Super Retail Group Limited (SUL) Earnings Call Transcript & Summary

Good morning, everyone. I am Sally Pitkin, Chair of Super Retail Group, and I'm delighted to welcome you here to our 2023 Annual General Meeting of Shareholders. I note that a quorum is present, and I formally declare the meeting open. Throughout its history, Super Retail Group has developed strong connections with indigenous Australians through our customers, team members, partners and the communities in which we operate across Australia. Shareholders may be aware that in the year ahead, we are developing our inaugural reflect reconciliation action plan involving the scoping and development of relationships with Aboriginal and Torres Strait Islander stakeholders across Australia. This plan will help us shape our approach to advancing the cause of reconciliation and committing to specific and meaningful initiatives. And so I would like to acknowledge the traditional owners of the land from where I am speaking, the Turrbal and Jagera peoples, and the Traditional Owners from other parts of the country for those of you who are joining via the online platform. I recognize First Nations people's continuing connection to land, waters and the community, and we pay our respects to the elders past, present and emerging. For those attending in person, we do have emergency procedures for this venue, our head office here at Strathpine, the emergency exit for this room is via the door behind you proceed then please to the stairs in the central atrium down the stairs and out the front door, just to take a moment just to identify the exit, please. In the event of an emergency, 1 of 2 alarms may sound. The alert alarm is a warning beep. If this alarm sounds, please check surroundings and just stand by for further instructions. But in the unlikely event we need to evacuate a whoop-whoop alarm will sound and everyone should evacuate using the nearest safe exit. Just a reminder, we don't use lifts in the event of an evacuation, and our evacuation assembly point is the grassed area at the southeast corner of the building. And just as a courtesy reminder for us all to have our phones off or on silent. It is my pleasure now to have the opportunity to address you both in person for those here and virtually for those attending the online meeting platform. We are conducting the meeting in a hybrid format for the first time this year, and we think this provides shareholders with an additional opportunity to participate. The Notice of Meeting has been distributed to shareholders, and I will take it as read. I'd now like to introduce my fellow directors and our Chief Legal Officer and Company Secretary. Starting on my far right, we have Judith Swales; peter Everingham, who is also Chair of our Human Resources and Remuneration Committee; Annabelle Chaplain, the Chair of the Board Risk & Sustainability Committee and who is standing for reelection today; and Anthony Heraghty our Group Managing Director and CEO. And on my far -- given I don't know my lefts or my rights, on my far right, we have Mark O'Hare, who is standing for election today, Howard Mowlem, Chair of the Board Audit Committee who is also standing for reelection; and Rebecca Farrell, our Chief Legal Officer and Company Secretary. We also have members of our senior leadership team in the audience today. And representing our external auditor, we have lead audit partner, Paddy Carney, present. I now will talk through some important procedural matters for the meeting. We're going to be holding a poll on all of the resolutions before this meeting. This allows everyone attending an opportunity to vote, and I now open the polls for all items of business that shareholders will vote on today. The polls will remain open until 10 minutes after the meeting closes. So if you're here in person today and are entitled to vote, you will have been given a yellow voting card. At the conclusion of the meeting or if you leave the meeting sooner, could you please put those completed voting cards in one of the ballot boxes that are located near the exit. For those attending via the online platform, we have a virtual meeting guide, which provides information about how to vote and how to ask questions. And this guide is on our AGM section of our website. and also on the online platform. But if you have any technical difficulties, please call Link Market Services, and we have a 1-800 number for that, 1-800-990-363. To vote and participate in the meeting online, shareholders and proxy holders need to register first by clicking on the get a voting card button and then there's a series of prompts to follow. And once registered, your voting card will appear with all the resolutions to be voted on at today's meeting. And you can cast your vote for each resolution by selecting the option corresponding with the way you wish to vote. And then you click the button that says submit vote and do that any time before the voting closes. You, of course, can edit your electronic voting card up until the time that the voting closes. At the conclusion of this meeting, a red bar will appear on the online platform advising of the remaining voting time. So we will announce the poll results to the ASX later today, and we will also post them on our website. Rachel Teo of Link Market Services, the company's share registry has been appointed returning officer and will determine the results of the polls. And as you would be aware, only shareholders and proxy holders can ask a question during today's meeting. And I would ask that all questions please be directed to me as Chair in the first instance. And to shareholders who have submitted questions ahead of the meeting, thank you, and we'll address those questions as we go through the meeting in relation to the formal items. So there's three ways to ask questions today just to complicate things. There will be questions from the floor, written questions through the online platform and also questions which can come through on the telephone. What we will start with is questions from the floor. We'll then move to written questions through the online platform and then take questions on the telephone. For those of you in the room, if you would like to ask a question, please just put your hand up. We've got roving microphones so that everyone can hear and particularly for those joining us remotely. Just show the moderator your yellow voting card or your blue nonvoting shareholder card, and we can take your question. And there is also our online shareholders, you'll see there's an ask a question button, and you can select whichever item of business your question relates to. Could people please ask 1 question at a time, and we might do 2 questions per shareholder. I just want to make sure everyone has an opportunity to ask a question. But no limit otherwise to questions. We'll circle back to you if you've got more than 2. All right. I think we move on now. One other thing, if we've got multiple questions all on the same topic, I might try to group them together. I think that's it. So for each item of business...

