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

Ladies and gentlemen, welcome to Shaver Shop's results presentation and investor conference calls for the first half of the 2022 fiscal year. Please note that today's call is being recorded. [Operator Instructions] Presenting today will be Cameron Fox, Shaver Shop's CEO and Managing Director; and Larry Hamson, Shaver Shop's CFO and company secretary. 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 will now hand you over to Mr. Cameron Fox, Please go ahead.

Yes, Good morning, ladies and gentlemen. And thank you for joining us today. In terms of agenda, I'll first run through the highlights of our results for the first half of FY '22 and some of the key sales and operational drivers for the business. I'll then hand over to Larry who will take you through the details of the financials before I wrap up on our trading, update and outlook. So let's begin. And moving to Slide 3. Similar to what we've experienced over the last 24 months, the first half brought with it a number of challenges. Pleasingly, we were able to manage through each of these and ultimately deliver a very strong set of first half results. Our consolidated sales grew 2.8% to $127.1 million. This is another record for Shaver Shop and was achieved despite us losing more than 6,000 in-store trading days, or 28% of available in-store trading days due to government restrictions associated with COVID-19. The sales result was underpinned by the acquisition of the last 6 franchises in February 2021, as well as the 37.2% growth in online sales. Now to put that in perspective, online sales were $51.6 million in the first half or 40.6% of total sales. This equates to more than 370,000 online orders that were picked and packed by our store teams, given we still fulfill almost all online orders from the nearest store to the customer. Compared with the first half 2 years ago, our sales increased 18.3%. This clearly reflects the strength of Shaver Shop's performance since the pandemic began. And when comparing to the growth of 2.8% versus last year, reinforces that last year's first half result was an exceptional one for our business. As expected, gross profit margin declined slightly by 90 basis points, but was still very strong at 43.8%. It's up 250 basis points on the half yearly result from 2 years ago. Operating Expenses remain well-controlled, representing 22.9% of sales, in line with the result from last year. This led to NPAT dropping 8.6% to $13.1 million, and earnings per share of $0.106, down 9.4% on last year's result. In the context of our store network having been closed to customers, more than 1/4 of the available trading days, this is a very pleasing result overall, and reflects underlying demand for our product range and the strong fundamentals of the business. Our balance sheet also remains exceptional, with $36.3 million in cash and absolutely no debt. Shaver Shop generated $42.7 million of operating cash flow in the first half, which, as always, is largely due to the extended payment terms we received from suppliers in lead up to Christmas. Our cash balance and trade payables will naturally reduce in January and February as these suppliers are paid. Finally, in terms of capital, as indicated at our full year results in August, the Board is focused on continuing to manage Shaver Shop's capital efficiency with the intention of continuing to increase the dividend payout, provided it delivers the most attractive returns to shareholders. Accordingly, the Board has once again approved an increase in the interim dividend to $0.045, up 40.6% and fully franked. This still allows us to undertake the investments we need to grow the business, including executing our omni retail initiatives, opening 2 new stores in the second half and refitting 2 of our existing premises. So overall, another very impressive financial performance of the business, and particularly pleasing in light of the environmental factors we needed to deal with. So if we move to Slide 4. Now I may sound like a bit of a broken record, but our team, particularly our store teams remain our core competitive advantage and what separates us from the competition. We have passionate and dedicated staff who lives, breathes and love coming to work at Shaver Shop each day. And this was once again reflected in our incredible NPS scores being an average of 88% in the first half. Despite significant challenges in their rosters and availability due to COVID-related issues, our store teams keep delighting customers with their exceptional product knowledge and outstanding customer service. I'm extremely proud of our team and how they have adapted while continuing to uphold Shaver Shop's values, which center around excellence in customer service. The health and safety of our teams, our customers and the broader community remains our top priority. Our online experience also continues to improve. We stepped up our online delivery options and are in the final stages of a project that will enable us to deliver multiple logistics partners to deliver online orders in the second half. This will now include a priority, same-day offer as well as an ability to choose between multiple courier partners. Click & Collect also became a meaningful proportion of online sales in the half as customers chose to avoid potential postage delays by coming into our stores. Our active online customer base increased almost 50% to 650,000 customers in the last 12 months. And with projects underway to segment our database into cohorts with similar characteristics, we are on track to deliver initiatives to increase the number of returning customers to Shaver Shop, as well as accelerate the shopping cadence. We expect these initiatives to go live in the second half. Our buying and merchandise teams have also been very active with the Therabody, Tidal Wave, American Crew and Tooletries brands all being added in recent times. Finally, our store portfolio now sits at a total of 121 sites with 7 of those being in New Zealand. The stores in Clermont, WA; Hervey Bay, Queensland will be added in the second half. But given the seasonality of our business are not expected to generate meaningful sales or earnings until the next financial year. In addition, Bondi and East Gardens, key stores in New South Wales are currently closed as they undergo a facelift, and our Perth CBD store is moving into a new outstanding site at Piccadilly Arcade on Hay Street. We