Thank you everyone for joining the Accent Group FY 2022 full year results investor briefing. We will begin with a presentation by Daniel Agostinelli, Group CEO, and Matthew Durbin, Group CFO and COO, followed by a Q&A session. If you would like to ask a question, please select the Raise Hand button to be placed in the virtual queue. This button can be found at the bottom of your Zoom interface. Now, Daniel, over to you. Thank you.
Thank you. Good morning, everyone, and thank you for taking the time to attend the call today. I'm joined on the call today by our Group CFO, Matthew Durbin. We will now take you through the results for the full year ended 26th June 2022, an update on our growth plan and a trading update for the first seven weeks of FY 2023. There will be an opportunity to ask questions at the end. If I can now refer you to page two of our investor presentation, which was released to the ASX yesterday evening. The operational disruption experienced in the FY 2022 year, along with the associated impact to the financial results, has been well reported.
In the context of the operational challenges and focus that was required to manage the day-to-day business, I'm very pleased with the continued progress executing our growth plan and initiatives. The Accent business has grown significantly over the past three years. Through a period of significant disruption, we've continued to invest in growth and to build scale, customer reach, and capability across the business. Group sales, including franchisees, are approaching AUD 1.3 billion. We have opened more than 280 stores across Australia and New Zealand to increase total store numbers by more than 50% to 762 stores. Our contactable customer database has grown by 50% from 6 million to more than 9 million customers.
Online sales have grown by more than 200% to AUD 263.8 million, which represented 24.4% of our retail sales in FY 2022. Our vertical brand and product sales are now more than AUD 70 million from a standing start in 2019. We have continued to grow our distributed brands and have acquired several additional global distributed brands. The Accent business today is scalable and has future growth opportunities through online and new store growth. Our large and diverse brand portfolio and our new businesses continues to grow. The business today is flexible with proven capability to leverage digital and online to quickly respond to trends through our diversified portfolio of brands across footwear, accessories, and now more recently, youth and lifestyle apparel. Our market position of the business is also defendable.
Our distribution relationships provide access to global product innovation and exclusive access products. Our vertical own brands add to product differentiation and support underlying growth margin. Turning to page five, Sustainability. I'm very pleased to report that last night we released our first ever bespoke sustainability report. This has been the outcome of an 18-month journey to define our approach across the core pillars of our people, our responsibilities, and our environment. Within this, to define the initiatives and focuses for the businesses in these areas, some of the early work that we are most proud of, its initiation of the Accent Stamp Your Feet foundation and our associated partnership with Headspace in Australia and Youthline in New Zealand, who both play an important role in providing mental health and other support to the youth and key demographies that represent Accent's team and customers.
Another highlight is our association with the Australian Sporting Goods Association and their shoe recycling program. We have set up 229 recycling collection points across our stores, and in FY 2022, we collected more than 56,000 pairs of shoes for recycling. We're just getting started on this journey with a range of ongoing initiatives underway and new initiatives getting started. I will now hand you over to Matthew Durbin to talk about the details of our results. Thank you, Matt.
Thanks, Daniel. Turning to slide eight, total sales for the year, including TAF franchisees, of AUD 1.27 billion were up 11.3% on the prior year. Management estimates that these sales were impacted by around AUD 95 million in half one of the year due to a combination of government-mandated lockdowns, which saw more than 400 stores close for three months, and then subsequently the impact of Omicron in the last weeks of December and into January. Gross margin percentage was also impacted by 190 basis points for the year due to the requirements to move through inventory while stores were closed. Through the year, the company continued to invest in its people, new stores, new businesses, and technology, which impacted cost of doing business in a disrupted sales environment.
EBITDA of AUD 62.3 million is in line with the guidance provided in our trading update on the 22nd of July. Inventory levels at the end of the year were in line with expectations, with clean, aged stock levels. Turning to digital and online on page nine. Digital sales continued to grow strongly throughout the year, with growth of nearly 26%, and they made up around 24% of total sales for the year. Half two saw a significant pullback in promotional activity in store and on our websites, with an associated positive impact on average order value as the focus for the online channel shifted away from clearing inventory back to more profitable sales. It was pleasing that online sales continued to grow in total at higher gross margins.
We anticipate the digital percentage of sales achieved in half two of 19% is representative of a more normal mix of online sales moving forward. Investment continued through the year in loyalty and customer data with the launch of loyalty programs in Hype and Platypus. Coming to VIP and loyalty on slide 10. Our contactable customer base grew by 900,000 customers to 9.3 million customers. This continues to be the result of a strong drive to invite customers to join in store along with the impact of our loyalty programs now in place in The Athlete's Foot, Skechers, Hype, Platypus, and Merrell. Investment continued in our new customer data platform, which will go live in the first quarter of this year. Moving on to retail and wholesale on slide 11.
