Shaver Shop Group Limited (SSG) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Shaver Shop's results presentation and -- sorry, investor conference call for the financial year ended 30th of June 2020. Please note that today's call is being recorded. There will be a presentation followed by a question-and-answer session. Presenting today will be Cameron Fox, Shaver Shop's CEO and Managing Director; Larry Hamson, Shaver Shop's CFO and Company Secretary; together with Allana May, Shaver Shop's Chief Marketing Officer. If you wish to follow along with the slides, Shaver Shop's presentation has been lodged with the ASX and is also available from Shaver Shop's Investor Center website. I would now like to hand the conference over to Mr. Cameron Fox. Please go ahead, Cameron.

Good morning, everyone, and thank you for joining us today. When we take you through the presentation, you will see that our omni-retail initiatives have been a key driver of growth over the past 12 to 18 months. And as highlighted in our market announcements from May and June, we also benefited from Q4 from increased demand for DIY personal grooming solutions, a trend which has existed for many years but accelerated when COVID-19 struck. Given the very strong online sales growth, we thought you should hear from the key leaders within Shaver Shop that have been responsible for both developing the strategy as well as implementing it. So in addition to Larry and I presenting today, you'll also hear from Allana May, our Chief Marketing Officer. Moving on to the agenda on the second slide. First, I'll recap the year just gone. And some of our key highlights, of which there are being many. Larry will then take you through the financial results in more detail. Allana will discuss how we have become omni-retail leaders in our category as well as some of the plans to further enhance our market position. I'll then review our trading results over the first 7 weeks of FY '21 as well as the outlook for the coming year. So let's move on to Slide 4 and our key highlights. Shaver Shop delivered record results across almost all key financial measures in FY '20. Total sales were up 16.4% to almost $195 million. This strong growth was realized despite foot traffic in shopping centers being down across the year, most particularly impacted by COVID-19 restrictions in the fourth quarter. We were able to offset this decline in foot traffic and achieved a 15.3% overall like-for-like sales growth by executing the following: driving online sales growth of 103.5% and increasing our sales conversion and delivering exceptional customer service metrics in-store. As mentioned earlier, Shaver Shop clearly benefited from an increase in demand for personal care and grooming solutions as COVID-19 social distancing restrictions hit in the fourth quarter. This also turbocharged online sales, which ended up being $47.8 million across the Shaver Shop network in 2020 to now represent almost 1/4 of all Shaver Shop sales. Importantly, our gross profit margins were stable despite taking significant steps to realize stock in the fourth quarter to improve liquidity and mitigate risk. With operating expenses well controlled, comparable EBITDA was up -- was $18.4 million, up 36% on last year's results and beating the guidance range of $17.25 million to $18.25 million provided in June. Comparable net profit after tax was up 44.6% to $10.6 million, leading to earnings per share of $0.087. Importantly, the growth in sales was achieved despite Shaver Shop significantly reducing stock levels in the fourth quarter. This led to operating cash flow being up 131% to $28.9 million and to the company having $12.6 million in cash and no debt at 30th of June. With this liquidity boost, we are now very well positioned to navigate through COVID-19 and grow strongly thereafter. I mentioned New Zealand at the half year. This business has gone from strength to strength over the past 18 months, and I'm even more excited about the prospects that lie ahead for this region. Turning to our technology transformation program. Our core IT platforms are now in place, and we have started to reap the benefits, both on the top line as well as improved operational efficiency that these systems have delivered. And finally, although COVID-19 uncertainty remains, the strong financial performance and financial position led to the Board to declare a fully franked final dividend of $0.027 per share, fully franked, up 8% on 80% franked or $0.025 per share dividend announced last year. Slide 5 illustrates our first and second half sales growth. Importantly, have been a strong growth trajectory for some time. In fact, if the sales trends continue through August, we are on track to deliver our 20th consecutive month of like-for-like sales growth. That's positive like-for-like sales growth for each month since January 2019. So first half was strong with sales up 12% to $107.5 million on the back of online sales growth of 61%. The second half was even stronger with total sales up 22.4%, supported by online sales growth of 153%. This exceptional result is even more remarkable when you consider the following factors: 11 stores in Australia, together with 7 stores in New Zealand were closed in April with the Australian stores only gradually reopening across May and June. Customer foot traffic across major shopping centers was down across most of the second half. Our prior comparative period was also very strong with like-for-like sales growth of 11.9% in the second half of the prior year. And finally, with the massive increase in demand for key personal grooming product lines in April, we experienced unavoidable out-of-stock situations on some of our best-selling product lines. So Shaver Shop had consistently delivered strong results across the entire year, and many of our core categories like clip and trim, long-term hair removal, hair styling and power oral care were the key drivers in both the first and the second half. Slide 6 illustrates trading in the first 9 months of the financial year compared to the COVID-19 impacted trade in the fourth quarter. You can see that up until March, the trends from the first half have been pretty consistent. We did see significant softness in demand around mid-March, which has what led us to make some immediate and difficult decisions to reduce costs and improve liquidity. Some of these decisions include canceling the interim dividend that have previously been announced. Reducing stock purchases, deferring rents, applying pay reductions across the support office, executive management and directors as well as slashing all discretionary spend. As center operating hours reduced and foot traffic plummeted, we closed 11 stores in Australia. And as a result of Stage 4 restrictions in New Zealand, all 7 of our stores shut for the month of April. But at the same time, as our in-store sales declined, we saw massive growth in our online sales, up almost 300% across the month of April and May. And to accommodate this growth and mitigate risk in the event our stores were required to shut, we established a high-volume fulfillment facility for online orders in a warehouse on the outskirts of Melbourne. This was accomplished within 2 to 3 weeks and was an outstanding effort by the team and shows the agility and capability of our business to adapt quickly under very difficult and uncertain circumstances. Finally, in June, we saw many of our Australian stores gradually reopen with foot traffic levels increasing. A real highlight is that despite the ongoing concerns around COVID and changes in store operations to support enhanced health and safety measures, our customer service metrics also increased. And while bricks-and-mortar like-for-like sales increased in June, online sales also remained strong, around double the prior year results. Leading to the Board updating the market and providing earnings guidance of $17.25 million to $18.25 million EBITDA. This was all achieved while continuing to drive stock investment down and liquidity up across the fourth quarter. So overall, an exceptional result for our business in what was a very difficult operating environment. I'm now on to Slide 7. As for all businesses, the operating challenges under COVID-19 are not insignificant. This is especially true, true in retail, and particularly where face-to-face customer service and interaction is critical to your value proposition. The safety of our team members and customers has remained paramount throughout, which has led to a number of operational changes to implement. But with these changes and challenges has come opportunity. COVID-19 has made people think differently about their beauty regimes. This could be due to either safety concerns, budget and income limitations or physical restrictions in going to the local barber, hair salon or waxing clinic, et cetera. Whatever the driver, the trend [Technical Difficulty] many years has been accelerated. What's unclear is how many of these customers will make this a lasting shift? That said, our intent is to make the shopping and DIY experience so positive that we permanently capture as many of those customers as possible. The same is true with the shift towards online shopping. We truly believe COVID-19 has driven a quantum leap in the acceptance of e-commerce. And given the investments we've been making in this area, which I'll let Allana address in more detail, we are well placed to benefit from this transition. Our strong sales performance means we did not qualify for [ Job KP ] in Australia. We did, however, receive support in New Zealand when our stores closed in that region. So overall, COVID-19 has accelerated the pace of change in the market, our customers and within Shaver Shop. Our business, as we have proven many times in the past, is agile and resilient and was able to adapt quickly, and we believe is now in an even stronger position to increase sales and market share in our category. I'll now hand you over to Larry, who will take you through our results in more detail.

