Thank you, Chiara. Good morning, everyone, and thank you for taking the time to attend the call today. We will now take you through the results for the full year ended June 29, 2025, and a trading update for the first seven weeks of the H1 FY 2026 year. There will be an opportunity to ask some questions at the end. Accent , again, delivered sales, growth, and profitability in the FY 2025 year. I'm pleased with the Accent team's ongoing focus on our customers, product innovation, and high standards of retail execution online and in stores. We continue to make progress against our strategic objectives. If I can now refer you to the operational highlights on page four of our investor presentation, which was released to the ASX this morning.
The key highlights include the opening of 54 new stores, bringing the total number of stores to 903, inclusive of our online websites. Vertical owned brands and product sales have grown to more than AUS 130 million, a mix of around 9% of our total sales. New distribution agreements signed with Lacoste and Dickies, with Merrell and Timberland agreements also renewed for further terms. Our long-term Skechers distribution agreement was extended to a 10-year term out to 2035. Skechers is our most important distribution agreement, where we currently have more than 200 stores and a large online and wholesale business. In April, the company signed a long-term strategic partnership with Frasers Group to bring Sports Direct stores to the ANZ retail market. I'm pleased to report that the Sports Direct rollout is on track with our first store due to open in Melbourne in November.
I will now hand you over to Matthew Durbin to talk through the details of the result.
Thanks, Daniel. Turning on to page five, total sales for the year, including to franchisees, were AUS 1.6 billion. EBIT of AUS 110 million was in line with prior year and at the upper end of the guidance of AUS 108 million -AUS 111 million provided in the June trading update. Inventory levels were in line with plan, with aged levels clean. The year-on-year increase in inventory reflects the timing of stock in transit, converting The Athlete’s Foot franchise stores and inventory acquired in conjunction with the Frasers transaction, along with opening inventory for Lacoste and Dickies. In terms of the summary of financial performance on slide six, gross margin was down 85 basis points to 54.9%, reflecting the more promotional consumer environment and in half to the impact of lower sales and disciplined approach taken to managing inventory.
Cost of doing business of 46.6%, including list appreciation and interest, was an increase on prior year, arising from low LFL sales in half two and continuing inflationary pressure in store team wages and annualizing rent reviews. Net profit after tax was AUS 57.7 million. Coming on to retail and wholesale on slide eight, owned retail sales grew by 2.5% to AUS 1.3 billion. During the year, 54 new stores were open. New store performance remained strong, with sales and return metrics in line with expectations. Of the 57 stores closed or divested, 39 of these related to divestments and discontinued brands, with a further 18 stores closed where sustainable renewal terms could not be agreed. Wholesale sales of AUS 155 million reflected the challenging macro and consumer conditions in the broader lifestyle footwear market.
Sales of vertical owned brands and products grew to nearly AUS 130 million, continuing to improve underlying gross margins. The key contributors to the growth were Nude Lucy, Nils, Stylerunner, and Ode. Turning to the growth plan on pages nine and ten, the company continues to have a strong pipeline of growth opportunities. The Sports Direct rollout is on track, with the first Australian Sports Direct store planned to open in Melbourne in November. At least four stores, including online, are planned in FY 2026. At least 50 Sports Direct stores are planned over the next six years. The Lacoste and Dickies distribution agreements both commenced on the 1st of July, with sales starting to grow in FY 2026. There are further store rollout opportunities across the portfolio, with at least 30 stores, excluding Sports Direct, planned to open in FY 2026, including more new stores in Skechers, Nude Lucy, Hoka, Stylerunner, and others.
The all-important Skechers distribution agreement has been extended to a 10-year term out till 2035, reinforcing the position that Accent Group Ltd holds as the distribution partner of choice for global brands in the ANZ retail market. The Athlete’s Foot franchise reacquisition program remains on track. On an annualized basis, the 15 The Athlete’s Foot stores reacquired in FY 2025 generated around AUS 43 million of sales, all strongly profitable. A further 13 reacquisitions are planned in FY 2026. Turning to dividends and the trading update, the company has announced a fully franked dividend of AUS 0.015 per share, bringing total dividends for the year to AUS 0.07 per share. The full year dividends represent a payout ratio of around 70% of earnings per share for the year. Total owned sales for the first seven weeks of FY 2026 are up 2% to last year. Like-for-like retail sales for the first seven weeks are up 0.8%.