During the year, we added 139 new stores across all formats and closed 15 stores where sustainable renewal terms could not be agreed. New stores continue to perform well, and the momentum in the Glue Store and Stylerunner businesses, including the new stores in those formats, continues to strengthen. We expect at least 50 stores will open in FY 2023, 50 new stores. Wholesale sales continued to grow in FY 2022, driven by existing brands and the addition of new wholesale brands, including the brands acquired with the Glue Store business. Sales of Vertical Brands and products grew to more than AUD 70 million and continue to support the improvement in underlying gross margin. Coming to dividends and trading update.
The business has announced a final dividend of AUD 0.04 per share, fully franked, up 23% on the final dividend last year, bringing total dividends for the year to AUD 0.065 per share. In terms of the trading update, trade for the first seven weeks of FY 2023 has been positive. Total sales over this period are up nearly 49% on the prior year due to positive like-for-like sales. Stores opened for trade this year that were closed last year and new stores opened in the last 12 months. Like-for-like sales were up at 8.9% in the first seven weeks. Additionally, total and like-for-like gross margin dollars and gross margin percentage for that period are also ahead of last year and importantly are up on the first seven undisrupted weeks of FY 2020.
We also wanted to update on some current observations on supply chain and inflation as they relate to the last seven weeks. Supply chain constraints have moderated and delivery performance from our major third-party suppliers has in May improved significantly. We've continued to action price rises in several of our distributed brands and in our vertical own products in order to offset input cost price rises. To this point, we haven't seen any noticeable customer pullback. We remain very focused on cost of doing business to ensure we continue to identify and remove waste and drive cost efficiency. While we have not provided guidance, we wanna draw everyone's attention to the previously reported estimate that due to disrupted trading conditions, around AUD 95 million of sales were lost in the first half of FY 2022.
We also note that gross margin percentage for the full year 2022, also due to disruption, was around 200 basis points less than the gross margin percentage rates achieved across FY 2019 to FY 2021. I'll now hand back to Daniel to wrap up.
Thanks, Matt. We acknowledge that there is some uncertainty in both the economic outlook and global supply chain. Having said this, based on the sales in the last seven weeks, we have not yet seen any consumer pullback and are positive about the start of the year. It is our intent to continue the focus we have had for the last six months on full price margins and no lazy retailing. I'm pleased with the progress that has been made through a highly disrupted period on our key growth strategies. We continue to build a defensible business in Australia and New Zealand. Our portfolio of global distributed brands, own vertical brands, integrated digital capability, and a large store network are core assets of our group and position the company well for growth into the future. That concludes our presentation today, and we would be happy to take any questions.
Thank you.
Thank you. We'll now begin with the Q&A session. As a reminder, to ask a question, please select the Raise Hand button at the bottom of your screen to be placed in the queue. For those who have joined by phone, please select hashtag nine to raise your hand and hashtag six to unmute and mute yourself. We'll begin with the first question from Sam Teeger.
Good morning, everyone. Daniel and Matt, thanks for the presentation.
Good morning, Sam.
Good morning, mate.
Are you expecting to get all the AUD 95 million of sales and 190 basis points of loss margin back in 2023, or are there some other offsetting factors you think we should be taking into account?
Sam, I don't wanna make any predictions around that. I think, you know, it's a factual statement that we feel that we lost those two last year and that was simply because of the stores being closed. I'd sort of encourage everyone to take their own view of that. If we experience an undisrupted trading period, right now, you know, we're not seeing any reason why a fair bit of that shouldn't be recovered in both accounts.
Okay, cool. In terms of the rollout, you guys are guiding to at least 50 stores. What are the, say, main barriers that you expect to drive this? How many stores have you opened to date in FY 2023? Is the slower rollout compared to FY 2022 more of a function of the deals you're being offered by landlords, or is it maybe you guys have a bit more of a cautious consumer outlook?
Online, that's less. Sam, well, we are certainly driving a harder bargain, I suppose, or deal towards when we're negotiating with our landlords. Some of the things we're also doing outside of opening new stores is expanding some stores where we think there's more growth to be had. An example of that is Miranda and Garden City. That's that side of it. In terms of how many stores we've signed to date, I might just refer to Matt. I just can't remember now.
Yeah. No, that's all right. I think Sam's question was how many have we opened in the year to date, and it's a handful, Sam. We're only eight weeks in, so let's call it eight stores have opened since the end of June. In terms of you know, the slowing of the rollout, what we've always said is that it's not our strategy to open less stores or more stores. It's our strategy to do the deals that we need to do with the landlords and the demographics where we feel as though we can get a strong return on investment. You know, we'll just have to see.
We don't wanna set high targets for ourselves and then have to do deals to meet a target.