Thanks a lot, Cameron. Great to be with you all here today on the call, and I look forward to answering any of your questions on the financials at the end of the presentation. Moving to Slide 9. Shaver Shop's market and business strength became self-evident during FY '20 as we recorded new company records for sales, net profit and earnings per share. As a recap, we finished the 2019 financial year in a strong position with our online sales as well as our in-store teams really starting to fire on all cylinders. This continued into the first half of 2020 and ultimately accelerated further as COVID-19 struck in the fourth quarter. Total sales for 2020 ended up 16.4% for the year, with the key growth drivers being like-for-like store sales being up 15.3%, which was driven in large part by the 103.5% increase in online sales. We also had 4 more stores in the corporate network by the 30th of June 2020. 2 of these were the franchise buybacks of Doncaster and Hornsby. We opened 1 new store in Auckland, New Zealand, that new market just before Christmas. And we reopened our Karrinyup, WA store coming into the last quarter of 2020. Pleasingly, margins were flat with last year as we were able to realize significant amounts of stock in the fourth quarter to drive liquidity but without undue margin pressure. You can see this with our gross profit margins having been consistent with last year at around 42.6%. Operating expenses were well controlled across the year, but particularly in Q4 as we move to reduce and eliminate all discretionary spending. Importantly, we had no contribution from job keeper, as Cameron mentioned before, to our FY '20 results and really only a small contribution from the New Zealand wage subsidy program. We are also able to work collaboratively with our landlords to reduce rents during the periods most impacted by COVID-19 restrictions. As a result of closely managing operating expenses, our cost of doing business as a percentage of sales reduced 180 basis points in FY '20 to 33.7%, and in turn, lifted our EBITDA margins by 130 basis points to 9.4%. This was despite lower franchise royalties being received in the year due to the franchise buybacks we undertook. But also due to our decision to offer our franchisees royalty relief in the fourth quarter. Total comparable EBITDA was up 36% to $18.4 million leading to both net profit after tax as well as our basic earnings per share being up 44.6% at $10.6 million and $0.087, respectively. Slide 10 gives you a bit more background in the Shaver Shop sales trajectory over the last 5 years. You can see that the company has shown consistent growth, although in those early years, this was driven proportionately more by the performance of a few very successful products like Foreo and Dafni. The significant positive contributions from these products in financial years 2016 through early 2018 made it more difficult to see the consistent growth trend in Shaver Shop's core grooming and personal care categories. In 2019 and 2020, we're now back on track to a more normal and even sales distribution across our key products, and we can see the impact of our omni-retail investments coming through in 2019 and 2020, following the appointment of our marketing and digital teams. This has led to the significant growth in online sales that has been achieved in the last 2 years, with online sales now representing almost 1/4 or 23% of total sales for the year. The marketing team has only been with the business for the last 2 years. So we still see tremendous upside in building out our capability and further investing in our omni-retail growth initiatives. Slide 11 shows the 5-year trend in EBITDA and illustrates the impact of Foreo Daigou sales on the earnings of the business in 2017 and 2018. Pleasingly, the underlying business EBITDA that's excluding the impact of Daigou increased from $12 million in FY '18 to $13.5 million last year, and up to $18.4 million in 2020. Clearly, Shaver Shop operates in a category that has benefited from social distancing concerns and the closure of service-related businesses like hair salons, barber shops and waxing and beauty clinics for a period of time. That said, Shaver Shop was already on its way to delivering strong growth in earnings for 2020 well before COVID hit. And the trends towards DIY personal care were already well established. So it's difficult to say with a high degree of certainty, what the short to medium-term impact of COVID will be on our business. Although as Cameron will speak to later, we've had a strong start to FY '21. We also operate in a growth market, and we believe we are well positioned to grow market share over the long term. On the right-hand side of the slide, you can see the key driver of EBITDA growth in FY '20 was our like-for-like stores, which was really pleasing. This includes online sales for those stores and was partially offset by higher corporate overhead costs, including additional marketing and customer service roles, higher short-term incentive provisions given the short-term -- or the strong performance of the business in FY '20 as well as increased third-party marketing costs. Moving on to Slide 12, which reconciles between our statutory balance sheet and our comparable balance sheet after adjusting back to the old lease standard. Shaver Shop has always had a strong balance sheet and relatively low gearing. Pleasingly now though, we're in an even stronger position with $12.6 million in cash and no debt at the end of the financial year. Coming into the fourth quarter and not knowing the potential impact of COVID-19 on our business, Shaver Shop decided to drive immediate liquidity. In terms of realizing stock, this took the form of reducing overall purchases of new stock, particularly when a switching opportunity existed with stock already on hand. Utilizing our systems and processes to increase the frequency of purchasing so that was more real time and increasing online promotional activity and adjusting those promotions to reflect the stock that we had already in stores. The result was a reduction in total stock on hand to around $15.1 million at the 30th of June 2020 or almost $11 million below the prior year. This result is exceptionally pleasing given our sales and margins, which remained strong throughout the Q4 period. The ending stock level is around $5 million lower than what we see as our optimal stock levels at the end of the financial year in the future, but reflects the caution that we had around COVID-19 in June of this year. Since the 30th of June, our stock on hand has reverted to around $20 million or up around $5 million from the end of June. We also renegotiated our bank facility, which is now a $30 million facility, up $10 million on the expiring one. It has a 2-year duration with similar terms and covenants. Finally, on this slide, we intend to maintain the strong balance sheet position we work so hard to achieve so that we can continue investing for growth and take advantage of any other opportunities as they arise. Moving on to our cash flow. The reduction in working capital is clearly reflected in our operating cash flows for FY '20, which on a comparable basis with last year was $28.9 million, up 131% or $16.4 million. As mentioned on the prior page, we do expect around $5 million or so reinvestment in stock in FY '21. There was also around $2.7 million in rent payments that were deferred as we work through the rent abatement negotiations with landlords. Both of these benefits that are reflected in our FY '20 operating cash flow are expected to reverse in the first half of FY '21. Also improving overall cash flow in FY '20 was the cancellation of the interim dividend in March and subsequent payment of the replacement special dividend after the end of the financial year in July. This dividend payment amounted to $2.6 million. So if we normalize for these abnormal items that were really the result of COVID-19, operating cash flow would have been around $21 million, and our ending cash balance would have been around $10 million lower at around $2.5 million, still an outstanding result. Moving on to capital management on Slide 14. Shaver Shop has once again increased its dividend. The Board today announced an 8% increase in the final dividend to $0.027 per share, and pleasingly, we've been able to move back to 100% franking. This takes total dividends for 2020 to $0.048 per share or a payout of approximately 56% of reported net profit after tax. This is slightly below the targeted range reflected in our dividend policy and reflects the board's desire to balance increased returns to shareholders with maintaining balance sheet strength over the continuing period of uncertainty brought about by COVID-19. Importantly, this also enables the company to accelerate investments in the omni-retail growth initiatives that have been very successful and driven significant returns to date. I'll now hand you over to Allana May, our Chief Marketing Officer, who will take you through the steps we've taken over the last 2 years to become a leading omni-retailer in our category.