For the year, the company is targeting low single-digit EBIT growth in FY 2026. This is inclusive of the startup costs expected to be associated with Sports Direct. The outlook for half one FY 2026 EBIT is for a similar level of EBIT to half one FY 2025, with growth in half two FY 2026. This target is based on achieving low single-digit like-for-like sales growth, growth from new and annualizing stores, incremental profit from The Athlete’s Foot franchise reacquisition program, new distributed brands, and continued growth in Hoka and Nude Lucy. Gross margin percentage and cost of doing business percentage are planned to be broadly flat to FY 2025. The projection includes the impact of startup costs for Sports Direct. Now back to Daniel to wrap up.
Thanks, Matt. We are pleased with trading the opening weeks of FY 2026. In particular, there are returns of positive like-for-like retail sales growth. Wholesale sales have traded in line with prior year, with strong forward wholesale orders. We're very pleased with what's happening in wholesale. The Accent team is focused on executing our plan for FY 2026, including innovative new product, new stores, launching Sports Direct, growth from our existing and new distributed brands, and a continued drive on cost efficiency, underlining gross margin improvement. The Sports Direct rollout, in particular, is a major growth opportunity for our company over the coming years. Finally, I would also like to take this opportunity to personally acknowledge and thank our Chairman, David Gordon, for his support, leadership, and stewardship of the company over the past 19 years.
David has announced his intention to retire at the company's AGM in November, and we wish him all the very best for the future. That concludes our presentation today, and we would be happy to take any questions. Thank you.
Thank you. We will now begin the Q&A session. As a reminder, if you would like to ask a question, please select the raised hand button to be placed in the virtual queue. Our first question comes from Garth. Garth, please go ahead and unmute yourself to ask your question.
Good day. Can you guys hear me?
We can. Thanks, Garth.
Terrific. Good day. Congratulations on the result. Thanks for taking my questions. Just on the trading updates, could you just sort of break down the difference in the lifestyle and performance of lifestyle and the performance of your performance banners? Just that the performance had previously been quite strong, and I just wanted to assess whether that was still a lifestyle that was dragging that down.
Yeah, Garth, thematically, that trend continues. You know the banners like The Athlete’s Foot, Hoka, and Merrell, this is a trend we've talked about now for at least 12 months, continue to perform strongly. The more lifestyle-oriented banners are definitely softer in terms of the growth, albeit, as we called out, what we're starting to see is a strong forward pipeline of wholesale orders, which gives us confidence as a forward read that some strength might be returning in that part of the business.
Okay, great. Thanks. Just on that, I think the inventory growth was well above the revenue growth. How confident are you that you're not going to have to discount with that stock that you've got? I know you mentioned it was clean, but is that just related to the new store openings, or is there something that we need to just be conscious of there?
No, there's no issues in terms of the composition of our inventory or the levels. That's why we specifically called out the sort of year-on-year, I'm going to say, one-off impacts, which is new inventory that's coming in for The Athlete’s Foot franchise stores that have converted. We've got opening inventory levels from Lacoste and Dickies, which will translate into sales. You know we haven't made much of a deal about it. We acquired quite a bit of inventory, which you can see in our combinations note there as part of the Frasers deal, part of which will be inventory for wholesale and part for Sports Direct.
All right, terrific. Maybe one more if I can. Just theft has been an issue with one of your peers that was called out yesterday. Are you seeing similar levels, and have you sort of had to factor in any measures to protect staff and stock?
are two aspects to that, Garth. I might just talk to the financials around shrink and then Daniel can talk to the team. It's a bit easier for us, I think, than others. We're very diligent on it. You know, when you've got one shoe out on the wall, we're a little bit more protected in the way our business model works. We're not seeing any dramatic increases in shrinkage, to be honest, in our business.
Terrific. Thank you.
On the people side, Garth, absolutely. We're spending a lot of time making sure that our team is safe. We're doing all we can to advise the shopping centers, in the main, the landlords, that more has to be done in this space. Hopefully, it all goes away for everyone. Certainly, there's been a little bit of a spike, but we've not had incidents that we've heard that others have had to date. Hopefully, we won't.