Can I also, Sam, maybe this is another way to answer it. I'm very confident that we will open at least 50 stores.
Yeah. For sure. Okay. And then third question. Appreciate your strategy is to focus on full price sales, but you know, any comments on color around what the competition is doing right now and how rational the market is. It would be helpful.
Absolutely. The competition or many of our competitors are still discounting. Not sure of their stock positions, but we've taken a view that our stock position is very strong. It's clean. It's the cleanest it's been in a very long time, pre-COVID, if you will. We will continue on that drive. A further reason to that is that as new product is landing in our stores and our supplier base is getting back to some, well, a lot of normality, our customers are responding. We're seeing sell-through rates on new product that are better than even some pre-COVID periods.
That tells us that there's no need to discount, and we also have a duty to manage our distribution of brands as they should be. We will continue on that journey.
Great. Thanks, guys.
Thank you, Sam.
Thank you. The next question we'll take is from Chami Ratnapala.
Hi, Daniel and Matt. Hopefully you can hear me.
Hi, Chami. We can.
Hello.
Thank you.
Yeah. Just a follow-up question from me. I think Sam touched on the store number. I noticed that the breakdown for the stores in terms of banners has not been provided. Are you able to talk to this? I mean, which banners would this number of 50 be driven by? Thank you.
Yeah, no problem, Chami. I mean, what you'll notice generally in this presentation is that, consistent with the theme of not providing as many targets as we have previously, in a whole host of areas. We've pulled back on that detail, which I know is a little bit frustrating for you guys, but, it's a bit commercially sensitive. The easiest answer for that is if you have a look at our big gun, banners and our growth engines in terms of the new businesses, you can assume that to get to at least 50 stores, there will be a bunch of Platypus stores. There will be a bunch of Skechers stores.
There will be some TAF stores, and we previously set out a target for where we want it to be for Glue stores. Then there'll be a handful across the other banners. That's probably how to think about it, including some new Stylerunner stores. I hope that sort of helps. But you know the big guns of TAF, Platypus, and Skechers and then Glue will be the ones where most of the new stores are open.
Great. Thanks for that. Just on Stylerunner, anything on Nude Lucy? Would that be continued or?
Sorry, say that again. You just broke up there.
With the Nude Lucy sort of dedicated stores, I think I understand that there's one at the moment. Would that be part of the strategy as well?
Yes. There are some Stylerunner stores in that mix. Absolutely. I think you picked up on Nude Lucy as well. There's definitely Stylerunner. Nude Lucy, we're not talking about yet, Chami. Everyone can go and have a look at the stores if they want to.
Great. Thanks for that. Just with 50, are you able to talk to the first half, second half split? Or would this be more second half story, or is it broadly across both halves?
Yeah. Look, anticipating more first half split of that AUD 50, to be honest. Yeah, definitely more first half split, and then we'll see where we're at for the second half.
Thanks for that. Thanks for taking my question.
Thanks, Chami.
Thanks. The next question comes from Keegan Booysen.
Morning, team. Can you hear me?
Yeah. Hi, Keegan. How's it going?
Good, Matt. How are you doing?
Yeah, good. Thank you.
Good, good. First question from me, just around the outlook commentary on the gross margins for FY 2023. You said sort of assuming no interruption to trading, obviously the GMs are gonna be higher than FY 2020 or some of the uninterrupted periods in FY 2020. Just you know, outside of the lower promotional environment, if you can talk to some of the other key drivers, you know, what FX is doing, how much Vertical Brands is contributing to the margin rise, et cetera.
Yep, perfect. No issue at all. If you have a look at the table that we typically put in the back of the presentation and also in our financials, we talk about the hedging being at AUD 0.74 going forward. You can imagine we're certainly very well hedged for the first half. It's relatively consistent with where we've been. You know, I'd say currency's fairly neutral. Definitely the pullback in discounting is gonna play a big role. You know, we've now unfortunately had to discount more than we'd like for the best part of two and a half years. Vertical is playing a role.
We've previously talked about, you know, Vertical product that should be achieving a 10%-15% improved gross margin on third-party product. You guys can start to do some numbers as the volume of that grows beyond AUD 70 million, what that might do, you know, at a 10%-15% improvement. We continue the strategy as well of driving our distributed brands. Store rollout and Skechers, which continues. More Skechers, Vans and Dr. Martens into our multi-branded banners. Margin expansion in the Athlete's Foot through more mix of HOKA, more mix of Saucony, which all come at higher margins.
No, that's great. Then just second one from me as well. Can you talk a bit around what the drag has been like for NZ trading and how we should think about the phasing of that, particularly against the comps you're printing now, against you know, a weaker Aussie PCP, please?