Thanks, Larry, and it's a pleasure to be here with you all today. I'll kick off from Slide 16. So I've now been in the business for just over 2 years. And in that time, I've really honed my expertise around the men's grooming side of the beauty and personal care market. Prior to joining Shaver Shop, I spent 7 years at Priceline, helping to establish and execute their marketing strategies across brand, digital and loyalty. So it's a perfect transition in joining the team at Shaver Shop. My expertise in this space has been of enormous benefit in helping identify opportunities to successfully expand Shaver Shop's brand reach and increasingly moving to gender neutral and female categories, while continuing to be faithful to Shaver Shop's brand heritage, which itself is incredibly strong. So with that, let's talk a little about the market that Shaver Shop operates in. The personal care and beauty market, along with the personal care appliances market is worth just over $10 million annually here in Australia and really stretches across all demographics and age groups. The market has also been consistently growing over the last 15 years or so, and we certainly don't see this trend changing anytime soon. Fashion and beauty looks and trends as well as product technologies are consistently evolving, leading to new must-have innovations each year. Many of these innovations try to improve the simplicity and efficacy of products for use at home. So COVID-19 has really just accelerated the move to DIY personal care and beauty that has been around for some time. Moving to men's grooming. This market is a subset of the broader beauty and personal care category and represents around $1 billion to $1.2 billion annually. We estimate that Shaver Shop's addressable market after we exclude areas like female cosmetics is around $7.8 billion, with Shaver Shop's financial year 2020 total network sales of around $211 million. This means our estimated market share is just under 3%, leaving plenty of room to grow. This also makes it really exciting for my team and I, as we see a number of opportunities to leverage Shaver Shop's strengths to continue growing further. Moving to Slide 17. We started implementing our always on marketing strategy shortly after I joined the team. What this means is for us the ability to connect with our customers in a consistent, relevant and meaningful way through whatever channel they choose to engage whenever and wherever they are. Increasingly, this has seen slowly transitioned away from our traditional methods like hard copy monthly catalogs. And while we provide these in the digital format, we are also leveraging more real-time interactive communication through digital and social channels. This also aligns with our desire to capture more mind share with our younger millennial demographic who consume information in a much different fashion to older generations, while still in writing formats that are known and trusted by our older customers. We have significantly improved our social media and digital communication capabilities over the last 24 months, but we continue to identify so much opportunity to build our brand through these channels. And while traditional media is proportionately receiving less dollar spend than in the past, it is still important and remains a pillar of our marketing strategy. Television advertising that is relevant and targeted still drives very strong returns and remains a solid performer in our marketing channel mix. We have certainly seen this over the last 12 months, where targeted spots and channel buyers have stimulated considerable demand for both new and existing products that have been within Shaver Shop's arsenal for a number of years, being front of mind definitely has value. And lastly, all our marketing efforts are designed to be aligned so that customers know that when they choose to either visit our stores or come to our website, they will receive the same exceptional customer experience that Shaver Shop has become well known for. Now on Slide 18. This provides a bit more detail on the drivers of our online sales growth. Pleasingly, we launched our core CRM platform in late 2019. While we've had a strong transactional e-commerce site for some time, getting the CRM platform integrated is hugely exciting for us so that we can, one, create new and improved customer journeys through the site; two, understand and analyze how customers are engaging with our content, and three, use this information to continually monitor and adapt our engagement model to deliver a richer and more enjoyable shopping experience. While those capabilities are now there, we're really only now just starting to be able to leverage that information. So while our online sales revenue more than doubled in the last 12 months, this is before we've really started to analyze and apply these learnings to our marketing activity, of which will be an ongoing focus for us over the next 12 months. In addition to improving our data capture and analysis capabilities, we have continued to focus on building our active customer database, which is now up to 440,000, an increase of 86% in the last 12 months. This also remains a priority for us in the coming year. We have significantly improved almost all of our digital sales metrics with the number of sessions, up 56% to $8.9 million. Our orders are up 168%, conversion is up 55%, our units per transaction or UPT is up 11% and our balance rates have come down 13%. But it's not just customer-facing platforms and processes that have supported our success. We've significantly improved the speed and efficiency of our fulfillment process of the stores, and we established our first high-volume fulfillment facility for online orders. We expect to switch this on to accommodate peak volume periods without having to bear significant investment in overheads and working capital through the rest of the year. So in summary, there is a huge amount of work that has gone into being able to generate and deliver the online sales growth that we've seen. COVID-19 has certainly supported that growth in the fourth quarter, but it was the investments we made prior to that which enabled Shaver Shop to manage through this incredibly challenging period. Moving on to Slide 19. And while it appears clear that there has been a seismic shift in the propensity for online shopping, our stores and people remain our key competitive advantage. They are technical experts in the products that we sell. This is important because with the innovation that continually happens in this sector, retailers need to ensure their frontline teams are well trained and confident when responding to customer questions. When you think about it, a lot of shavers and clippers look the same. So it's up to our people to help guide customers on what to think about before making their purchase decision. Is it battery life? Will I use it in the shower? How are they going to use the product? Quality of the blade, quality of the motor or some other feature that is most important to them when using it. These questions are instrumental in the product recommendation, the customers experience with us and their lasting connection with the Shaver Shop brand. Whether you come into the store or you shop online, your local Shaver Shop store is the conduit delivering an outstanding customer experience. As many of you already know, our online fulfillment is almost always from the store closest to the customer. So our store teams pick, pack and send each order out to the customer. This means we have 123 mini distribution centers around Australia and New Zealand. It also gives our customers the confidence to know that if they have a post-purchase question or concern, it will be addressed by Shaver Shop's trusted local store team. The success of this model and the competitive advantage our store teams bring is obvious when you look at the 2 graphs at the bottom of this slide. Our Net Promoter Score and customer experience metrics have always been world-class. But even as the impact of the global pandemic hit over the last 6 months, our store metrics have continued to increase. A testament to the dedication and capability of our store teams. And finally, because both our online and in-store channels deliver strong contribution margins in their own right, Shaver Shop is agnostic about how customers choose to shop. This is the essence of the omni-retail experience and something that we are all incredibly passionate about at Shaver Shop. And with that, I'll now hand you back to Cameron.