also are evaluating a few options for new stores in New Zealand, a market which continues to go from strength to strength. So we have a number of opportunities to increase our store footprint, and we'll keep applying our prudent return thresholds before giving the green light to these investments. Slide 5 provides a summary of the key drivers impacting our top line as well as more perspective around the growth we've experienced over the last 2 years. Now Shaver Shop operates in the attractive and growing personal care and grooming sector for men and for women. This is a mass market where innovation is rampant with global suppliers investing millions of dollars each year to bring salon-quality solutions to the home. In our niche of men's grooming, we believe this segment is growing faster than the broader market as men, particularly younger men have become more beauty conscious in the social media age. This is meaning they have tools in their arsenal, more tools in their arsenal to either trim their hair on their heads or their faces or anywhere else on their body. So there are strong fundamental tailwinds supporting our business that we believe will be with us for many years to come. As you can see from the top graph, revenues have grown strongly, up 18.3% compared to 2 years ago with organic growth, particularly online, being supplemented by the franchise acquisitions we did this time last year. In the bottom graph, we split out the key drivers versus the prior corresponding period. The benefits of being a multichannel retail with both bricks-and-mortar stores and a strong online capability is clearly visible in this chart, with in-store sales declining approximately $10 million across all store classification in the first half, but being more than offset by the $14 million increase in online sales. Last year, we had Victorian stores closed for almost 3 months. However, in the first half of FY '22, our biggest 2 trading regions, New South Wales and Victoria were both closed to in-store customers for almost all of the first quarter. This led to Shaver Shop losing around $10.5 million of in-store sales from these locations. Concerns about COVID with the Delta and Omicron variants had a material impact in the first half of this year, which caused customer foot traffic declines and sales to reduce by $1.9 million for those stores that were able to trade on the same days in both years. This was partially offset by the incremental contribution from the new Bunbury store as well as the incremental in-store contribution from the franchise buybacks. If it were not for the growth in online sales, our top line performance would have gone backwards by a significant margin. The next slide shows our quarterly sales for the first half in comparison to the prior 3 years. You can see that while sales growth declined by 5.1% in the first quarter as New South Wales and Victorian stores reopened, we saw a strong kick in second quarter sales, up 8.0%. Unfortunately, the strong rebound at the start of the quarter was not able to be sustained after Black Friday and Cyber Week promotions when Omicron surfaced. As the number of COVID cases rose sharply, we saw shopper foot traffic decline materially with the last-minute Christmas shoppers and bargain hunters over Boxing Day reluctant to spend in the way they had done over historical periods. But while that was very disappointing, given the strong October and November trading results and our expectation for the very strong Christmas sales, quarter 2 was still an exceptional result when you compare to 2 years ago with sales up 21.1% and the half year results being up 18.3% compared to first half FY '20. So moving to Slide 7. Our omni-retail investments have continued to deliver with 37.2% growth in online sales to $51.6 million. The sales growth was primarily due to an increase in transaction volumes, supported by a slight bump in average transaction value. To put into some perspective, our store network picked and packed more than 370,000 online orders in the first half. Around 2,000 online orders on average each day for every day. Over the last 12 months, more than 650,000 customers have chosen to shop with Shaver Shop online. Now that represents an increase of 48.7% compared to the same time last year. Pleasingly, returning customers represented almost 2/3 of total online sales in the first half of FY '22. Our ability to seamlessly offer Click & Collect was an important asset in the lead up to Christmas when customers became increasingly concerned with a very well-publicized post-digital age as well as of course the rise of Omicron. Click and Collect represented more than 10% of sales in the first half, rose to 20% over the month of December and represented more than 35% of online sales in the week before Christmas. Now lastly, from a revenue perspective, we experienced a swing in category mix across the first half. Hair cutting remained our largest category overall, representing 35% of total sales in the first half. However, after lockdowns ended and salon and barbershops reopened, haircutting share decline and swung towards long-term hair removal, DIY massage category, fragrance and power oral care in the lead up to Christmas. These categories were strong performance in the second quarter but generally have a lower than company average gross profit margins and accordingly put some downward pressure on consolidated gross profit margins, which dropped 90 basis points in the half to 43.8%. This is still a very strong result for the company and above our long-term average. To provide some context, our gross profit margin of 43.8% was up 250 basis points on 2 years ago. Our clean shaving categories like men's electric shavers and manual shaving continue to have soft demand as work-from-home orders remained in place through most of the half. We expect renewed growth in these categories as CBD offices reopen and men revert to a more clean-shaven look in the office environment. Finally, on product mix and category mix, 24 of our top 30 products by sales were exclusive to Shaver Shop in the first half. This is very consistent with the levels achieved over the last 5 years and continues to reflect suppliers' confidence in Shaver Shop's business model and ability to maximize sales of their latest product innovations in personal care and grooming category. So with that in mind, I'm going to hand over to Larry to take you through the financial results in more detail.