Yeah, sure. New Zealand is tough, and even up to last week, you know, remains tough. It's been tough for the first seven weeks. Negative comps, and to this point, we haven't really seen an improvement in the trajectory. Frankly, we don't think we're doing anything wrong over there. Our execution there is as good as it is in Australia or better. We've got great inventory levels over there. We're seeing it simply as a function of the fact that the consumer over there and the teams still have to walk around in masks, and I just don't think that economy's recovered.
No, that's great. Just last one from me as well. You know, as you approach around 10 million loyalty customers, I mean, your loyalty database is becoming one of the biggest in the country out of the retailers. You know, when do you plan on making the investment on the back end to get the systems talking to each other? Maybe if you can talk to some of the benefits you expect to generate, you know, from getting the loyalty programs integrated and, you know, whether that's targeted promotions or lower CAC costs, et cetera.
Yep. So, that's a really good question. We've been investing in that. That project's been underway for the last 12 months. It's just come out of tests, and we're starting to get some initial data from it. That's our customer data project. Some of the initial benefits that we're gonna get from that are a real sense of the behavior of the customers across the different banners, and the crossover shop between a Hype or a Platypus or an Athlete's Foot or a Tribe. That allows us to start to develop profiles of customers and actually take them on a life journey through our different banners because we get them at different ages. That's one benefit.
As we get better at understanding those customers, we will be able to target them better with CRM. That will allow us to create customer segments, more efficient customer segments. Ultimately, what that means is that you're less reliant on paid channels of marketing. That's gonna take some time, but one of our big things in cost of doing business efficiency over the next 12 months is to reduce our paid digital marketing spend. The spend that goes to Insta, that goes to Facebook, that goes to Google.
Mm-hmm.
Try and convert more through our own channels.
That's fantastic, guys. Thanks, guys.
Thank you.
Thanks, Keegan. Next up, we've got Alexander Mees.
Morning, gentlemen. Thank you, Daniel and Matt, for taking my questions. Just a couple on costs to start with, please. I'm just wondering, should we be expecting around about 5% increase in your staff costs in FY 2023, plus the annualization of the new stores?
Yes, correct, Alexander. Thank you. We're sort of governed in the store teams by the general retail industry award. Indeed, that went up 5.2%. Support office employment costs won't go up that much, but they're certainly going up. That's a reasonable assumption.
Excellent. Thank you. Just on leases, just wondering what proportion of the leases are rent increases that are linked to CPI, please?
Yeah. We haven't previously talked about that. The rough number is, you know, under 25%, so under a quarter of our leases.
Great. Thank you. Just finally, apologies if this is obvious, it's been a long week. Just on your EBIT. Should I be thinking about an underlying EBIT number of AUD 70 million, adding back the AUD 7.7 million one-offs? If so, is that best comped against the AUD 124.9 million that you referred to for last year on slide eight or the AUD 117.1 million on slide 15?
Right. That's a good question. The 70 is the number. That is correct in terms of the underlying. I'm just going back to have a look at the slides here. I can see the 117 on 15. What was the other slide number? Slide eight?
Slide eight. Yeah.
That is a good question. I think it's the 125.
Okay. I think that's consistent with what was reported last year, so that would make sense.
Yep. I think that's right. My apologies, we may have an error in that other slide. We'll check that.
No worries. Thank you so much.
Thank you.
Cheers, man. Thank you.
Cheers.
Thanks. Next up, we've got a question from John Hynd.
Good morning, Daniel and Matthew. Thanks for taking my questions. Could we start on the consumer and perhaps some color around what's happened since April, since the last trading update? Keeping in mind, obviously, the comments you gave around New Zealand, has WA come back? And how much is that contributing to the 20% like-for-likes you're doing at the moment?
Thanks, John. It seems to be across the board that we've had positive comp growth. It's largely about the same. Obviously, we've got much more store penetration in Victoria and Sydney, and growing in Brisbane. It seems to be across the board. As I mentioned earlier, what we are seeing as we're putting new product into the stores, we're seeing sell-through rates across every state that are as good as I've seen them, and certainly as good as pre-COVID. I'm not sure if that gives you any better color, but we're seeing it's across the board. Digital sales seem to have slowed a little bit, compared to obviously where they were.
I just think that's just the making of people wanting to get out and simply be out there doing what they did pre-COVID.
Okay. Thank you. On inventory, it looks like on a store, if I take your 2022 numbers, it looks like roughly, you're returning to normal inventory levels. On a store basis, can you perhaps help us understand, you know, where this gets to, you know, over 2023, keeping in mind, obviously volatile trading conditions. You know, you're also. You're Stylerunner is becoming, you know, a greater part of the portfolio. You've got bigger stores that you're rolling out now. How does that look? How should we think about that? Also in regards to 2022, can you give us an understanding of perhaps what the units look like versus FY 2019 and FY 2020, as well, please?