Sure. I guess that just means that you wouldn't be able to reduce the number of staff in store just from a safety aspect. That probably gives you a little bit less flex on wage costs looking forward.
I think so. We very rarely have any store with just, you know, a single person in store at any rate. Yes, I mean, so far, it has not affected our rostering methodology to this point.
Terrific. Thank you very much.
Thanks, Garth.
Thank you. Our next question comes from Jamie. Jamie, please go ahead and unmute yourself to ask your question.
Thank you. Good morning, Matt and Dan. Congratulations on some of the announcements today. Good to see. Maybe starting off with the outlook, just to add on to the previous question as well, considering the a bit more than usual skew in FY 2025, could you talk to sort of, you know, when you earlier said first half to be a bit consistent and then second half growth, could you elaborate here? Thank you for EBIT.
Yeah, look, there's not much more to say, Jamie. I think, if we look at a, I'm going to say, a normal split of first half, second half profit, and we have a look at what happened in the second half last year, and I'm going to say project through based on the comp sales that we're expecting in the first half and margin and cost of doing business, that growth in the first half on the first half last year, which was actually pretty solid, particularly in hindsight, we think will be challenging. We're just trying to set expectations. First half this year, we're expecting to be flat, and that's what we're targeting. Growth in the second half last year, sorry, the second half of this year against what was, frankly, a disappointing second half.
Also, Jamie, I can add that, as I said, we're quite pleased with what we're seeing with forward orders on wholesale. It's been quite positive. Hopefully, that'll hold up, obviously led with Skechers and Hoka being our two biggest brands. That's really a good sign for us.
Great. Just on that lifestyle, obviously, macro would be a bigger beneficiary there than the sports brands. How do you feel about the outlook through the next few months or even a bit longer term?
Look, I think it all comes down to, you know, what's the economy doing and so on. There's good momentum. Certainly, we've seen good momentum. One of our strongest banners at the moment, Jamie, is Platypus. In the past seven weeks, we're very pleased with that. Our Hype business continues to hold, which is great. Where we are facing some challenges is with Vans, which we've called out over the last couple of years. It's been very soft. Thankfully, the new products that have come in, like Hoka and so on, have been really, really, really positive.
Perfect. Thanks for that. Secondly, from me, looking at the new store number for FY 2026 out of Sports Direct, at least 30. What are you prioritizing here outside that key banner, outside the key Sports Direct banner?
I think there's still great growth in larger Skechers stores. Where we've tried a couple, they've been solid. Given what's going on with anything sport, and we're very happy with what's going on in The Athlete’s Foot, we will look to convert some of our current biggest stores into The Athlete’s Foot and indeed look for new ones based on what we're seeing. I guess that's where the growth will be. By the time you get four or five Stylerunners, four or five Nude Lucys, there's 10 stores right there. I think it's going to get down to, Jamie, we're driving pretty hard negotiations with our landlords that if we can't get the right metrics, we simply won't do it. We're in no rush to just be out on a mad run to open more stores. They have to hit the metrics. There's great opportunity.
On top of that, we've opened a couple of Hoka stores in the last couple of weeks. One we opened yesterday, and we're seeing pretty strong results out of those stores. There's a pipeline of stuff that we can do there. Also, I can add that we're in the market at the moment looking for Lacoste stores. By the time you add all of those up, we should easily achieve what our aspirations are in new store openings.
Perfect. Thanks, Dan. Thanks, Matt. I'll jump back in the queue.
Thanks, Jamie.
Thank you. Our next question comes from Sam. Sam, please go ahead and unmute yourself to ask your question.
Oh, hi, Daniel. Hi, Matt. Just on the guidance, just to be firm. It sounds like in the region of AUS 118 million -AUS 120 million of EBIT on the AUS 110 million is what you're thinking as high single digit, just given there was a one-off on the AUS 110 million. We're all on the same page.
Yep. That's a fair assumption, Sam, given the projection there for high single digit growth into FY 2026. Yep. Mathematically, 118 is high single digit growth.