Yes. [indiscernible] from the shareholder. You keep referring everybody, keep referring that through the voice that loss debt. So we don't have to welcome the country, right. We are all Australians, and we should be pulling the same basket. We are Australians all of us, not just a segregated group and we've got to always pay homage to that. They lost the [indiscernible]. So let's forget about that. Let's carry on as one Australian people.

Thank you for your comment. And whilst we are all Australians and I hope a cohesive community, we very much value and respect the contributions that our indigenous team members make and our customers and we're very committed to doing our inaugural reflect reconciliation action plan, which we think will strengthen us as a company and as a community. But thank you for your comment. All right. Now it occurs to me that we might have some customers here who might have some questions that don't actually relate to items of business at this general meeting, but we've got our Investor Relations team here and brand leaders who would be very happy to chat to you after the meeting or please feel free to contact them via e-mail at Investor Relations at superretailgroup.com. So we'll move on now with the items of business of the meeting. First, I'm going to provide some highlights of the past financial year. Anthony is then going to take you through the group's results and activities for FY '23 in more detail and update you on the first quarter of trading, and then we'll proceed with the formal items of business for the meeting. They're set out in the Notice of Meeting, which I've said has been taken as read. And we are also doing a webcast of this meeting so that you can look at the recording now or once the meeting is over. And following the conclusion of the meeting for those here in the room, please join us for some refreshments. So to my address, I am very pleased to report another strong year for Super Retail Group. The group's clear business strategy, adaptability and sound financial position helped ensure that we continue to perform well in the 2023 financial year despite an increasingly volatile retail landscape. Cost of living pressures, higher interest rates and escalating inflation combined to create a challenging environment for retailers in Australia and New Zealand. But the strength of our 4 core brands and unrivaled connection with customers and the passion of our team members has underlined the resilience of our business and the market segments in which we operate. In financial year '23, we reported record sales, higher profits and reinforce the market-leading position of our Core 4 brands. The revenue growth was underpinned by the performance of our store network. We had new stores, refurbishments and innovative formats which have attracted customers as they have returned to traditional shopping patterns following the pandemic. The group's commitment to our omni retail strategy and investments in our store network, team members and relationship with customers remains central to our success. To further strengthen relationships with our customers, we are investing significantly in personalization and loyalty. We now have a record 10-plus million active club members, and we are confident about the potential for further growth. Our strong financial performance and robust balance sheet has allowed us to invest in the business for the future while continuing to reward shareholders with dividends. The Board determined to pay a fully franked final ordinary dividend of $0.44 per share, which is at the upper end of our dividend payout policy. And in addition to the final ordinary dividend, shareholders have received a fully-franked special dividend of $0.25 per share. So together with the interim ordinary dividend of $0.34 per share, this has represented an aggregate dividend payment to shareholders in the last financial year of $1.03 per share. During the year, we increased efforts across the group to enhance sustainability in the way we work. As a company, we are committed to supporting our people and the environment while continuing to inspire customers to live their passion, along with team members, investors, partners and customers we are pushing ourselves more responsible choices and greater transparency about our values and practices. In our sustainability report, we were pleased to record further progress against our strength and sustainability framework. The framework sets out our commitment to the Super Retail Group team, community, responsible sourcing, the circular economy and to limiting the impact of climate change. We recognize we need to keep learning, adapting and improving every day so that we can build a more sustainable business. The group also worked hard to improve the health, safety and well-being of our people. We acknowledge our total recordable injury frequency rate increased slightly. That was impacted by higher team member turnover and heavier trade volumes. Manual handling and stock movement contributed to almost 3 in 4 of our injuries this year. Pleasingly, our measure of safety effort, which is viewed as a leading indicator, exceeded our target. But the Board and senior leaders are focused on improving our injury performance across the group. We have a commitment to addressing critical risks to strengthening culture that sits at the core of our health and safety agenda and we are focused on ongoing improvements through active leadership, accountability, ownership of commitments right across the business. So we have recorded some progress in areas of health and safety, but we recognized we've got more to do. During the year, we had quite a milestone with Reg's retirement -- Reg Rowe's retirement from the Board. Reg your extraordinary story is well known to Super Retail Group shareholders and team members. Along with Reg's late wife Hazel, Reg started Super Retail Group more than half a century ago and has shaped the culture of the business in various leadership roles, including as Managing