course of the first half.

Perhaps just then on some of the technology investments, just sort of defining where that is playing? Is that more just back-end systems? Is there a -- is there an extent to which you are going to push harder into e-comm and omni-channel, or do we continue to view this business as a store-forward footprint?

Look, I think you should view it as an omni-channel business. We're committed to digital, and investment in digital is ongoing, as is our investment in capital for the store rollout. Digital is more important in some markets than others. In the U.K. it's an important factor, in Australia it's an important factor. In some of our emerging markets, digital is still in its infancy. But I would look at the capital investment we're making in a considered way in both digital and online -- and stores.

The next question comes from Aryan Norozi at Jarden.

Just on the gross margins excluding Jewells, 82.9%. Just notwithstanding that sort of first-half/second-half seasonality where the second half is lower than the first half, any other drivers into the next 12-18 months? We obviously talked about FX, but any positives or other positives and negatives? For example, have you been discounting less stock as in liquidation mode and stepping back and well that's why the comps are a bit softer but your GP dollars are good? Just any other things that we should factor in the next 12-18 months, please?

Yes, not specifically, Aryan. I mean, we obviously don't like to talk too much about what we think is going to happen in the future, particularly not around gross margin. So we'll just manage all of the different levers that drive that outcome the same way we always do.

And can I confirm just actually the LTI targets, the CEO LTI targets, is that based on the statutory EBIT? And is that based on year-on-year growth each year, or is there a high water mark where in 1 year you've got to, sort of, if you miss it you've got to claw back? How do they work please?

I think we might let Mark answer that one.

Yes. The way that the LTIs are structured for the group are on statutory EBIT and their year-on-year growth figures. And that's all published in our annual report.

Perfect. Last one. Just how many -- just the point around ANZ sales per store. Can you just give some color on how many stores were closed for refurb this half? Just so we can look at what the underlying sales because the sales per store fell about 8% or 9%. Just to get an idea on what that underlying number is please.

Yes. I mean we would typically have 1 or 2 stores close monthly as they are refitted and refurbished. I mean that's the normal course of business. We've got 180-odd stores over in Australia. And you know, we continue to invest. I think it's fair to say -- I'll just reiterate what I said earlier, we've probably started to deploy more capital in Australia and New Zealand because the fleet is a little older over here. So there's probably been more stores closed in the first half than there has been previously as we've started to introduce Series 5 and refit and refurb the fleet. So I would say there's probably more were closed for a period of time to be refitted in the first half than probably in the previous years, I would say that.

The next question comes from Wei-Weng Chen at RBC Capital Markets.

So lease costs, they look like they've gone up about 43% but your store count's kind of only gone up about 16% year-on-year. So just wondering if you could speak to what the discrepancy is between those 2 numbers?

I'm assuming you're talking about the number in the P&L?

Yes. No, in the cash outflow.

Right. Yes, I'm not sure how to answer that one in a simple way because it's impacted by the way we have to account for these things under the new accounting standard. So obviously the biggest driver in that number is new stores and growth in the network. But yes, I actually can't give you a breakdown of it today, I'm sorry. We generally don't go down to that level of detail. But I can come back to you with that one if you like.

Okay, cool. And then the $10.8 million of losses in the Jewells business. How much of that was, if any, was a write-down of inventory? I just noticed there was some pretty large discounts on your Jewells website from about October onwards. So it doesn't necessarily look like it's fully reflected in your gross margins if I'm reading slide four right?

No, I'm not sure what you mean when you say fully reflected in the gross margins.

As in like if I -- if I'm reading your Slide 4 right, you can kind of imply a gross margin for your Jewells business. But it looked like there was a pretty big reset going on on your Jewells website. So I was just wondering how much of that $10.8 million in losses was relating to kind of a write-down of inventory?

Yes, I mean there'd be normal provisioning that we have to do when inventory is going to be sold below cost. That's all on the gross margin line in the P&L. So there's -- it's all there. You can see the margin if you do the back calc.

Yes, I think that -- I'll just add earlier point, it's a -- we're not really breaking that down because we're in the start-up phase of that business and that's what it takes to start it up. And we've disclosed the cost of that which demonstrates the underlying health of the Lovisa business. And we've disclosed the cost because we firmly believe there's an opportunity for a second brand for Lovisa.

Yes. Okay. And -- but can we -- should we be thinking about this $10.8 million as a kind of a run rate when we think about next half? Or it won't be like as large as it is this half?