Thanks, Allana. Now on to our trading update and outlook. In summary, we've had a very encouraging start to FY '21. The sales trends we experienced over the last quarter of 2020 have effectively continued over the first 7 weeks of FY '21. This means that like-for-like sales over this period were up 28.2% and total sales were up 27.5%, the latter being impacted by the Victorian Stage 4 restrictions as well as the New Zealand restrictions more recently. With customer foot traffic still down across the country, the core driver remains our online channel, which has delivered 187% sales growth on prior year. These strong sales results are being achieved without any abnormal pricing or promotional activity, which means gross profit margins are in line with expectation. Also pleasing is that our core hair removal [Technical Difficulty] Not surprisingly, Shaver Shop store teams are continuing to provide exceptional customer service. Our stock levels are also returning to more normal levels although we've decided to continue to be cautious in Victoria until greater clarity emerges around the length of the lockdown in this region. Finally, we are continuing to make investments in our core omni-retail strategies. Moving on to our outlook on Slide 22. As mentioned earlier, Shaver Shop's business model has proven to be extremely resilient. This is not a great surprise as we are in an attractive market segment and the DIY beauty and personal care products we sell can help household finances when times are tough. That said, it is difficult to estimate the level and duration of demand that has been supported by COVID-19 and some of the stimulus measures implemented by the government versus some of the longer-term demand drivers that exist in the category. With that in mind and having regard to the importance of Christmas seasonal sales to our full year earnings results, Shaver Shop's Board of Directors is not providing FY '21 guidance at this point in time. As we did in the fourth quarter, Shaver Shop is maintaining an agile and flexible management approach to ensure we can adapt quickly to any changes we see. We have an encouraging selection of new and innovative products that we intend to launch in the first half of FY '21, and we feel confident that we've worked through any material supply concerns. And finally, we believe the shift towards online shopping suits Shaver Shop's omni-retail strengths. And to that end, we will be investing further in those capabilities, which takes me to our growth initiatives on Slide 23. With only about 3% market share in our addressable market, we expect to continue growing share through both increasing the size of our active customer database as well as increasing our exposure through online marketplaces as well as in our SEO and SEM activities. We also tend to continue looking at selective store openings, where we are highly confident that they will deliver attractive incremental returns. Finally, in terms of increasing share, we believe the impact of COVID-19 has accelerated the shift towards DIY personal care and grooming solutions, so we intend to increase our brand exposure in both social, digital and more traditional channels. As Allana mentioned earlier, a key upside for Shaver Shop, now that our core technology platforms are in place, is using the data we have to retarget and drive higher transaction frequency. We're also intending to continue increasing our basket size, both from a value and volume perspective. The end result will be increasing value and returns from our existing customers. I believe the value that we could derive from this may be as big as increasing our market share over the next 12 to 24 months. Our business is driven by products and so renewal and expansion of our personal care and beauty range will always be a key imperative. Securing exclusivity on these innovations, particularly across our core hair removal ranges, continues to be a key to setting Shaver Shop apart from our competitors. And finally, there are a range of digital excellent initiatives underway that are designed to engage, inspire and streamline our customer interactions so that Shaver Shop's brand is continually seen to be the category killer in our sector. That concludes the presentation today. I'll wrap up with our investment summary after taking some of your questions. I'll now pass back to our moderator.