Yeah. Look, we have had obviously a major focus on inventory, particularly as we cycle through disruptions. Largely we've cleaned or cleared any aged stock lines across the total business. In the main, our stores are in terms of units and dollars from an inventory point of view back down to where we would like them to be. There would be a different view from our team, I'm sure. They always want more stock, but we feel that the current numbers are back to where they were pre-COVID. That's allowing us to produce better margins because the error rate in our buying is simply better.
There's a major focus on this area, and we're getting back to, as you mentioned, some normality with our supplier base also fast getting themselves organized to pre-COVID levels.
Okay, thanks. In terms of higher stores with bigger footprints, you're not expecting that to move the dial. It sort of almost implies you're gonna be a little bit more conservative with your inventory position for 2023.
Yes, absolutely. Well, look, the inventory discussion for us as a team is a daily or weekly, if you will, review. If you take our Glue Store , which are larger footprint stores, stock turns in there are about where we wanna see them, and improving. There's a complete focus on, as I mentioned earlier, on keeping our stock levels in terms of stock turns in line with what we're projecting. We're largely hitting those at the moment.
Okay, thanks. One more from me if it's okay. Of the sort of 240-odd inventory, how much—I understand that wholesale stores are within that number. Can you give us some commentary on how you're seeing the wholesale stores, I guess, think about the current cycle? I mean, are these numbers ahead of what you're expecting? Below? What's the color you're getting there?
Do you mean the growth in the store base or the products within those stores?
I guess how they're thinking about trading, Daniel.
Okay. Well, if you take the Skechers, our Skechers banners, and you take a look at Skechers' announcements internationally, that brand is growing consistently. It's not small growth. It's solid growth. New products that we're getting into market are very exciting, and we will certainly be growing the Skechers store base. In many cases, larger footprint Skechers stores around the country. Our brands, I mean, there's always a brand that's doing better than another one in terms of trend. Right now we're very fortunate that Skechers and Dr. Martens are super strong. Indeed, we have the HOKA license, which is seeing some very solid trade for us.
If you take the Vans business worldwide, they're off a couple of points, and they seem to have that arm wrestle between Vans and Converse. We've been through four or five of these cycles, and the brand's just too strong. We're already seeing some recovery from them, so we're very optimistic about what that brand will do for us. Most importantly, we certainly will grow the direct-to-consumer through our vertical banners or semi-vertical banners being Vans, Dr. Martens, Skechers, and so on. As these brands do what they do around the world, we're enjoying the sales increases from those brands and trending into our particular Hype, Platypus, and Athlete's Foot banners.
Okay, thanks. Just sorry, one more. In terms of stock in transit of that AUD 241, what does that represent?
John, I'm just gonna have to look that up. I don't have that number.
Yeah. That's all right. I mean, if you wanna get back to me later, that's fine as well, Matthew.
Yeah. I can get back to you on that later.
Yeah.
It was about like-for-like with the last year. Thanks, John.
Next, we'll take a question from Mark Wade.
Good day, guys. Thanks for taking the questions. Just wanna understand, just looking back at the result you've just handed down, why exactly didn't that second half rebound more given the favorable demographics?
Of your customer base and the improved foot traffic generally in malls as that second half progressed?
Yeah, that's a good question, Mark. It's interesting. You know, certainly January, February, March remained quite challenging. We started to see some lift in the back of back-to-school. It was short-lived. You know, I think potentially the specter of some of the macro that was occurring in May, but it's sort of anybody's guess that trade was subdued for most of the half below where we hoped it would be. You know, New Zealand was tough through that whole period. It's 10% of our business. Western Australia was tough through the whole period. You know, we continue to invest through that period as well. You know, the leverage of costs over the reduced sales certainly impacted.
That's the best answer I can give on that, Mark. I, you know.
Okay.
The only thing I'd say is it's pleasing that just in the last, you know, seven to nine weeks, it's feeling a lot better.
Fantastic.
I can add a little bit of color to that too. Obviously we visit stores daily, including myself and all the management team. You know, it seems quite obvious to us that I mean, the real concern we had is, are we executing correctly in stores? We determined that we were. We did really hold fire in terms of getting out of any discounting given we saw what our stock positions were doing. We probably left a few sales on the table there.
Most importantly, the last, call it, 10 or 12 weeks, as new product has been arriving into stores, our customers are biting and that's been very, very pleasing for us. We can't just use an excuse that it was totally inventory driven, but it seems as soon as our inventory hit stores that sales just, you know, bounced back very, very quickly over the last eight to 12 weeks.
That's encouraging. Maybe just continuing that thread. The new Glue concept, you've got eight stores converted. How are you finding the consumers are responding to that format post-conversion?