Can you sort of give further color on the startup costs, what that includes, marketing, team, and other components, and any numbers around that just to help us understand what that is within that guidance? Thank you.
Yeah, no problem, Sam. Look, I won't provide any numbers. However, the types of costs that are incurred ahead of the curve are clearly standing up a team to get the stores launched. There's buying teams, there's planning that needs to be done, there's store operations, backend warehouse operations. There's quite a bit of investment that goes into that. Some of it CapEx, some of it OpEx. Marketing is also a big cost when you're trying to establish a brand. In terms of the, I'm going to say, the ahead of the curve components, those are the two you're dealing with. If we're aiming to open 30 stores over the next sort of three years, you can imagine that marketing is insignificant in terms of what we're thinking about over that period of time.
When will that marketing start before the first launch, or will you wait till you get a few stores under your belt?
Concurrently, it'll start with the first launch, but the investment around that first launch will be localized, very focused on that store opening and then digital. We expect the online site will open at around the same time, if not a bit earlier than the store. Performance marketing, other digital marketing, and then as the network starts to grow, we'd expect that that marketing will be more broad-based.
Just encouraging that you've locked in all your called out four stores and at least four stores. It sounds like securing site so far is, you know, you've got a good line of sight there.
Yeah, Sam, I've been quite surprised. It's amazing when there's no space, but then you get a hot business coming to the market, they tend to find the space. Yes, we've got many we're negotiating on at the moment, but we're really, we're being very picky, to be honest, where we'd like to open. Of course, we need the metrics to match. At the end of the day, the consumer's going to vote. I think what we've put together and what we're seeing coming from the Frasers Group internationally, we're excited about getting this one open.
Final question from me, just on the, it's encouraging to see lifestyle improve. Can you talk about whether that's product-driven, macro-driven, execution-driven, or a combination?
I think it's a combination, Sam. There's definitely more momentum. We felt it coming for the past six or seven weeks. Our comps have improved, and there has been a little bit more of product innovation. We're fairly confident of what we've seen in the forward pipeline from all of our brands that there's good innovation coming, albeit a lot of it is sport-inspired and that's sort of what the market's wanting at the moment. That's starting to bleed into the lifestyle space, which is good news. Part of the great results coming out of Hype is purely chasing that trend, and the likes of Platypus and so on are very close behind that now, growing in that area fast.
Thank you.
Thank you very much, Sam. Our next question comes from Ed. Ed, please go ahead and unmute yourself to ask your question.
Hey, Tim, can you hear me okay? One more time.
Yep, thanks, Ed.
Hi, thanks for taking the question. It was good to see the EBIT coming in at the top end of the guidance range. I was just curious, given that you provided that in June, did anything change through June? Was there any improvement in the macro environment? Have you seen any improvement in the gross margin environment, or is it too early to say yet?
A couple of comments around June. You can deduct fairly easily looking at our trading update in June and then the final comp number for the second half that the last three weeks of June were very challenging. That's like a little bit of a trend of what we're seeing in that lifestyle period. When we go on sale, we're not getting the uplifts that we have seen in the past year or two. That certainly happened. We'd seen that trend and factored that in. Part of the reason I'm going to say that that guidance range was a surprise to everyone at the time was there was a projection in that that ended up coming true. We didn't see anything we didn't expect, I'm going to say, in that last three weeks of June, which is why we were able to hit the top end of guidance.
Look, I'm very reluctant to call out margin at the moment. We've said that we expect it to be around the same level as last year. As we sit here right now, I'm very confident of that projection, but we're only seven weeks in.
Okay, no, that's helpful. You've also talked to like-for-like retail sales retaining growth in FY 2026. Just talk through what you think drives that. Is it more full price sales, more foot traffic? Which way should we be thinking there? I know you're kind of careful to say pull out margin now, but yeah, what's implicit in that?
I think there's a couple of things going on in the macro. I think certainly interest rates are going to start to help us. In the back end of last year, in particular, we were cycling some pretty strong comps in Skechers from the prior year. That's now out of the base, so that's positive. We're starting to see, as Daniel said, some positive momentum in Platypus. There's a few things pointing to that lifestyle side of the business starting to recover. Certainly the forward wholesale pipeline being strong, we feel gives us a forward read. It's as strong as we've seen it for 18 months. That's probably, that's reflective of how others are sort of thinking about the next 6-9 months as well.