[Operator Instructions] Your first question comes from Danny Younis from Shaw and Partners.

Cameron, Larry and Allana, well done on a very strong result. I've actually got 3 questions, if I can. The first one, maybe to you, Cameron, I know it's a difficult question to answer, and it's one that a lot of retailers been grappling with, but the pull -- the potential pull forward of sales because of government stimulus, i.e., job seeker and job keeper. I'm just trying to understand what your assumptions are around your thinking in that second half? It's pretty clear your first half '21 is going to remain strong with that momentum that you pulled off in the second half '20. But what's your thinking around second half '21 at the moment without giving any numbers, obviously, but are you looking to position the business where it was in the exit of second half '20? Or do you think it will head back towards the second half '19 sort of performance?

Yes, very difficult to answer that question, Danny, because in part, that may also be linked to how long some of the COVID-19 restrictions are in place. But one thing I would call out, Danny, is that although we know that some of the incremental sales are attributable to COVID-19, I certainly don't think it's the full amount, and you only have to look at our track record. We've had 20 months of consecutive like-for-like sales growth since January 2019. So you know the business was actually moving forward prior to COVID-19 actually hit. And clearly, some of those investments we have in our omnichannel initiatives, we're paying dividends well and truly before the COVID-19 situation struck in mid-March. We're also seeing, Danny, a lot of our new customers on our website increases over the June quarter. A significant proportion of that was through new customers. We're already seeing in July onwards that we're getting a significant amount of repeat purchases. So what I would say is that we are doing a very well job in terms of attracting new customers and driving them to repeat purchases, which I think bodes well for the business long term. Having said that, Danny, clearly, second half will be a challenge because we will be comping significant growth across June quarter in particular.

Yes. Okay. That all makes sense. And you touched on a few points, which leads into my next question. Maybe 1 for Allana as well. I think Larry and Cameron have been pretty generous in providing about $7 million annualized in marketing and sales or advertising spend. Looking at Slide 17, you've adopted a multi omnichannel, which looks really good across TVCs, EDMs, digital, et cetera. I'm just interested, if you get to your target 1 million customers in 24 months, which you've earmarked in the presentation, how do you use those various channels there to measure various outputs like increasing your market share, increasing your returns, your conversion rates, et cetera? How do you work out the efficacy or optimization of each of those individual channels in terms of your marketing spend?

Sorry, Danny. I'll just -- we're all at different locations. So I'll just -- I'm going to moderate. The joys of being in Stage 4 restrictions in Victoria. So I will basically hand that question over to Allana. That was your intent, wasn't it, Danny?

Yes, absolutely.

Yes, Allana, I'll get you to answer that question, please.