Thanks, Cameron. Before I start talking to the numbers, it's important to reiterate the context in which our results were achieved. In particular, the impact of lost in-store trading days due to government restrictions needs to be at the back of your mind when analyzing our results. Given we expect our stores to contribute roughly 70% of our sales day to day in a normal trading environment. So while sales increased 2.8% in the first half, this is actually a very strong result when you consider that customers were not able to shop in our stores for more than 6,000 trading days. Gross profit margins decreased 90 basis points to 43.8%. But as Cameron mentioned, this is still well above the long-term averages for the first half. We continue to manage operating expenses closely and adjust our cost base as circumstances require. This led to operating expenses as a percentage of sales remaining flat with the prior corresponding period at 22.9%. I'll discuss how the mix of operating expenses changed on the next slide. But from a pure dollar perspective, operating expenses increased 2.8% or $0.8 million to $29.1 million in the first half. Due to a combination of, a, an increase in the number of corporate stores after we acquired the last 6 franchises; b, higher marketing and advertising costs; and c, higher direct costs associated with online sales. This was partially offset by a decline in employment costs as difficult but necessary decisions were taken to stand down casual staff and reduce permanent and part-time hours during lockdowns. Depreciation and amortization and interest have become relatively fixed costs and are now primarily impacted by any changes in our store lease portfolio. With the addition of the last 6 franchise buyback stores in the second half of last financial year, we now see lease amortization and interest associated with these stores, having an incremental cost impact on the interest and amortization lines in the P&L in the first half. The second half lease interest and amortization should however be relatively flat with last year's second half result given the acquisition of the 6 stores was completed in early February 2021. Net profit after tax decreased 8.6% to $13.1 million, and earnings per share came in at $0.106, which were both the second highest half yearly results in the company's history behind last year's exceptional performance. After accounting for the tax benefit we get on franchise buybacks, cash NPAT was $13.7 million and cash EPS was $0.111 per share. Moving to the next slide. Our mix of operating expenses changed in comparison to last year as we adapted to the changing environment. We have always operated a lean cost structure at Shaver Shop, and the first half of FY 2022 was no exception. As mentioned on the last slide, we unfortunately found it necessary to stand down a large number of our casual workforce in New South Wales and Victoria during Q1 and in the ACT in New Zealand over other parts of the year. This, together with savings at our support office delivered a reduction in total employment costs of approximately $1 million. The drop in employment cost was largely offset by an increase in direct costs associated with the growth in online sales. The most material of these costs, as I mentioned before, were postage as well as merchant fees, including buy now, pay later commissions. Occupancy costs once again benefited from rent abatements negotiated with landlords for the lockdown periods. This value was approximately $0.5 million and equivalent with the first half rent abatements secured in the prior corresponding period. Other than adjusting for the short-term changes caused by COVID-19 just highlighted, we don't foresee material incremental operating expenses being required by the business in the future. So all else being equal, organic sales growth and the reversion to in-store trading should hopefully deliver some operating leverage for Shaver Shop in future years. Slide 12 provides our best estimate of the key drivers of NPAT. To do this, we have classified each store as either a greenfield, buyback, like-for-like store or permanently or temporarily closed. To be clear, our like-for-like store for this analysis is one that was open and operated as a corporate store in both the prior year as well as the current year and was not closed for more than 5 days in any given month. If a store was closed in either half for 5 or more days in a particular month, its monthly results for that -- for both the last year and this year is classified as closed. Not surprisingly, you can see that the biggest impact to profitability was the temporary closure of the stores across New South Wales and Victoria due to government-imposed trading restrictions. These are our best estimates as it's extremely difficult to allocate store costs on a daily basis to reflect when stores are open or closed to the public. When stores were able to be open as reflected in the like-for-like bar, profitability was relatively flat year-over-year with 3.6% like-for-like sales growth being offset by lower gross profit margins. Incremental profit contributions came from both the greenfields from the new Bunbury store that we opened, as well as the franchise buybacks that we undertook. This was offset by slight increases in marketing expenditure as well as corporate overheads and reduced franchise fees. Moving on to Slide 13. The $13.1 million in net profit generated in the first half translates into $0.106 per share, which is down slightly on last year, but still 74% above the result from 2 years ago of $0.061. The continuing strong performance of our business, combined with our conservative balance sheet has led the Board choosing to increase the fully franked interim dividend by 40.6% to $0.045 per share. This is up 114% compared to the $0.021, 80% franked payout from 2 years ago. As indicated at our full year results in August, it's the Board's desire to continue to increase Shaver Shop's annual dividend payout, subject to any other better uses of the capital for shareholders. It's also the Board's intent to seek to bring the value of the interim and final dividend payments closer together so that the final dividend payout is not that much substantially higher than the interim dividend. The FY '22 interim dividend has a record date of the 17th of March 2022 and a payment date of the 31st of March 2022. That brings us to Shaver Shop's balance sheet, which continues to be in a very strong financial position. Net cash was $36.3 million at the end of December, which was up $28.9 million compared to our 30 June 2021 balance sheet and reflects the fact that our first half always generates very strong cash flows due to the seasonality of our business as well as the nature of the business that we operate. Each year we worked with suppliers to negotiate extended trading terms for Christmas stock purchases. This generally means we sell through the stock before we need to pay our suppliers, which significantly derisks our business and puts us in a very strong liquidity position at the end of December. You can see that this time last year we had net cash of $41.1 million at 31 December, and that over the course of the second half of the financial year, that cash balance declined to $7.4 million at 30 June as we repaid suppliers for Christmas stock purchases, paid dividends and also completed the buyback of the last 6 franchise stores. In addition to the large cash balance, Shaver Shop has access to an undrawn $30 million debt facility. This facility matures on the 31st of July this year, and we are already in constructive dialogue with our banking partners regarding its renewal. Our ending stock levels were relatively consistent with 12 months ago at $24.6 million. This represents around $200,000 per store and is well down on the stock levels we maintained prior to COVID. We believe these new levels are sustainable, and pleasingly, our inventory position remains very clean. Finally, in terms of net assets, we now have a shareholders' equity balance of $80.9 million prior to our interim dividend payment, which gives us a 12-month return on closing net assets of 20.1%. This is slightly down on the prior comparative period, but the 20% return on capital again reflects the Board's desire to manage capital efficiently. My last slide today deals with our cash flow. Operating cash flow in the first half was $42.7 million, up approximately $1.5 million on the prior corresponding period. As indicated previously, our first half always generates strong operating cash flow, and our second half generally has negative operating cash flow as we pay suppliers for Christmas stock purchases. Over time, our strong cash flow conversion has enabled us to invest in the future of our business through new store expansion, buying back franchises, completing full store refits to bring key doors up to the latest look and feel, as well as in our ongoing program of work around omni retail initiatives. It has also enabled Shaver Shop to pay handsome and growing dividends to shareholders as evidenced by the payout of $6.2 million in the first half of FY '22 and today's announcement of around another $5.8 million to be returned to shareholders in the second half by way of the interim dividend. So in summarizing, another very pleasing set of financial results, Shaver Shop remains in a very solid financial position and operating position with the flexibility to invest in organic or acquisitive opportunities when they arise, subject to them making -- meeting our strict investment criteria and return hurdles. Thanks for joining today. I'll now hand you back to Cameron for the trading update and outlook.