Director, Chair and then Non-Executive Director. And we're delighted that you remain the group's largest shareholder. You're a committed long-term shareholder who has promised to remain a familiar face to team members across our network of stores. Thank you. In April, Mark O'Hare joined the Board as Reg's replacement. Mark is the Chairman of the Advisory Group for Reg's private investment vehicle and an experienced corporate adviser. As a Board, we continue to evaluate our governance arrangements and the mix of capability and experience among directors to make sure that the Board is best placed to provide strong governance to support Anthony and the leadership team. To provide for future Board capability and to plan for nonexecutive retirements, including my own and Howard Mowlem's decision that if appointed today, he will not seek further reelection, we are undertaking a considered process of Board renewal. We have appointed a leading recruitment firm to support the search process for non-executive directors, and I can assure shareholders of the director's focus on our responsibilities for succession planning at all levels of the business, including the Board. After reviewing the Board standing committees and their respective charters and responsibilities, the directors have decided to establish a Board Risk and Sustainability Committee. That committee started work at the beginning of September this year. And at that time, the Audit and Risk Committee has become the Board Audit Committee. We think these changes reflect the growing significance of sustainability considerations and the increasing audit-related workload in relation to sustainability and climate. Given the extended tenure of the group's external audit, auditor and following good practice, the Audit Committee recommended to the Board that we undertake a competitive external audit tender process. This is underway, and we expect to advise shareholders of the outcome of this process in due course. So looking ahead, the 2024 financial year marks our 20th year as a company listed on the ASX. The year ahead will continue to present serious challenges for the business and the wider retail sector as economic conditions remain tight and cost of living pressures become more acute. Nevertheless, the strength of our brands, our experienced leadership team and customer value proposition leaves Super Retail Group well positioned for sustainable growth over the medium and long term. Your Board remains focused on positioning Super Retail Group for shareholder returns over the long term and creating a positive impact on the communities in which we operate. Our strong balance sheet leaves us well placed to continue investing in the business to generate that long-term value for shareholders. Store openings and refurbishments, data analytics, loyalty, including the launch of the loyalty program this week, if I'm allowed to say that, they are priorities in the year ahead. I would like to thank all my directors, colleagues for their sound counsel and support during the year. Given the strong performance and high team member engagement over the past 12 months, I also want to, as always, highlight the leadership displayed by Anthony and his management team. Thank you. And finally, I want to acknowledge each and every one of our 15,000-plus team members for their dedication and commitment to make Super Retail Group a stronger and better business. Thank you for your continuing support. And I would like to now ask Anthony to address the meeting. Very happy for you to ask now Mr. Menon.

[indiscernible] I would like to first wholeheartedly endorse -- do I need this?

You do for people who are online.

Yes, yes, sorry, okay. People online. Wholeheartedly endorse anything you do towards reconciliation with our indigenous people. The recent vote had nothing to do with us continuing the cruelty that has happened over the 230-plus years since this nation was colonized -- you know what I mean. The other issue is Reg Rowe. On a sort of a lighter note, if I may. I've known edge for a number of years. And I'd like -- if I may make a couple of comments. Reg helped me in a way that he probably didn't appreciate, and it will become obvious about the comments that I make afterwards. But Reg and I are blessed with lovely arctic silver hair. When I grow mine out, it looks very similar to his. And when I used to walk through the warehouse, the employees used to think it was me. We're looking over the top of a pallet, a white head looks like a white head. And I've got to say that people were full of smiles when I walked around from behind the pallet until they found out it was me and not Reg. So thanks for that, Reg. But the other comment I'd like to make about Reg is and my dealings with him, and I was -- I used to work for toll, supplier to the Super Retail Group. And the head of saying back in those days, and it wasn't attributed to Reg, you'll know who was attributed to. There was 2 prevailing philosophies. One was we smashed through and the other one was supplier always pays. Do you remember those sayings, Reg. But there is a big bat on supplier always pays because if Reg had engaged the supplier in the early days, they had very special treatment. He was very, very loyal to the people who had helped him build his business. So the thing that I remember most about Reg and still today was the way he built relationships with his people and his suppliers that he knew. And when I say people, it wasn't just managing directors, it was the forklift driver. It was the person in the retail shop, selling the goods. And when he says he's going to a store to check to see if there's still enough stock in there or whatever else he is checking up, he will be doing that in a very kind way and a compassionate way towards those people. He's got a great relationship with these people at all levels throughout the organization. So I'd like to acknowledge Reg for that relationship that he built with those key people in the organization. Thank you very much.