So far, very pleased with the conversions. If you take Melbourne Central as an example, it's a large footprint store, and we're very pleased with what's going on there. Indeed, legacy inventory's largely been resolved through that. What we're seeing is that customers seem to like what we're doing in terms of what the sales are of those stores to date. Indeed, we converted another one yesterday with some solid increases on what the store was doing same time last year. It's very early with the business, but so far we're pleased.
Okay. Good one. Just on the outside, the business has a lot of moving parts to master. I mean, there's wholesale and the retail and the franchising, et cetera. I mean, how else are you planning to simplify the business apart from the already flagged exits of PIVOT and then moving out of Stance and Sperry? You've got that new divisional structure. I'm just trying to get a sense of what else can be done to better simplify the business.
Good question. That's one that, you know, we discuss, you know, ongoing. As we previously called out, our job as a team is to continue to find bullets, as we call them, to try in the market. Some will work, some won't. We've had a good look at the business and figured out that anything that's not achieving ROI or ROE, however you wanna measure that, we are simply just exiting. If you take the Sperry brand that we have, we have decided not to go forward with, it was actually profitable. However, it's a distraction. It wasn't profitable enough in terms of meeting our metrics.
We have been, I guess, having to simply review where our investment and our effort is gonna drive more EBIT and more returns. At this point, if you take the brand Stance, which we've called out, we won't be going forward with that brand. There's probably a few other little ones in there. In the main, we're through the traffic.
Okay. Just lastly, for Matt, I didn't come across the like-for-like figures for the year just finished, along with the wholesale sales dollars in absolute terms.
Yeah, good question, Mark. We didn't publish the like-for-like figures for the year just finished. They were nothing to write home about.
Mm.
To be honest, FY 2021 was disrupted and FY 2022 was disrupted, so they're a bit meaningless.
Mm.
You know, I think, the best way to think about it is the AUD 95 million that we felt that we missed.
Mm.
In the first half in December, the wholesale numbers we haven't split out. They've grown. You know, that's more aligned to just frankly providing less market sensitive information about our business. That's the reasoning behind those two.
All the best, guys. Thanks for the answers today.
Appreciate it, Mark. Thank you. Just while we're waiting for the next question, that question John asked regarding the goods in transit. At the end of June this year, it was AUD 48 million of the AUD 241 million of inventory, and at the end of last year, it was AUD 39 million.
Thanks. Next, we've got a question from Shaun Cousins.
Hi. Good morning. Thanks, everyone. Maybe just three questions. First, just you're not providing as much detail now, and I get the commerciality there. We should read into that there that the ambition around 60 stores for Glue by December 2023 and I think the Stylerunner aspirations, it's not that you're abandoning those, you're just choosing not to be as you know, generous with your information about your business to your competitors. Is that how we should think about it?
Yeah, absolutely. Yes, it's purely because it is market sensitive. We're out to grow the business. We don't wanna just, you know, we don't wanna hit a number and end up overpaying on rents and so on. The aspiration is, yes, to continue on that trajectory.
Fantastic. Great. Maybe, Daniel, just in terms of supply availability, you highlighted that supply is coming back. Are there still sort of constraints or do you have as much product across all the brands that you would like? Or is there still some product that you're not getting access to such that even some of the strong results you've highlighted to start 2023 are still being somewhat moderated by an absence or a lack of product from some brands?
Yeah, look, it's a bit of a mixed bag. In terms of our Skechers business, we're largely back to, you know, close on 100% of where we want to be. We've still got some issues in New Zealand with product. We would want some more. But largely that banner, which is very important to us, it's looking much more positive. There are some brands that are still getting themselves organized. But in the main, we're starting to see some free flow. As I mentioned earlier, if we take our team out in the field, they would always want more stock. But we're seeing that their stock turns are better than we've seen them for a long time.
Indeed, sometimes losing a sale can end up making you more money given when you take the cost of doing business and so on into account.
Great. My third question is just around labor. Conscious of the labor cost, but just can you talk a bit about labor availability? How much of a challenge are you finding that does it sort of see a larger number of open roles? Then do you have to kind of work harder to get access to staff in your stores please?
Yes, like everyone, it's tough out there. Our job is to try and do it 1% better than our competitors. In the main, well, we don't have any concerning vacancies in the field. Primarily our area managers, state managers and nationals, all of those roles are filled, with many of those having long-term tenure with us. We're seeing some disruption in digital and technology and, you know, potentially IT. In the main, we're, you know. It's not something that is on the, you know, number one priority list for us at the moment. We're largely okay. I think a lot of that's got to do with the very products that we sell.
We're able to still, I guess attract, you know, great people.
Fantastic. Well done. Thanks so much, Daniel.
Thanks, Shaun.