Thanks, Larry. So the first half of FY '22 was characterized by significant trading volatility. Quarter 1 was very challenging with long-term lockdowns in New South Wales, Victoria, New Zealand and the ACT being combined with snap lockdowns in other states. Quarter 2 started with a bang as New South Wales and then Victoria reopened, with the strength continuing all the way through November and at the end of Black Friday promotion. Our hopes for a very strong Christmas were unfortunately short-lived as the rise of Omicron led to subdued customer foot traffic, softer retail sentiment and a reluctance for shoppers to go to shopping centers, both in the lead up to Christmas as well as through the critical Boxing Day week. The demand softness continued through mid-January before recovering at the end of the month and into early February. [ That ] day results remain quite volatile and difficult to predict. Customer foot traffic remains well down on pre-COVID levels, but pleasingly, propensity to spend remains elevated, which has led to a 2-year total sales growth rate of 22.6% in the second half to date. Compared to the same time last year, total sales have increased by 6.2%. Online sales continues to be the key driver of growth against both the 1-year and 2-year period comps, up 23.8% and 149.6% respectively. Please note that due to the postage delays we experienced this year, we needed to defer a higher value of online sales that were not delivered to our customers as of 31st December. So this reduced our first half sales growth and has increased our second half sales growth but has no impact on our year-to-date growth figures. The reluctance for consumers to spend time in browsing stores is reflected in our like-for-like sales being flat in the first 7 weeks of the second half. Compared to 2 years ago, like-for-like store sales are up 16.8%, reflecting the continuing and relevance and demand for Shaver Shop's offering. In-store sales have gradually improved into February, which bodes well for the second half given our stores are still expected to represent around 70% of our total sales in the future. We expect in-store trading will continue to improve as third-dose vaccination rates rise and concerns over Omicron subside with time. Importantly, our service metrics continue at or above our internal targets with our store teams remaining focused on the job at hand. As most retailers, we experienced significant staffing impact at the start of the half from self-isolation requirements associated with COVID or being close contacts. Pleasingly, despite these short-term challenges, we were able to keep all stores trading, and we are hopeful that we'll have increased workforce stability for the rest of the second half. In terms of supply chain, we're not experiencing any broad-based issues with stock availability, and discussions are just commencing with suppliers around promotional purchases for Mother's Day and our end-of-financial-year sales event. Also heard rumors that selective price rise is being considered by suppliers. As always, we will take a very aggressive stance to protect our position. With our market share, our breadth and depth of range in our core categories, we have the ability at every single price point to switch sell away from suppliers who choose to drive price rises through that we are simply not aligned with. We are committed to opening 2 new stores in the second half. And if discussions go well, we may end up opening a new store in New Zealand as well. Our omni retail investments are continuing with projects going live that will enhance data analytics and our understanding of and communicating with the various customer cohorts. We will also be launching a platform that will significantly enhance the number of logistic options customers can choose for online orders. So overall, Shaver Shop remains in a great position with a differentiated specialty retail offering centered around passionate store teams and providing excellent customer service and the sale of exclusive product lines. We are in a growing market with plenty of innovation still to come, and we continue to expand our category and product range as well as our market awareness both here in Australia as well as in New Zealand. So whilst this position gives me strong confidence about Shaver Shop's long-term prospects, the uncertainty caused by COVID-19 remains in the short term. And accordingly, Shaver Shop is not in a position to provide FY '22 sales or earnings guidance at this point in time. Thank you for your attention. Larry and I would now be pleased to take any questions.