Sure. So look, I mean, the opportunity for us once we hit that magical 1 million number. But obviously, the opportunities that go into leading into that. So we've got a lot of initiatives in place at the moment around, I guess, doing that targeted advertising. So that's been a real opportunity for us across social, digital, targeting customers that are obviously shopping with us, targeting customers who, I guess, behaviors are similar to customers that have been shopping with us. That has certainly, I guess, helped a lot of the work that we've done in the last 2 years to really drive those performance results. And that will only continue for us, as we get better data, as we get better understanding from the CRM platform, we'll only be able to target and really shape the experience that customers are having with us to ensure that we give them the best shopping experience possible with Shaver Shop, whether it's in-store or online.

Okay. And maybe 1 for Larry. One of the highlights of the result, I think, is your OpEx line. So as a percentage of sales, they continue to decrease. And I know you've been very prudent post COVID, but also pre COVID. So Larry, I'm interested in how those individual lines will look in FY '21. What I'm trying to garner here is to what extent are these reductions in your staff and occupancy and marketing reductions. Are they long-term or just short-term related to COVID?

Well, occupancy hasn't really -- there's been the $300,000 in rent abatements that came through. Obviously, we're going to continue to work with our landlords when there are COVID-impacted foot traffic scenarios. But I wouldn't expect that -- well, it all, I guess, depends on how long restrictions might be. So it's very difficult to predict that one. In terms of the store rosters, we are maintaining a lower store roster base in FY '21 so far as you'd expect. I think we will revert to the old level. So if you look at where we are tracking in the first half of last year, that is more aligned to the long-term thinking around the roster base in the business. But in these times, where foot traffic is still well down on the prior year, we intend to maintain lower rosters in the stores, and that's probably going to be true in the lead up to Christmas. But then I think in the second half, we'll expect it to -- hopefully, if there are no restrictions in place, hopefully, it reverts back to more normalized levels.

And marketing and advertising?

Marketing and advertising, I think we still expect to increase slightly, but we are starting to get some really good operating leverage on the marketing line. And some of the activities that Allana and her team have been able to implement and really drive some significant sales growth and the online metrics that Allana called out. Those are really strong, but we were already delivering really strong metrics before COVID, as I think we've mentioned a couple of times. And so the returns that we're able to generate on that marketing spend are certainly increasing. And so we'll continue transitioning away from some of the more traditional marketing media like hard copy catalogs and those types of things. Because we have shown, I guess, over the last 3 or 4 months that we've been able to transition to digital catalogs as well as increase our online marketing spend and really drive some significant returns for the business. So not a significant increase overall in marketing, although I do expect a bit, but expecting to drive continued really good returns from that marketing spend.

Your next question comes from Nicholas McGarrigle from Ord Minnett.

I guess Danny had asked a few of the more potent questions. But for me, I'm just trying to dig into the customer acquisition work, in particular, the ones that you've now got in your database. Can you give us any sort of sense on the demographics of those consumers and what the early signs of repeat purchasing have been?

Yes Nick, I'll pass that one on to Allana again. Allana, if you could just address that question for Nick, please?

Yes, of course. Look, so in terms of the database and the split. So it's a pretty even split. When you look at ABS statistics across the country, you've kind of -- you've got your splits, your state splits in line with pretty much the population. So from an online perspective, particularly in the last kind of 6 weeks, we have certainly seen an over-indexed for Victoria. And then from a demographic perspective, it really is it does across the board. So we are certainly getting a lot of younger customers in. We've got a really strong, I guess, older demographic that is shopping with us in-store, and that's what we're really seeing across the -- I guess, across the entire database is that we've got even split across gender, age groups and across the states as well, which is a great opportunity for us to really go through and do more targeting.

And just anything around the repeat purchase rates? Or -- because obviously, that's an important -- you're now carrying a pretty big customer database heading into Christmas. And then, I guess, the opportunities to retarget and get them repeating? What -- are there any sort of early trends around that?

So we have -- and I think Cameron mentioned it earlier as well, we have seen a strong spike, whereas, I guess, between March and May, we were really seeing a lot of new customers coming through and purchasing, whereas kind of June, particularly July and even early signs in August are showing that with -- that repeat purchase of that database customer is actually over-indexing on the website now, whereas it was much higher for new users in those first 3 months of that COVID period. So we're really confident with the activity that we've got in place that we'll continue to maintain that share and get those customers back in and purchasing with us.

That's great. And the -- back to, I guess, Cameron and Larry, just around the overall store network. With the growth in online, does that change your view on the longer-term trajectory of the need for the same size physical network? And how do you think that the rest of the network might evolve in terms of size, format, fulfillment and any potential to take some of the online performance in a centralized sort of manner?

Yes, look, Nick, I'll answer that initially and certainly throw it to Larry if he's got anything to add. But I think our view on greenfield sites is pretty consistent with what we expressed for the last couple of years. You'll recall that we've been pretty cautious with looking at greenfield sites. And predominantly, our investment has gone into 2 areas, which has been e-commerce, making sure we're investing in becoming a world-class omnichannel retailer. And the second one is staff training. We're still very open to greenfield sites where we feel it's a bit of a no-brainer, and we can get very, very strong commercial terms from the landlord. And I think New Zealand would be a good example of that. New Zealand, we only have 7 stores. We still have relatively low brand awareness. And our sales and profit growth from that region over the past 12 to 18 months has been exceptional, has been a bit of a -- one of the many shining lights for us. So absolutely, there is opportunity to do further stores at the right terms in New Zealand. But Australia, I think we'd be very, very cautious and certainly, we would only do a greenfield site, Nick, if it was absolutely going to tap into an incremental customer and deliver incremental return for the business. Again, predominantly, our investment will continue ensuring that we're a world class-leading omnichannel retailer and we'll continue to invest in e-commerce predominantly.