Next question comes from Sam Teeger.
Hi, guys. Just a really quick follow-up. I imagine it's small at this point, but what proportion of sales is coming from apparel? How does the gross margin you're achieving today compare to footwear?
It's still small. It's growing, particularly through Glue Store. When we've previously talked about Glue Store, we've said that business when we bought it was about AUD 100 million, and it was 85% apparel. That'll start to give you a sense of where apparel is sitting. Apparel margins are around the same as the footwear margins on balance. You know, a third-party apparel margin is similar to a third-party footwear margin, and then a vertical apparel margin is similar to a vertical footwear margin. You know, you can see that as probably not too much driving the mix.
Got it.
I'll just follow up there, Sam. We have also said that Glue, when we acquired it, was significantly below where it needed to be in margin. You know, so there's an overall theme of improving the margin in that business.
Got that. Just in the annual report, when you're referencing Accent Lifestyle, what comes under that?
That's the Glue Store, and it is also what we're calling the trend Vertical Brands.
Got it. Thanks.
Yep. Thank you.
Next question comes from Peter Richardson.
Good morning, Daniel. I've just-
Morning.
Peter Richardson from Teaminvest . I've just been running a few numbers over your store sales for the last four years, and there doesn't seem to be a lot of growth per store, per store sales. Now, maybe that's not an important metric, but my question is, should we expect organic growth from your stores? The second part of that would be, there may be a lag because of the amount of new stores you've opened, so how long would it take a new store to hit normal revenue sort of targets?
Well, obviously, it's an important metric that we look at day in, day out. We have also opened many stores in what you'd call the. You know, in order to get the growth we've opened in some B and C grade centers, where the rents are terrific, but the sales certainly aren't as high as they would be at a Chadstone or as a Bondi Junction store. Having said that, the metrics still say that the stores are very viable, so we will continue on that path. There is a drive on comps, but we have certainly not seen major growth in the market.
Indeed, the whole sneaker market has not really grown to the levels that we would've liked, you know, especially compared to 2016 - 2017. As I said, we will continue to open stores where the metrics make sense, and we're still seeing a lot of that happen for us. In terms of when we will see major comp growth, I really can't answer that question. It's something that we're continuously focusing on.
Peter, I might add to that, a couple of points. It is very, very difficult to compare for the 2022 and the 2021 year, back to prior years and even FY 2020, the back end of that was interrupted. You know, I think we've gotta take a good, hard look at what happens in FY 2023, when we get a full year of undisrupted trading. You know, for example, for last year, if you're doing those sorts of comparisons, I'd suggest you have to add back the AUD 95 million that we felt we lost in the first half.
Yeah.
You may have seen that.
Yeah, I was comparing 2022, including the 95 back to 2019, and there's been a 10% growth between those two numbers.
Yeah. Which we think is okay. It's not as good a standard as we'd like it to be, but there's some mix in there. Yeah. The other piece, in terms of the ramp up of new stores, what we find is that they ramp up pretty quickly. In most of our banners they hit their straps within the first 12 months. The only counter to that that we've seen is The Athlete's Foot. And that tends to take a longer period of time to build, because they you know build their database, customers get used to the fit proposition, which is the competitive advantage in that banner.
That can take, you know, 24 months before those stores, or even a bit longer, before those stores start to get to maximum volume. Too early to call the profile of that, the new Glue Store stores and Stylerunner and some of the other new banners at the moment. We haven't had enough history.
Okay, thanks. I have a couple more questions, if I may. Your strategic review that you did earlier this year, I assume the board is involved in that, and was Brett Blundy involved in that?
Absolutely. He sits on our board and he adds his view on what we're doing and what the forward projections look like in every banner. Yes, in terms of, he's involved at that high level area, yes.
Okay. I think he has a representative on the board, so I wasn't too sure on that, so thank you for that. Just finally, it's a bit of a minor question. You ended on the 26th of June instead of the 30th of June. Just a little bit strange.
Yeah. Yeah, no, that's always been the case at Accent. We run a retail calendar rather than a financial year 30 June calendar. That's something that a number of retailers do. You know, we could align it with 30 June. We find a retail calendar is actually better for us to manage the business.
Okay.
Yeah, if that makes sense.
Sure.
It's no different to what we've done in the past, Peter. It's like for like.
All right. Thank you, guys.
Thank you.
Next question comes from Tom Camilleri.
Good morning, guys. Just wanna start to think about the ROI benchmarking given the focus. How do you think internally about that benchmarking? Can you help us think about how we should forecast that? Does it differ by the type of store and type of banner, say, a Glue Store versus a Skechers?
Tom, sorry, can you say that again? I just wanna make sure I've got the question right. Apologies.
Yeah, sure. Like, how do you think about internal benchmarking? What the ROI target is internally.