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

Well done on a super result given the environment. I've got 2 questions to kick off with, and then maybe for Larry. Larry, you said the operating leverage in future years should start to open up, which is a big positive. If we can focus on the second half that we're in at the moment in terms of the cost of doing business. So in the first half, there was $29 million in total or around 23% of sales. You had a little bit of a benefit there from your staffing cost, so we're down about $1 million year-on-year, and your operational was up and your marketing and advertising was up. Should we look at the second half cost of doing business? Should we see maybe a reversion of staffing costs increasing by that $1 million that you lost in the first half? And overall, how does the cost of doing business look like in the second half relative to the first half?

So generally speaking -- and thanks, Danny, for your comments on the results. Generally speaking, our second half always has a higher cost of doing business percentage of sales than the first half just because we're a seasonal business. And with strong sales coming through in November and December, we get very strong operating leverage in those 2 months, in particular, which results in our second half having a lower cost of doing business percent -- higher, sorry, a higher cost of doing business percentage than the first half. So yes, assuming no lockdowns and those types of things, I do expect our employment cost to increase in the second half. It's probably not -- if you look half on half, Danny, we do have a large ramp-up in casual staff in the first half coming into November and December. So you might not see that full million coming through because we won't have that same ramp in the second half, but it's probably in the order of $0.5 million to $0.75 million that you might see coming in in the second half. Again, assuming there's no lockdowns touchwood. Marketing costs, you best -- a lot of the analysis around this, you're best looking at the second half from last year and comparing and trying to build that base from which to forecast from. So last year in the second half, it was a relatively normal second half for us. There weren't significant long-term lockdowns. We had a number of short-term lockdowns here in Victoria. But most of the other states were relatively untouched. So probably the second half of last financial year is as good a base other than having to add in for the 6 franchise stores that we acquired and some operating costs related to those. That's probably your best base for building your operating expense forecast going forward.