Thank you for your comments, Mr. Menon. And at Supergroup, we do recognize and value that doing business is about partnerships with people. It's very, very important to us. And care and respect for our people is another very important value. Thank you. Now I'll hand over to Anthony.

Thank you, Sally, and good morning, everyone. It's my pleasure to provide you with an overview of the 2023 financial year and an update on our year-to-date trading performance. Despite a challenging macro environment, I am pleased to report another year of record sales for Super Retail Group as our 4 core brands strengthened their market position and our active club member base surpassed 10 million customers. I'd also like to acknowledge the amazing efforts of our 15,000 team members who were instrumental in delivering this result through their passion and their dedication. I would also like to thank our management team who have displayed great leadership, encouraging our team and driving strong business performance. During the year, we marked a momentous change in the history of the company with the retirement of our company founder, Reg Rowe from the Board. Over 50 -- his 50-year journey with the business, Reg has served as Managing Director, Chair and Non-Executive Director, and he remains the biggest shareholder in the group. Reg, on behalf of the entire Super Retail Group family, I would like to thank you and your outstanding service to the company, and I'm looking forward to catching up with the coffee in the next couple of weeks. And as always, I'll be buying. This year, we've made -- we've remained focused on executing our key elements of our corporate strategy. We grew our core brands through new store openings, alternative store formats and refurbishments. We leverage the closeness to our customers through ongoing enhancements to our loyalty program, which resulted in the addition of an additional 1 million club members. We've maintained a strong investment in our digital capabilities and leveraged our store network to support online sales. Following a strong first half performance cycling a COVID-19 impacted first half in FY '22, sales growth moderated in the second half as higher interest rates began to impact consumer spending. With cost of living pressures continuing to impact both Australia and New Zealand he outlook for the next 12 months remains challenging. We remain confident in our ability to execute the group's strategy to perform through the peaks and troughs of this economic cycle. All right. Turning to our financial highlights. Group sales increased by 7% to a record $3.8 billion. Group normalized EBIT increased by more than 10% to $438 million. This translated into a normalized profit before tax of $391 million, which is up almost -- was up $41 million or almost 12% on FY '22. At the bottom line, statutory NPAT was up 9% to $263 million and normalized NPAT was up 12% to $274 million. Strong operating cash flow meant the group finished the position in a net cash position of $192 million compared to $13 million in FY '22. After having regard to the group's balance sheet position and target long-term bank debt gearing between 0 and 0.5x net debt to EBITDA, the Board considered it appropriate to reward shareholders by way of a $0.25 special dividend. As a result, the group paid out aggregate annual dividends to shareholders of $1.03 per share. This slide shows that in the past year, we've added over 1 million active club members to our membership base. And remember, a club member is someone who has purchased from us in the last 12 months. Our club member NPS score has improved from 65 to 67. So not only do we have more customers, they are also highly engaged with us. Currently, the group -- across the group, these active club members represent 73% of our total sales. In the context of a softer consumer environment, this is an important figure. These are shoppers who know our brands and whom we can communicate directly with, meaning we have more -- we have less reliance on casual shoppers just walking past our stores. Having broken through the 10 million active club member mark for the very first time, our goal is to continue to grow that base, but more importantly, to increase the average annual club member spend. Our store network was critical to the group's performance in FY '23 as store foot traffic rebounded following the end of the pandemic. The group opened 24 new stores in the last 12 months, a net addition of 20, taking the total number of stores to 736 across Australia and New Zealand. But investment in our store network is not just about store openings. It's also about refurbishing the network and upgrading our fleet with new and exciting formats. Supercheap Auto continued an extensive refurbishment program that saw 37 stores upgraded to our next-generation format. Rebel opened its 15th rCX store during the year, and these large format flagship stores are performing very well. In fact, since we opened our first rCX store in FY '20, the stores we have converted to the rCX format have delivered an uplift in sales intensity of over 2,000 square meters -- $2,000 per square meter. In addition to rCX, Rebel has commenced the execution of its regional store rollout strategy with 4 new stores in Ballina, Dubbo, Nowra and Tamworth. This year, BCF successfully launched its superstore format in Townsville and Kawana in Queensland. The Townsville