Well, I don't think that's how you should think about it. I think John made that point earlier, I think you should consider this an investment that the company's making to find a second global brand, and the Board will be very sensible and the underlying Lovisa performance is very strong.

Yes. And then just last question. Appreciate the discussion earlier about store closures impacting the ANZ business. There is a boycott petition out there online. I was wondering whether you consider that at all to have had an impact on the business?

John, are you happy if I answer that?

Please.

Yes. No, not at all. We don't think that's had any impact on the business at all. We understand it's come as part of the court case, and that's part of the process. And we've had none of that feedback from our team.

The next question comes from [ Raymond Jang ], Private Investor.

This is just a question about the ANZ market. Just wanted to see if you could point to any particular regions where sales declined?

Look, it's John here. We don't go into that level of detail in terms of specific state or territory or region. I think I was pretty candid earlier, we know we had work to do in Australia and New Zealand from a retail excellence as in operational standards point of view. We've made some rehires, we've got some team members who've onboarded in the last few months and they're starting to kick some goals. So we're focused on what we can focus on inside our cage which is product and retail excellence. I've mentioned there's a lot of new product that's sitting down that we're excited with, and we're seeing some good results. So I think you've got to look at it is ANZ is -- AUSPAC is one of our 3 regions. We've got EMEA, we've got the Americas and we've got AUSPAC. We're focused on all of our territories. I've mentioned that we've been spending money on the fleet of stores over here. We probably didn't invest as much capital in Australia and New Zealand previously. We're doing that now, and we're focused on product and retail excellence. And I think that's what we would say on that.

No worries, appreciate the response, John. Just one more question. How are you finding the competitive dynamic in the Americas market compared to Australia?

Look, it's -- the category we play in, there's competition everywhere. I mean, there's an abundance of competition in North America, in every single shopping center, be it kiosks or be it listed jewelry retailers or be it independents. It's no different the world over. It's on us on what we need to do in terms of product and retail operational excellence. It's all within our view, it's all within our hands and that's what we're focused on. So I think it's a competitive industry. But like I said to someone recently, you wouldn't go into the jeans business if you were petrified of Levis, Wranglers, Mavi, you name it. You wouldn't go into white shirts where there's a range of white shirts that are out there for a guy to buy. I mean, competition's here to stay, it's not going anywhere. It's not going to go away. It's on what we can do in terms of our product, our price proposition, our hierarchy, our good, better best, our pricing, our sell-through, our quantification. We're focused on what we can focus on which is all within our hands and our capabilities.

The next question comes from Sean Cousins at UBS.

Just a follow-up. Just on the rollout of the new format, should we see a step-up in the broader rate of CapEx? It was $61 million last, in full year '25, $31 million, $32 million this year, excuse me, this half. Will the new format see a step-up in CapEx or that should broadly be captured under the existing sort of CapEx range that you've done?

Yes, I mean the early stages of rolling out any new store concept is more expensive than the old concept, so that has impacted on the CapEx in the current year. But as we do more stores, get better procurement, that should be able to offset a bit. Obviously with the marquee stores, prime locations, we'll spend a little bit more and -- because it'll get the return on investment. So you may see a little bit, but we'll just continue to invest where we need to keep the store network looking as sharp as it can.

But in short, we shouldn't anticipate a dramatic step-up in overall CapEx? Is that what you're saying there? Sorry Chris?

Yes. I mean there's no program to go out and refit a massive number of stores outside normal leasing time lines. So process is as leases coming up for renewal we'll do a refit at that point rather than mid-lease. So it should be the same sort of cadence as we normally have.

And with that, just given that normal cadence, how does that help you address a somewhat underinvested like ANZ network in terms of that they tend to be sort of older, they like there? Can you make more dramatic changes in that you've got -- it's a competitive market here in Australia as it is in other sort of places, but you've got probably newer competitors that are presenting better looking stores than your historic competitors, do you not need to go a little faster in Australia and hence there like you need to be a bit more urgent on that?

Yes. I mean, wherever we need to, we'll invest the funds, Shaun. I think is the answer to that. So if there is an urgent need then we'll find a way to get it done. Otherwise, it's the normal process that we follow. Which to be honest with you, that is part of the normal process. We have competition everywhere in the world and we have to adapt to it and take whatever actions we need. So this is not just an Australian thing.

Operator, are you there? I don't think so. Okay. It seems there's no further questions. So if you're still on the line, I think on behalf of Mark, Chris and myself, thank you for joining us today and asking those questions, and we look forward to speaking soon. Thank you.