The other thing that we've been experiencing, which is great news for us in the industry, is the average transaction has gone up in many of our banners, particularly in the Hype and Stylerunner business. That's really positive for us. A lot of the reason for that is because some of the shoes and the styles that are coming in have got some performance within them. That obviously causes an extra cost and price, but there hasn't been the resistance that I thought we may get, particularly in the last, you know, call it a couple of months. That hopefully will lead to an easier manner to chase the comps.
All right, thanks for the color . Maybe just one last one from me, and apologies if you've addressed this somewhere in the materials already, just on your new comments, the FX rate that you seem to hedge for for 2026, is there any quality you can provide there?
If you go to the chart that we provided in the back end of the slide pack, you can see that for the FY 2025 year, we actualized at around that 66, 65 level. Everyone could observe as well as I can that over the last six months, the dollar's been bouncing around between 63- 65. You can imagine that any hedging that we've done would be at around those levels. Right now, if we're buying spot, we're buying it around those levels as well. As we come into this year, it's fair to say that currency will be a headwind year on year.
When we talk about maintaining the percentage margin, what's feeding into that is we are hopeful at this point that the promotional environment won't be as severe as it was last year with interest rate cuts and hopefully the household budgets starting to feel a bit better. At the same time, we talked about, Daniel talked there about ATVs increasing, so some price increases. The other element is we're continuing to get benefits under the covers from the work that we're doing around vertical and distributed. As Hoka grows, Skechers returns to growth this year, and with some other distributed brands coming in and the strength of Nude Lucy, that helps the underlying margin in the mix.
All right, thanks, Matt.
Yep.
Thank you. Our next question comes from Sean. Sean, please go ahead and unmute yourself to ask your question.
Great. Good morning. Can you hear me?
Thanks, Sean.
Fantastic. Thank you. Maybe just to clarify the first half 2026 guidance to be in line with first half 2025. I think this might have been addressed, but just to make it really clear, your first half 2025 was AUS 80.653 million. That included a AUS 9.7 million gain on a reversible impairment, a AUS 3.8 million impairment, and a AUS 2.6 million one-off. What is the dollar base that we should be looking for, please? Maybe you could just, it's a busy morning, so there's a good chance that I and others may, but certainly me, will get this wrong.
That's a good question, Sean. When we talk about our results, we don't sort of talk in relation to underlying. It's just too complicated for everyone. When we talk about flat, I'm talking about an ambition to be flat to the dollars that were delivered or the result that was delivered. You could say that there's a small amount of underlying growth in that, but to not confuse everyone, it's the AUS 80 million. When we say that's there or thereabouts what we're targeting, that's the number.
Perfect. No, thank you for the clarity. Maybe just on cost of doing business reductions, the company had embarked on several sort of quite effective reductions in cost of doing business above the store level. I'm just curious around the degree of cost savings that had been possibly realized. Maybe they needed to be reinvested in fiscal 2025 and the degree to which any may come through in fiscal 2026, please.
We continue to drive cost efficiencies in a number of areas of our business. Through the period this year, we were cycling through the benefits of a support office headcount reduction, and we will get some benefits of that indeed. In the core business in the first quarter of this year, offsetting that is that we've got startup costs associated with Sports Direct that are coming into the first half. The program continues to try to drive costs and aim to drive costs, and we're having success in distribution costs, in marketing costs, in particular digital marketing costs, the amount we spend with Google and TikTok and so forth. As we have improved our own channel data analytics, that's helping us target the 10 million customers that we have in our database.
There is a constant battle at lease renewal that goes on to make sure that our occupancy costs remain in line as a percent to sales. You will see in the result there was deleverage in that in the second half. As I've maintained, if we're not achieving low single-digit like-for-like retail sales growth where you have 3 %- 4% inflationary factors, it's quite difficult to drive leverage on that. If you think about our cost of doing business and the statement that we are aiming to have cost of doing business broadly in line as a percentage with FY 2025, as we go into FY 2026, there continues to be a lot of work that has to be done under the covers to achieve that, albeit some of the inflationary pressures are starting to moderate a little.