And just related to the idea of fulfillment centrally as opposed to in-stores?

Yes. Look, the team, we mentioned in the presentation that when COVID-19, first, I guess, struck in Australia in mid-March, we moved very quickly to set up a fulfillment center, a central fulfillment center in Victoria on the outskirts of Melbourne. We did that in a couple of weeks, and it was phenomenal. The guys did an incredible job in setting that up. We've got a lot of learning experiences from that. And absolutely, that is ready to go at any point in time we need. Having said that, I think one of our greatest competitive advantages actually is the fact that we have 123 mini DCs across Australia and New Zealand. As you know, Nick, our stores are very fluid, very adaptable, and they basically pick, pack and ship the orders from the closest store to the customer's postcode. So we found that to be a very agile and very effective form of fulfillment over the past 3 months, in particular.

I might just add something in there, I guess. In terms of that centralized distribution facility, Nick, we do intend to try and use that to really handle those peak periods. Sort of switch it on, per se, like the Black Friday, Cyber week events, which end up being very, very large for us in terms of sales now and going forward, and to be able to handle that peak load and make it manageable still for the stores to do the bulk of the online sales from store, but still be able to have an online fulfillment facility that can deal with the over -- the extra capacity. So I think that's a really nimble model and really avoids having to invest significant amounts of capital in facility, people, stock, the lot and it's great that we've been able to prove it over COVID-19.

And maybe just 1 last 1 around the health of the underlying franchises that remain. And I know that there was some reduction in the payments that you were charging them. Just how they navigated this period, and if there's any potential better opportunity now to acquire those remaining franchises in the current environment?

Yes. Look, I'll answer that first, Nick. In terms of the rent relief -- or sorry, the royalty relief, we made this decision pretty early Nick to give them royalty relief over the June quarter as soon as the quarantine measures were announced. So we did that in good faith. The franchisee stores themselves have actually held up very, very well. As you know, they've got very, very strong stores in City Metro. So they benefited again from our transition to omnichannel retailing. In terms of the probability of them shelling nickel or a buyback really hasn't changed. They're very successful stores. They're obviously very good operators. And I certainly don't see any short-term opportunity to buy back those stores. But we're keeping dialogue with them and we'll continue to keep that line of communication open with them.

Your next question comes from Shuo Yang from Microequities.

Well done on the excellent results. First question, just on your online sales. Can you sort of talk about what are some other EV wins? What is you -- what didn't go well in terms of whether it's site conversion, fulfillment? What are some EV wins do you think that can be attained in the near term?

Yes, I'll let Allana have first crack at that response. Over to you, Allana.

Thanks. Look, I think...

You love talking about all our wins, you should -- you shouldn't delay response.

Yes. So I mean, from our side, the biggest opportunity that we've really got for online is obviously the targeted communication that we've got with customers. It's also the content that we've got on the website, and the team has put a lot of work in and continue to do that around making sure that the -- I guess the content is resonating with what the customer is looking for and obviously, managing that communication piece at the moment. You've got different states in the country that have got very different needs, spaces as well. So it's really making sure that our messaging is absolutely on point that we make the site really easy to navigate, that customers if they're coming on site that they can shop quickly, they can find what they want, they can get the information about the products that they're looking for. And then obviously, it's an easy checkout. And then obviously, the fulfillment process is quick. And orders are packed and sent out to them quickly. That's really what we focused on for the last little while, and that's what we'll absolutely be focusing on in the short and long term.

Okay. Great. Second question, just on the online sales, the $47 million. What's the split between your own website and marketplace, third-party marketplace?

It'd be predominantly, it's nonmarketplace, Shuo, it would be 95% through Shaver Shop website or thereabouts.

Okay. Great. And third question, just on the comment around the $7 billion broader personal care market. Are you referencing the broader market aside from just appliances?

I'll take that one, if you want, Cameron. Yes, it does include other areas outside of just personal care appliances. We're already in skin care, men's grooming, depilatories, now into fragrances, so we expanded into fragrances this year. Obviously, that's a pretty competitive category, Shuo. But we are dabbling in that category at the moment. So it is a broader category range than just the personal care appliance market, which itself is probably around $700 million or $800 million in size, I would estimate.

[indiscernible] you guys are doing some work on in terms of maybe inorganic opportunities to get a broader share of that market?

You want me to answer that, Cameron?

Yes, sorry, Larry. Yes, sure.

Yes. We're not actively out there looking at inorganic opportunities at the moment, Shuo. So if a great opportunity presented itself, that was in a category that was aligned in the personal care and beauty market, that was really compelling, we'd certainly look at it, especially if we thought we could add value to that opportunity over time. But we're not actively out in the market at the moment. And we do participate in a lot of those categories that I mentioned before, maybe to a smaller extent than say, the appliances side, but we still see opportunities to grow our share in that sector.

Okay. Great. And last question, just on the rebuild of the inventory. Did you say that the $5 million has already come back into the inventory? Or was that going to be rebuilt over the extent of FY '21?