Superstore remains on track to achieve $20 million in sales in its first year. Looking forward, our network expansion plan for FY '24 is targeting 24 new store openings, another BCF superstore and 4 more rCX conversions. On to online. Online sales declined to $445 million in FY '23 as customers increasingly reverted to in-store shopping. Online remains an important channel for our customers, representing 12% of total group sales. Click and Collect, which is our most profitable channel, accounted for about half of those online sales. Nevertheless, with 94% of transactions completed in store, our brand awareness and national footprint of stores across Australia and New Zealand remains a significant competitive advantage for the group. We are making good progress on our sustainability agenda which is focused on supporting our team and limiting the impact of our operations and products on the environment. As a group, we have set a decarbonization strategy by 2030 of zero Scope 1 and Scope 2 greenhouse gas emissions. This includes emissions generated by our operations and from the energy we use. This year, we've reduced both emission types against our F17 base by 26% through initiatives such as LED lighting upgrades, the installation of solar panels and an energy efficiency program within our stores. We've set a 40-40-20 target for Board executive and senior leadership positions by 2025 and have a number of initiatives in place to help ensure we achieve our diversity and inclusion goals. Over the next 12 months, we also plan to develop our inaugural reflect reconciliation action plan as we seek to advance the cause of reconciliation and meaning -- and deliver meaningful outcomes for our Aboriginal and Torres Strait Islander members and customers -- team members and customers. For more detail on our approach to sustainability and the progress we are making, I strongly encourage you to refer to our sustainability report. Turning to corporate strategy. And as we've reiterated at our Investor Strategy Day earlier this year, there's been no change to our approach. The group's strategy is based on 5 pillars: growing our core 4 brands, leveraging our closest to customer, connecting our omni retail supply chain, simplifying the business and excelling in omni retail. In FY '24, the group expects to spend $150 million in furthering our strategic objectives, including investments in our store development program, a new automated national distribution center, enhancements to our customer loyalty programs and developing our cyber, omni and digital capability. Now this slide provides a summary of the segment results for the full year. And now let me unpack and provide you with some more detail on the performance of each of our brands. Supercheap Auto has delivered a strong performance this year, reinforcing the reliability of the auto category and the strength of the Supercheap Auto brand. Benjamin Ward and his team have done a super job delivering a full -- a record -- delivering a record full year sales result, a record customer NPS score and a record number of fitments in-store service program. Why spend 60 minutes struggling to change your wiper blades, when we'll do it in 5. Supercheap Auto has continued to excel in customer acquisition. Having added more than 550,000 active club members to their Club Plus membership program in the past 12 months. Supercheap Auto has successfully modernized the brand with new visual identity and a new slogan, 'whoever you are, whatever you drive, make it super.' This rebranding has been extremely effective in helping Supercheap Auto appeal to a more diverse range of customers. A summary of financial performance of Supercheap Auto is set out on this slide, and I would like to make the following comments. Total sales grew by 8% to $1.45 billion. Like-for-like sales grew by 10% driven by growth in transaction volumes and higher average transaction value. Second half like-for-like sales growth was 6%, PBT margin increased by 100 basis points to 14.1%, PBT increased by 16% to $204 million. Gary Williams and his Rebel team delivered another record full year sales result for Rebel. Performance Sports was Rebel's strongest performing category, benefiting from the successful rollout of the homes of Sport format, key events like the FIFA Women's World Cup and a rebound in participation in grassroots sport. I should make special mention of Gary and his team's absolute confidence in the success of the Matildas this World Cup. 12 months ago, when he advised me how many Matildas journeys he was buying, I thought it was a typo. But come July this year, there foresight paid off, and the Matildas were our best supported team in all sports ever. Following the opening of our 4 rCX stores at Erina, Joondalup, Knox and Warringah, rebel now has a total of 15 rCX stores. It's also worth noting that rebel's top 3 performing rCX stores each achieved over $20 millions in sales this year. In addition to the rCX rollout, rebel commenced a regional store rollout by opening 4 new stores in Dubbo, Tamworth, Ballina and Nowra. We've been really pleased with the performance of these stores, and we see further opportunities in the near term for more regional store openings. On top of this, rebel has expanded women's apparel range to include P.E Nation, [indiscernible] and The Upside and launched a redesigned rebel website. A summary of the financial performance of Rebel