Having said that, it's a fact that the frontline team costs are going to go up at 3%- 3.5% again this year. You need a couple of percent of comp sales, otherwise you have to take team off the floor. As we heard from an earlier question, we're not in the business of taking team off the floor for safety, but as much as anything for customer execution and good store execution.
Great. My final question is just on Sports Direct. Can I ask how you balance the requirement, and then maybe if you could amplify the requirement for Sports Direct for you to sort of sell brands that, be it sort of Slazenger, Everlast, Lonsdale, which have sort of more of a mixed reputation in this market? How do you manage the requirement to sell those brands with selling the leading brands and particularly doing the right thing by your own distributors in terms of sort of Deckers for the Hoka brand, which has been very well, in terms of the distribution's been very judiciously managed in the appropriate sort of channels? I'm just curious how you sort of manage those different requirements and how you put that into a store where you're making each of those different parties happy and having an attractive offer for the consumer.
I'm just curious if you could talk a bit about that predicament that you face merchandising the store, please.
I might have the first go at that. I think the best thing to do is to sort of reference the Sports Direct global model. They're very much about premium branded and value. What you will find in a Sports Direct store is you'll find a terrifically branded Nike concept footy area, which is going to have the best Nike boot on the wall. We will have that in Sports Direct. For the parent that comes in and then wants a kid's boot, we will have a very keenly priced Sondico footy boot, which is a brand that we're going to make great margin on, and the customer will see the value. That's the global model, Sean. I don't want to say too much more other than we're going to execute what Sports Direct do and what the brands around the world appreciate them doing.
I think it's a good question too. Obviously, that was one we looked at before doing anything. The support from all the brands, including the distributed brands that we distribute, has been nothing short of great. From our own point of view, the brands that we sell, the buyers will simply go and buy it based on the merit of the product. All of our brands that should be in a sport store will be in the store and very strongly represented.
Fantastic. Thanks so much, Matt. Thanks, Daniel.
Yep, thanks, Sean.
Thank you. Our next question comes from Sam. Sam, please go ahead and unmute yourself to ask your question.
Thank you very much. Hi, Daniel. Hi, Matt. Thanks for the presentation this morning. This is probably one of the softest periods I've seen Accent go through for some time outside of COVID. To your credit, you've managed costs very, very well in this period. My sense is a lot of people have left the business recently. From all the broader cost-out initiatives undertaken, what's the risk here that when conditions rebound in the lifestyle footwear space, you won't have enough people to see the leverage and execute on the way back up? Will you end up having to put back in a lot of the costs that you've taken out in recent times?
Sam, that's a great question. There are a couple of aspects to that question. If I think about the customer-facing aspects of our business and the engine that drives what we do with customers, both being retail customers and wholesale customers every day, that's not the areas that we've pulled back. In fact, our team levels in store, store managers, assistant store managers, area managers, we haven't touched those ranks at all. What we've aimed to do is look at support office functions predominantly, where we've been able to put in more efficiency initiatives. We've been doing offshoring as well into Vietnam and, in fact, more recently into Manila in the Philippines. We're finding great cost efficiencies in, I'm going to say, support office team doing repetitive type tasks, data-driven tasks, and we've found some great savings through that area.
I don't think we'd feel uncomfortable that where like-for-like retail sales go, there should be good leverage on that for us.
Okay. Yeah. Sam, I can only add that I don't think the exercise was simply just to take people out. It was more of an exercise to say, what do we look like if we start thinking about right-sizing the business from a people point of view? I think we're largely there, and I think particularly my management team, we're in a great place. I don't think that that certainly won't be an excuse if we can't execute. It won't be from lack of people.
Sure. Can we explore the theft issue a bit more? How's this Victorian crime situation impacting your thinking around how many Sports Direct stores you want in Victoria or the rents you can afford to pay in Victoria unless the police and courts start to clamp down on this issue, given the types of products in a Sports Direct will be much more susceptible to theft than your pure play footwear banners? Daniel, maybe it'd be good to get your thoughts on, do you think the retail industry is doing enough effective lobbying of government to take this issue more seriously?