Great. No, that's very helpful. And on gross margins, you've done a great job there, 43.8% versus historical. The year-to-date trading seems to suggest that's going to come down to about 43%. I'm just wondering, I mean, you've pointed out lower-margin categories like massage, fragrance, laser hair removal. Apart from that side of the equation, how much cost inflation is there in COGS? I think, Cameron, you touched on it in your outlook statement. How much was there in the first half, if any? And what do you expect in the second half? Are we expecting 10% increases from your suppliers or…

I mean, I'll start on that one. If Cameron has anything to add on to it, he's welcome to. I guess in terms of the first half, very little cost inflation, Danny, we end up every year lining up our promotional program, try and get it mostly done by June or July. Sometimes it leads into August, but that means we locked in a lot of prices pretty early on in the year. So very little CTI impact or price increases that came through in the first half. What we did experience to give some context around that strong margin result in the first half is over that first quarter when we had the long-term lockdowns, we still saw very strong sales coming through our clipper category, a market that we dominate, which has almost our highest margin, if not the highest category margin in our business. Also one of our biggest across that range of haircutting solutions, it is the largest category for the business. So the growth that we saw in that first quarter basically reverted and went across to those other lower-margin categories that we referred into the -- in the presentation, like how oral care, massage and long-term hair removal solutions for women. And we've basically seen that continue in the second half so far. So yes 43.8% certainly benefited from the strong hair clipping and haircutting performance in that first quarter. From my perspective, it's probably a bit too early to tell, I guess, in terms of price rises and what may come through that could impact this financial year. Those discussions are just commencing at the moment. And so even if price rises were pushed through by a supplier or 2, then it's likely not to impact the full year result this year that much. It would be more of a consideration for next year. And that's definitely the case given we're already locking in some of those promotional pricing programs for Mother's Day and in the financial year at the moment.

Yes, look. And Danny, just to probably expand on Larry's point too. There is always 1 or 2 suppliers that may try to push for an increase, but I can't stress enough that we've always been very, very aggressive on a supplier who tries to push through a price rise, particularly within our core business of men's grooming, remembering that one of our greatest strengths is our ability to switch sell. It's not like we only have one option at each price point and category. And I guess one of the benefits of our models is we have lots of exclusive products, a big branded exclusive products within each category, particularly within equipment trim and the men's electric shaving categories. So if one supplier is to take a price rise that we think is unreasonable, then we certainly changed our strategy, and we switch sell towards another still very credible brand that hasn't chosen to take cost price increases. That's been our ethos every [indiscernible] and no doubt that will be our ethos moving forward.

Great. Okay. Maybe one final one, maybe one for you, Cameron. A year or so ago you picked up the 6 franchisees. They're all A-grade stores. Unfortunately, you had COVID over the last 12 months, which made trading pretty difficult. But can you maybe just give us a rundown on how those 6 new stores have performed over the last 12 months. Have you done anything different or new because of COVID or not of COVID? I noticed in the half, they contributed about $2.5 million in sales. Were you happy with that number? If you can just maybe provide a little bit more information about those A-grade locations in the last 12 months?

Yes. Well, look, I guess the first thing I always talk about is people. And I think that's always the -- always probably the biggest challenges when you take something or take 6 stores that have been very successful franchise stores and move them to a corporate store environment. And is it going to work? There's always an element of risk there, particularly to their long-standing franchise. And we may have a slightly different operating ethos than what the previous franchise owners did. And what we have found, and most importantly, Danny, is the people are right, the people are strong, the training has gone well. So from a cultural point of view and an in-store service point of view, the biggest thing is I'm really happy, I'm really pleased. And when the store has been open for an extended period of time, like in the lead up to Black Friday, Cyber Week, those 6 stores were just terrific to have. I mean that big trading doors, Parramatta, Burwood, absolutely terrific store, Sydney CBD. So when we're firing foot traffic, healthy, and there's no lockdowns, obviously those 6 stores are absolutely terrific to have on board. We just need some continuity of trade. I think that's a big thing. That's not really specific to those franchise stores we bought. I think that's just across the eastern seaboard states in particular.

Your next question comes from James Casey from Ord Minnett.

A couple of questions, if I may. Firstly, just on the online sales, the percentage of online sales, just broadly speaking, where do you see that settling as the stores fingers crossed are able to remain open -- remain open during the half?

Yes. Look, I think Larry touched upon it during the presentation. Broadly, we sort of think online sort of normalizes around 30%. Bricks and mortar, obviously, 70%. And we're sort of seeing elements of that is when the reopenings have occurred in -- across New South Wales and Victoria from mid-October. That was roughly the ratio that we saw. And then obviously online gets a serious kicker when there's any form of lockdown or a public apprehension, I guess, around rising case numbers associated with COVID-19.