That's already come back in, Shuo. So in July and early August in preparation for Father's Day, which is obviously a key trading period for us, we already brought an additional $5-or-so million back into the business to be able to support the sales trajectory that we expect coming into Father's Day.

[Operator Instructions] Your next question is a follow-up question from Danny Younis from Shaw and Partners.

I've got 2 if possible. The first one is around your refurbs, refits. I think in the press, you've got 6 happening this year. I'm just interested in -- of your 110 stores across Australia, what percentage have yet to go through a refurb or refit so far?

Yes, Danny. Yes, we've got a couple -- 2 stores marked for full fit-out in the first half, probably about 4 potentially in the second half. A lot of the stores have actually been undergoing partial refits every 5 to 6 years. So the majority of the network is certainly amongst the latest look in terms of store design for Shaver Shop. But perhaps a bigger opportunity is there's probably about 10 to 12 stores that we call perhaps flagship stores or A grade stores that in the next 2 to 3 years, absolutely, ideally, would undergo a full refit. But again, the majority of the store network is still -- looks and feel like a modern Shaver Shop store.

Right. Okay. And the second question is, you've mentioned here "an encouraging product launch" or new products leading into Father's Day and Christmas, can you maybe just provide a little bit more clarity around what those products are or what categories they're in?

Yes, the interesting thing, Danny, with this half is the majority of the discussions with suppliers over the last 3 or 4 months has been on supply and locking down our supply over the first half. Obviously, consumer demand has been pretty healthy. So it's just been a case of working very collaboratively with our suppliers to make sure that we will have sufficient stock levels in December quarter. And we think we've made a lot of progress in that area with most of our major suppliers over the past couple of months. In terms of product innovation, it really is across a broad range. We've got solid innovation across hair clippers, beard trimmers and beard care, men's body groomers, lady's IPL, power oral care and hair care. So I think that's a very positive sign for us is that while we've been working very closely with suppliers on stock supply, there still is a healthy amount of innovation leading into the December quarter.

And there are no further questions at this time. I'll now hand back to Mr. Fox for any closing remarks. Apologies. You do have one final question from Shuo Yang, a follow-up, Shuo Yang from Microequities.

Just the last question. In a more normal year, say, FY '18 or FY '19, what would July and August contribute to your full year revenues?

I'm just working it out. So it'd be around 15 to -- no -- yes, about 20% of our total full year revenue. So August is a pretty big month. Given the benefits we get through from Father's Day, the Father's Day promotion. But it's nowhere near the same sort of level that you get through in Christmas. So it'd be in that sort of 15% to 20%. So July is relatively lower, and then you have a decent jump in August.

Your next question comes from Evan Kourambas from Lako Super Proprietary Limited.

Just a couple of questions. First of all, on the marketing front, what percentage of sales and more particularly, online sales are going into the female market or female products and what is the growth? Or what's the marketing plan to grow into that female sector? And secondly, at the AGM last year, you mentioned potential for international expansion outside of New Zealand. Is there any further comment on that?

Yes. Thanks, Evan. I'll throw to Allana firstly, and then I might round out the answer if needed. Thanks, Allana.

Yes. Look, I mean, from a female perspective, very strong performance for online for female categories, particularly across hair styling with brands like ghd and Dyson. And the long-term hair removal category IPL has been a massive performer for us. So that continues to be a number of those products tend to fall in our top 10 and top 20 and continues to be a major focus for us in the online space and driving sales and obviously driving that communication message to women around those products.

Yes. Thanks, Allana. I think also just to round that one out, too. We've had some really solid growth from female skin rejuvenation, which has been a relatively new category for Shaver Shop and also female fragrance. Obviously, fragrance, we entered into about 12 months ago. And although it's off a low base, we're initially very pleased with the results coming out of fragrance category. So in terms of -- Evan, hopefully, that answers the first piece. In terms of the international, the question on where we're at with international, I think given the current circumstances and the volatility associated with COVID-19 globally, we -- it's fair to say we'll probably park plans to grow our international operations. At least over the next 6 to 12 months, we're really focusing on solidifying our position in Australia and certainly growing our position in New Zealand, where I mentioned despite the first 2 or 3 years in New Zealand being relatively challenging due to low brand awareness, local supply challenges issues would really hit our -- hit a purple patch in New Zealand. So we're very keen to continue that growth opportunity over the next 12 to 18 months at a minimum.

And now there are no further questions at this time. I will now hand back to Mr. Fox for any closing remarks. Thank you.

Thank you. So as a wrap-up, let's just go through our investment checklist. Shaver Shop operates in a large and growing market, driven by changing consumer preferences and new product innovation. We still have significant potential to further increase our market share, as it was discussed significantly through today's presentation and Q&A. Over the last 35 years or so, we've developed an incredibly strong and trusted brand in Australia and are well on our way to doing the same in New Zealand. Our specialty retail business model is agile, differentiated and resilient and is based around customer service excellence and unparalleled product knowledge, product exclusivity and competitive pricing. The investments we have made in building our online capabilities in the last 2 to 3 years means we are the leading omni-retail in our category with strong online sales growth. We have a very strong balance sheet, with no debt and $12.6 million in cash with very strong cash conversion. We have experienced -- we have a very experienced management team that has executed extremely well over very difficult times and finally, our Board and leadership team is focused on investing for growth and improving total returns for shareholders as evidenced by the increase in the final dividend. Thank you all for your time today. That now concludes the investor briefing.

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