is set out. And as you can see, total sales grew by 8% to $1.3 billion. Like-for-like sales grew by 9% riven by higher transaction volumes. Second half like-for-like sales growth was 7%. PBT margin fell by 40 basis points to 11.2%. PBT increased by 4% to $146 million. Paul Bradshaw and the BCF team not only delivered record sales result, they actually improved their sales momentum in the second half. Amongst other highlights, BCF successfully launched the new superstore format in Townsville and Kawana. The Townsville superstore remains on track to achieve more than $20 million in sales. They're all $20 million, it seems, which proves that if you're not boating, camping and fishing in Far North Queensland, you're either dead or asleep. BCF achieved 10% sales growth in the fishing category and club member sales increased to 89% of sales. In response to a competitive market, BCF is focusing on developing our portfolio of private and strategic brands to differentiate it from its competitors and to provide customers with access to exclusive products. BCF's partnerships with leading outdoor specialty brands include Yeti, Weber, Darche, Dometic and Lowrance are proving highly successful and sales from strategic and private brands now represent more than 50% of BCF's total sales. There are positive signs that this strategy is leading to growth in BCF's market share. Turning to financial highlights. Total sales grew by 1% to $840 million. Like-for-like sales were flat as higher transaction volumes were offset by a modest decline in average transaction value. Like-for-like sales grew by 3% in the second half against this backdrop, segment PBT of $51 million was a very credible result. Macpac delivered a record full year result driven by favorable weather conditions in the first half and continue to rebound -- and a continued rebound in tourism and travel activity. In FY '23, Cathy Seaholme and the Macpac team for the first time delivered sales of over $200 million, underpinned by 20% sales growth in -- sorry, 20% growth in annual customer transactions. In short, it was a very good year for puffer jackets. Macpac opened 6 stores, bringing its store network to 89 stores across Australia and New Zealand. Macpac product is now stocked in over 200 Rebel and BCF locations across Australia supporting growth in brand awareness. In terms of performance, total sales grew by 22% and Like-for-like sales grew by 24%. Second half like-for-like sales increased by 5%, noting that the first half like-for-like sales was cycling a COVID impact prior corresponding period. PBT margins increased by 280 basis points to 13.3% and reflected a 140 basis point improvement in gross margin. PBT increased by 54% to almost $29 million. This slide sets out the group's sales and like-for-like sales performance for the first 16 weeks of this year FY '24. I am pleased to report that in the first 16 weeks of FY '24, the group has delivered sales growth of 4% and like-for-like sales growth of 2% cycling a 20% like-for-like sales growth in the prior corresponding period. Supercheap Auto's performance has been driven by ongoing strength in the auto maintenance category, including higher lubricant sales following the successful best-performing oils campaign, Rebel rCX and new regional stores continue to perform well and its flagship store in Emporium Melbourne, is scheduled to open prior to Christmas. In addition, the new rebel active loyalty program will now launch tomorrow. According to our chair, which it will happen. So we'll be launching tomorrow and accelerated sales growth in BCF have been supported by contribution in new stores and increased demand in boating, fishing and water sports. Macpac is cycling 76% like-for-like growth in the prior corresponding period. Sales in travel-related categories, backpacks and luggage are growing strongly. However, unseasonably warm weather has affected sales of insulation and rainwear products. Group gross margin as a percentage of sales is modestly favorable to the prior comparative period despite the impact of weaker currency on cost of goods sold. As previously announced to the market as a result of the continued inflationary pressure on wages, rent and electricity costs, the group expects cost of doing business as a percentage of sales to increase in FY '24. Online sales represent approximately 11% of sales of FY '24 year-to-date total sales. The group has opened 6 stores in FY '24 year-to-date and remains on track to achieve its target of 24 stores opening within the period. Total active club membership continues to grow and now exceeds 10.5 million members. The group is targeting CapEx in FY '24 of $150 million to fund its store development program, the new national distribution center at Truganina enhancements to its customer loyalty programs and cyber, omni and digital capability. Super Retail Group's unique portfolio of retail brands with market-leading positions in growing lifestyle and leisure categories, large active club membership base, strong balance sheet mean the group is well placed to deliver long-term value to our shareholders. As always, the group's first half will be highly dependent on trading the peak holiday period. I look forward to updating you on our progress through the year. And I'd like again to thank you, our shareholders, for your continued support. I'd now like to hand back to Sally to conduct the rest of the meeting.