Yep.
Is it just a flat benchmark across Accent or do you have different targets for, like, say, an apparel-focused store like a Glue or like a Nude Lucy or like a Skechers, for example?
The answer to that is it is a flat benchmark that we apply across the stores. You know, the minimum return on investment that we have to drive is 20%. You know, in some banners we look for more. That's, you know, if I think about just the pure letter of the law, what we've got sitting in our store evaluation tool. It's a 20% minimum.
Okay. That 20%, is that a 12-month return or what are you?
Yes.
looking for there in terms of timing?
Yep.
Okay.
That's a 12-month return. Yep, spot on. I will also say where the differentiation of the banners comes in is more sort of above the line, making sure we correctly allocate the costs. You know, so a new business will have start-up costs over a smaller bunch of stores. So in some respects they get a bit of a higher hurdle because they're getting more cost allocated. So that's certainly where we do some differentiation rather than the return on investment.
Okay, that's helpful. Has anything changed in the CapEx landscape? With landlords' contributions and, like, how are you seeing the dynamics play out there now?
Not really. It's really been just business as usual, as it's been for the last three or four years. We obviously have an attractive offer for them, particularly in the new spaces, and we continue to spend money on our stores and refit. In the main, there's really been no change.
Like as a rule of thumb, they're contributing about 50% still or what's the co-contribution there?
It's a little bit market sensitive from that point of view, but as I said, it's the same as it's been forever. It is a partnership and we co-invest.
Okay. Thanks, guys.
Thanks, Tom.
Next question comes from Hayden Liu.
Morning, both. Thanks for taking my questions. Maybe firstly, Daniel, you talked about putting through price rises, and you haven't really seen any pullback from your customers. Do you sort of have a line of sight on how much more there is to go on price rises? And I guess, do you fully expect to offset any further increases in input costs?
We have had price rises across, well, a lot of our products, particularly on distributed brands. The only way I can answer that is we're not seeing any real resistance in our stores. Indeed, where some products where it's especially on trend, there's virtually no resistance. The other view that we have is that because we are also wholesaling those brands, we're selling to our retail base that we supply, in some cases three and six months out, and our wholesale orders are largely up in all brands. Therefore, they're quite confident that the price rises will not have any major resistance.
Sorry, do you expect to sort of fully offset any further rises in the input costs?
Hayden, that's a hard one to answer, to be honest. We can only see out six to nine months. I can say across that time period where we've got visibility, the answer is yes. However, we don't know what's gonna happen beyond that.
Yeah. Okay. Great. No, that's helpful. Maybe just on the divisional CEO search for Glue and Stylerunner, how's that going?
It's going. I'm still doing it at the moment and enjoying it. It's still going and I'm in no real rush until we get the absolute right driver of those businesses. Largely they're very much in control. It's just the search is still in play.
Okay, great. Maybe just lastly, again, on Glue, there was a bit of disclosure in the first half. Seems to be ticking along quite well. Are you able to give a sense of just how that is going on maybe a sales per store level relative to pre-acquisition levels?
Yeah, sure. When we talk about momentum being strong, yeah, we certainly didn't buy that business to have the sales per store at the same level. It wasn't profitable. You can read into that that's improving. Now, you know, those stores were also disrupted in the couple of years before we bought the business. Again, it's a little bit hard to read, but I think you can read into momentum being strong, that we're pleased with the trajectory right now.
Great. Thank you both.
Thank you.
We have one final question from John Hynd.
Hi, John.
Hi, guys. Might sneak in, too. Just following up on that question, last question on Glue Store. Is it fair to assume that Glue Store's doing better than your 19.8% like-for-likes?
Yes.
Okay. Thank you. Then the contribution that the price rises and higher margin product sales has had on that like-for-like number. Just given the sensitivity in the current environment, are you able to give us a little bit more color on, you know, the key buckets, I guess, of that 19.8% for the last seven weeks, please?
Yeah, that's harder, and I won't try and break that down, John. I think you can assume that some of it's, you know, we'll call it price inflation, because we're not discounting to the same level.
Mm.
That we were last year. Some of it is just better demand and stores being open. Yeah. You know, if you have a look at our comps for the first seven weeks last year, they were well down. You know, 9.8% is a big number. However, it's against a disruptive period. You know, I'd leave it to you guys to try and do your best estimate on that. I haven't thought about the components of it too much, to be honest. I'm just pleased that
Sure.
It's a bit stronger than it has been.
Yeah, absolutely. Thanks very much for those, for my questions.
Thanks, John.
Daniel, I'll hand it back to you to close off the session.
Well, guys, thank you very much for your time, and I'm sure with many of us, we'll be having some one-on-ones and some briefings soon. Thank you all, and have a great day.
Thank you.