Okay. With regards to the second half, can you just remind me what the disruptions were in the PCP, what you're cycling this period?

Yes, there was probably -- it's mostly in Victoria. As I mentioned before, the other states are relatively untouched. So my recollection is there is at least 3 or 4 snap lockdowns here in Victoria, ranging from sort of 5 days in length. I think there was one that we've already passed in February. That was sort of 5 days in length, all the way up to 2 to 3 weeks from memory coming into sort of later in the half. So there's probably 4 to 5 -- 4 separate situations and then isolated sort of 1- or 2-day lockdowns in other states. I don't have the exact numbers, unfortunately, James in front of you, but it's mostly Victoria that was primarily impacted.

Okay. And then just with the additional 2 stores, would there be some small store opening costs given they're opening up later in the quarter, so just a small drag in the second half. Is that the best way to think about the new stores?

Yes, very small. So there might be across the 2 stores, it's certainly less than $100,000 that we'd be expecting. And what we found historically is because of the Shaver Shop brand is so well known now, as long as we get the premarketing right, there's usually a fairly strong uptake immediately on opening the door. So yes, there's some type of training costs and those types of things in the lead-up. But if we get the marketing right in the lead up to the store opening, it can actually have a little bit of a kick, but we're certainly not expecting anything breakeven or better in the second half of those stores, a slight loss.

Your next question comes from [ Rodney Van Royden ], Private Investor.

Well, firstly, I'm so glad others have congratulated you but -- and also to your team because brilliant results especially considering the conditions. And this is not a criticism, but I just have to hopefully have you expand on some of the costs of doing business. So Slide 12 explained it really well. So my 2 questions would be basically about that, how you're managing it, and I think others have mentioned inflation. But I'd like to specifically invite you to address it online in terms of also combining as my other area of questioning about online, how you're working on improving that side of it, perhaps should be considering a mobile phone app at some point?

So in terms of the operating expenses, did you have a specific question? Sorry, I may have missed it.

Well, I guess -- I know you've mentioned -- my apologies. You've mentioned previously that it's basically similar in-store and online, you're agnostic as to which channel customers prefer. So I'm just wondering if -- when you're -- because it's a very difficult situation to plan for and Cameron said it well, trading continuity is what everyone would like. But I'm just wondering if you're focusing more with your costs, are you going to be focusing more on building the in-store business or the online business? And if so, how would you expand the online potentially.

Yes, thanks, understood. So you're right, we are ambivalent between in-store or online in terms of how customers shop with us. After we allocate the fixed costs on what we think is a reasonable basis, contribution margins online and in-store are roughly sort of low 20% range, sort of 21% to 22%. So that is -- means we would like our customers just to come and shop with us regardless of which channel they choose to use. In terms of investment, we've been pretty clear that going forward most of our additional investment will likely -- particularly in operating expenses will come through more in the online side of things. So as we're looking to roll out some of the additional initiatives that Cameron mentioned around being able to segment and communicate with specific cohorts around what their needs and desires are for certain products, around our data analytics so we can understand the frequency with which customers shop with us and how we can improve their cadence. All those types of things are largely driven online at the moment in our online spend because that's where we have the ability to track the data. We are working towards being able to track it more in store, and there are projects that we're looking at to drive that. But all the data that you would have seen around active customers, et cetera, that all comes from online because that's the channel where we're best able to do the analytics. And that's where, in the short term, at least, where we expect most of the investment -- additional investment to come through. But it's -- we're not talking significant incremental costs. I guess it's important to note, we're looking at -- and keeping our expense base roughly the same and just investing in those core projects that I mentioned.

[Operator Instructions] Your next question comes from [ Daniel Kyle ], Private Investor.

Congratulations, Cameron, Larry and the rest of the team on the great result. I've got 2 questions for today. Our first question, have you and the Board considered share buybacks as a way of returning capital to shareholders? And if so, why wasn't it chosen with the low share prices on offer? That's the first question. And the second question is for long term, what are your plans for the business to increase value for shareholders over the long term?