Thank you, Anthony. We now come to the formal items of business for the meeting. I will introduce each item of business separately and then respond to questions on that item. For each item of business, we will display the number of proxy and direct votes received prior to the meeting, and they will be shown on the screens in the room and also on the online platform. all open proxies given to me as Chair will be voted in favor of all items. So the first item of business is our financial statement and report. This is for the financial year ended 1 July 2023, together with the director's report and the auditor's report. So there is no vote on this item. Anthony and I have already shared with you in some detail the company's performance for FY '23 in our addresses, but we're very happy to now take questions from shareholders on this item. And as I noted at the beginning of the meeting, our auditor, Paddy Carney, from PricewaterhouseCoopers is here today. Questions on the conduct of the audit, the auditor's report or any of the company's accounting policies or PricewaterhouseCoopers' independence in relation to the audit can be directed to Paddy through me. Now we received a written question addressed to the auditor from a shareholder ahead of the meeting. But as it doesn't actually relate to the audit, I'll read out that question now and answer it.

So this question comes from Matthew Rolloson, who asks what regional centers in New South Wales are in the next phase of expansion for Rebel and is Goulburn, New South Wales on the map. Thank you, Mr. Rolloson. Look, at this stage, from Goulburn, I suspect. At this stage, Goulburn isn't on the store rollout plan for rebel. The next stores in the regional rollout are [indiscernible], Bathurst and Wodonga, all of which we hope will be open by the end of next calendar year. Goulburn residents wanting to visit a rebel store could consider the trip to either Mittagong or Canberra. And while I wouldn't favor one store over the other, I do note that we've opened a new rCX store in Canberra Civic in the CBD. And that new format is very exciting. Across the group, too, I'm pleased that we have a very successful Supercheap Auto and BCF stores in Goulburn. Now we have another question that has been received in advance of the meeting. And this question comes from Tania Harrison, who asks, is SRG able to offer a method of buying back small shareholdings from employees. Because Ms. Harrison, there appears to be no simple way to sell the shares and she sees this would help lessen the number of shareholders and simplify administration. Thank you for the question, Ms. Harrison. We actually have in place a process for selling those holdings, and that process is through Link Market Services. So they can help you with the sale of any of your Super Retail Group shares, and we have a 1-800 number for you to contact Link Market Services. That number is 1-800-085-583. So they were the only written questions we received ahead of the meeting. So I'd now like to ask shareholders who are here in person if they have any questions.

My name is Paul Donahue, and I'm assisted today by Elizabeth Hemphill. We represent the Australian Shareholders Association, and we're holding 136,000 proxy votes from 42 retail shareholders. First of all, a comment rather than a question. Note last year that the format for the AGM was a physical only with a view only webcast, this year it's hybrid. So thank you very much for doing that. It makes it much easier for shareholders to participate from wherever they are. So thank you. My question is about the club loyalty scheme. So looking at some of those very impressive numbers you've got there about how many of your customers are in the club schemes and how active they are and what the high percentage of sales come from them. So I'm very encouraged to see the investment you're making in the loyalty program and personalization and the rollout of different targeted loyalty schemes for each brand. So my question is, are all those different loyalty programs running on some enterprise platform that just looks different for each brand? Or is there -- are they separate IT systems under the covers?

Thank you for the question, Mr. Donahue, and thank you for the comment on the hybrid meeting. We certainly hope to continue hybrid meetings now into the future. Our loyalty programs understandably need to be able to respond to the wishes of our customers and the different products in each of the brands. So yes, you're quite right. They look very different at the front end, but they're powered by one engine, so to speak, at the back.

Just sort of a follow-up question to that. Other pools of customers in those loyalty schemes for each brand, are they separate pools of people? Or do you see some sort of crossover where Supercheap customers are buying at rebel or things like that?

The customers are loyal to that brand. But yes, some of the customers for example, at BCF also shop at Macpac. We're very conscious, though that we need to be respectful of how the customers want to engage with us. And so we're very careful not to be inundating customers with information about other brands when they've signed up, say, to the BCF loyalty program. But Anthony, do you want to add any more color to that?