Sure. I'll take on the first one, and thanks, Daniel, for the questions. Share buyback is always something that the Board is considering when looking at its capital management alternatives. We did do a buyback back in 2017, an on-market buyback. And it's something that the board considers from time to time. At the moment, the Board decided to significantly increase the dividend rather than pursuing an on-market or an off-market buyback. But that is something that could be back on the table at some point in the future, but it wasn't decided at this point in time. So the second question was around long-term, I guess, growth in shareholder value. So in addition to trying to increase returns to shareholders by way of dividends, we're focused on growing the business as well. So we believe, particularly in the men's grooming segment, we're in a very strong position to continue to benefit from the growth that's happening in the market as well as from growing our share and from retargeting our customers to generate incremental sales, so increased purchase frequency and increased purchase cadence. And these projects that we're talking about are important ones to help us actually understand our customers better. So at the moment, 66% of our customers, as we mentioned in the presentation, had purchased from us online sometime in the past. So in the last 6 months, 66% of those customers that bought online had traded or purchased something from us online at some point in the past. But if you look at the number of those customers that actually purchased in the last year, most of them, this would have been their only purchase in the last 12 months. And so we have a large range of consumable products that we are retargeting customers with in-store when they're coming in the store and we're doing that online as well. But by better analyzing and segmenting our data, we think we can drive significant increase in purchase frequency and cadence from doing that. And that's why we've highlighted it again in this presentation. We also are looking to grow the number of stores that we have in New Zealand. So we're in dialogue with a few landlords actually for opening new stores in New Zealand. We've just been restricted from getting over there to actually visit the site. And -- but if we can secure the commercials we want with those landlords and the sites that we want, then we're hopeful of opening up another 6 or 7 new stores in New Zealand as well as well as the incremental 1 or 2 we might do here in Australia over the coming years. But those would be the 2 sort of key factors, I guess, in the short to medium term that we feel will drive incremental value for shareholders. Did you have anything else you wanted to add, Cameron?

No, I think that's a really good summary. I guess, separate to that you just got the organic opportunity, which is, you should never forget about, which is the market itself and the category opportunity. Now you got about 35 year Shaver Shop was just selling electric shavers, that's all we do. We sold electric shavers. We fixed some electric shavers. And then we've expanded. We've introduced power oral care. We're now one of the market leaders in power oral care. We then introduced IPO female solutions for females about a decade ago. We're the market leader in that. And our hair care is relatively new for us. DIY massage is relatively new for us. All these categories are actually bolting on, and we're expanding the adjacent categories of Shaver Shop and we're making them work. And I think that's one of the exciting prospects too is, the consumer demand for DIY personal care for men and women in Australian and globally is really exciting. It's growing, a lot of innovation. And I think we're really well-positioned to capitalize on some of that innovation and natural category growth.

Your next question comes from [ Jeffrey Ding ], Private Investor.

Congratulations on a great result. I just have a question. Are you able to talk about metrics around website visitation and how that has been trending throughout the current financial year and compared to prior years?

I don't have that information directly to hand. Cameron?

Yes. Look, I mean broadly, what we're actually seeing is website traffic is marginally up, but we're actually seeing increases in ATV from a website point of view as well, particularly over the last quarter. But that in part is being driven by category mix. One of our 2 categories have a very high ATV on average price. And our conversion levels has been relatively stable. Our conversion was quite high during the long-term lockdowns because people, for example, searching for hair clippers, Shaver Shop is a market leader in hair clippers. Our conversion on that category was very high, which pushed our overall conversion through the long-term lockdowns. Apart from the longer-term lockdowns, conversion has been pretty steadily and perhaps marginally up.

Thank you. There are no further questions at this time. I'll now hand the conference back to Mr. Fox for closing remarks.

Thank you. Sorry about that [indiscernible]. Okay, back on track. So as to wrap up, let's go through our investment summary. Shaver Shop operates in a large and growing market, driven by a change in consumer preference and new product innovation, as was discussed an awful lot over the last sort of 45 minutes or so. There is no doubt COVID-19 has supercharged growth in our sector and introduced a large group of new customers for Shaver Shop as people were forced to consider DIY personal care and grooming solutions. We still have significant potential to further increase our market share, again, as we just covered. 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 so now in New Zealand. Our specialty retail business model is agile, differentiated and resilient and is based around 3 key notions, customer service excellence and unparalleled product knowledge, product exclusivity and of course 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 retailer in our core categories with strong online sales growth. We also have significant further potential to grow. We acquired the last 6 franchises with cash end of February, which should deliver around $1.5 million to $1.6 million in annualized NPAT in FY '22. We have a very strong balance sheet with no debt and have very strong cash conversion. We have an experienced management and board team that has executed extremely well over 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 continued growth in our dividends over time. So thank you, everyone, for your time today. We do appreciate it. And that now concludes the investor briefing.

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