Yes, the arithmetic of $10.5 million and a $25 million population would mean that you have some crossover. But they are -- because every single member has to purchase to be active to be candidates and active, you can treat each of the memberships as discrete. So the answer is sort of both ways.

Thank you, Mr. Donahue. Can I just check Mr. Donahue that there are no other questions from people in the room? And if there are not, I'll certainly -- you should feel free to continue. Mr. Mangan has a question.

I'm wondering if you could give us some more detail around the online figures. I mean online was looking -- not that long ago as to that was a great growth area. I'm wondering if the -- you're so good at this, some loyalty programs and the memberships that's encouraging people to come into stores instead of online? Have you got any breakdown on demographics? I'm just -- and COVID was supposed to drive us all online as well. So it's sort of counterintuitive to think that online is not growing as quickly as we might have thought.

We expected for online to come back post the pandemic as people wanted to get back into stores and explore their connection with the brand through the store. But we still see growth in online. And going forward, I think we can expect online sales to be in the 20s in the future on a pretty steady state.

[indiscernible] not buying online.

Well, I think your comment around the impact of COVID on online consumption is entirely correct. It actually encouraged a lot of Australians and New Zealanders to buy online. And more or less, they've stayed. It's just that the stores have just -- have reopened. So Chair is entirely correct. You see online sales -- online sales as a percent of total sales has increased. We'll see a dip and then it will reacquire its growth rate and find itself back to 20%. And on those numbers, I think we can reasonably expect all demographics participate in online because they appreciate the convenience of either click and collect and delivery. So I think we have -- we're sort of blipping COVID, but ultimately, that trend still exists today.

Thanks, Anthony. And of our online sales, we still have a very high percentage of those online sales being click and collect. Our customers like to go to the stores to engage with our team members, pick up the item they've purchased online and have a look to see what else they might like. Thank you, Mr. Mangan. Other questions from the floor, please.

My name is Reece Burke. I'm a local shareholder. I've got 2 questions. My first question, I just like to commend you guys on operating a good business like with no bank debt. So I've just got a question in the cash flow statements. There's -- under the financing, you've got proceeds from borrowings and repayment of borrowings of like an exact same amount for last year and this financial year. That's that question. And my second question.

Sorry, Mr. Burke, it would be very helpful because you've got the annual report there. Could you just tell me what page you're on there?

96.

96. Thank you very much. But please go on. I'll just get to that page.

And my second question with Supercheap being such a good business as well. I'd just like to get your ideas on either the risks or opportunities from electric vehicles going forward?

Thank you, Mr. Burke for those questions. Addressing the second one first, we see electric vehicles as an opportunity, a great opportunity and the team have been building a business plan to capture that opportunity. I know Anthony would be happy to share some of the specifics that are top secret, Anthony. And we can just deal with that cash question.

Okay. Yes, EV is net opportunity for Supercheap Auto. Reason for that is that an EV car still needs to be washed, still needs bulbs. It also still needs a 12-volt battery. It also doesn't need 1 oil filter, it needs 2 because there's transmission oil. And it needs fluffy dice, which is what we sell to our customers. We're not a B2B player in auto, we are a B2C player in auto. So it's -- we think for EVs, it's a net opportunity. The second point I'd make is the penetration of EVs as part of the total car park will be slow. I wouldn't reasonably expect that we will all be driving EVs quickly. So that transition was a net opportunity for the company is one that will happen slowly, which means we've ample time to prepare. On your second question, that relates to the seasonal debt that the business engages in as we go through the retail cycle. So at this time of year, we have the business ingesting enormous amount of stock for peak we will carry debt over this period. And obviously, as we start to decrement that stock, that will turn to cash and then pay that debt off. So it's just simply the seasonal debt profile of the business, which is unique for all retailers.

Thank you, Mr. Burke. And your experience is the same as mine. I can't go into an SCA store without coming out with wonderful car cleaning products, a lot of which I've got lined up in the garage and the car is still dirty. But there you go. Another question, please?

Just inquiring about the bricks and mortar, we have in all the stores and the warehouse in Truganina, wherever that is.

Victoria.

Victoria, is it. There you go as long as it's got a main road, so we can get suppliers through. But how much of the stores that we own or do we lease all of them?

We lease all of our stores and the distribution centers.

Yes. So you can do the tax thing. That works out well.

Any other questions from the floor Mr. Donahue, please.