I don't think we've done enough as an industry, no. I think we need to do more. It's all over the news. It's all over the social media. There's, without any doubt, issues, particularly in Victoria. I hope the people that are qualified will do something about it. Like all the other retailers out there, the likes of JD Sports, Anaconda, and so on, we will simply follow the model of what Sports Direct are doing internationally. On the main days, I dare say we may end up employing a security guard, a security at the front of stores. That seems to be a model worldwide for these big stores. It's an area that we're going to learn and fall in line with. However, a lot of the stores, the way they've been designed, we will have team placed at the front of the store as well, proper rostered teams.
Again, it's nothing new for us. It's where we're taking lead here from Sports Direct International.
Got it. All right. Thank you.
Thanks, Tim.
Thank you. Our next question comes from Wei Wang. Wei Wang, please unmute yourself to ask your question.
Thanks, guys. Apologies if this has been asked before. On your guidance assumption of flat gross margins, what have you assumed regarding promotional activity in FY 2026? Is it flat because you're comping an equally promotional FY 2025, or are you assuming in flat guidance that FY 2026 will be less promotional?
Look, it's impossible to know, but broadly flat. We think we might get some benefits in some periods in respect to margin against last year, but broadly flat. I'll tell you in January.
Okay. With the Sports Direct rollout, I appreciate you haven't even got a store up and running yet, but have you seen or heard of any sort of competitive response to the planned rollout?
No, not at all. We still supply competitors in the space, and there are many. If anything, forward orders are being quite strong. I think we will have a point of difference of what we're going to market with. We're currently very excited about what's going on with Sports Direct. I'm not sure we've sold how good we think it is based on what we're seeing overseas, but it's terribly exciting what's happening in that space for us.
Okay, cool. Thanks. That's all from me.
Thanks, Wei Wang.
Thank you. Our next question comes from Ayan. Ayan, please go ahead and unmute yourself to ask your question.
Hey, guys. Can you hear me?
Yep.
I hope you're well. Just one for me. Just the store guidance, 30 new stores. What's the assumption around store closures into 2026? Sorry if you've already answered this.
No, that's a good question, and we haven't answered it. We haven't put out any particular targets around store closures. The way we think about store closures and the way to think about them is as follows. Mathematically, with our portfolio size every year, we have 150+ renewals that have to be negotiated store by store and site by site with our landlords. Our objective is that as we project out the sales of that store over the renewal period and what we think the EBIT's going to be, we have to be confident we can make a return on investment. Ultimately, we know pretty well what the sales are going to be. The balancing number is the rent, and where we can't achieve the rental outcomes that we need, that store has to close. We're quite disciplined about that.
One of the reasons for breaking down the closures we had in FY 2025 was to give you a sense that roughly 18 stores closed in FY 2025 as an outcome of those negotiations. As a portion of the renewals we were doing, you can estimate that that's about 10%. I can't project what is actually going to close because it'll be an outcome of all of those negotiations as we get into this next year. They're going well, we're actually getting more wins than not in that space, which is terrific. There will be some that close. We've got another 150 renewals to do over the next 12 months.
With those stores that you're closing and you typically close, are they EBIT positive stores? Are they all loss-making and so you actually get a benefit in the P&L when you close it?
Yeah, look, typically they're loss-making or very marginally profitable is the answer. That's where you close out in stores that aren't great and you open, you know, you open 54 that theoretically should be and generally are. You should get a benefit from that overall.
In the accounts, there's a AUS 3.5 million gain on lease modification. Is that, what's that in this year? Is that factored into guidance when you're looking at the growth and the sort of drag you have on year-on-year growth, please?
Look, without speaking specifically to that gain or other, I'm going to say one-offs that were in the P&L. That goes back to the answer that I gave earlier. We don't tend to look at one-offs and worry too much about them at that level. In terms of the guidance for next year, again, it's on the dollars that we delivered this year. In any given year in a business our size, you're going to have some things that are positive and some things that go against you. On balance, they tend to even out over the continuum.
Great. Last one quickly. The second half 2025 result, in my mind, you would have had costs associated with Sports Direct in terms of just the due diligence ramp-up of it. To what extent did that dilute your performance? That's not an underlying cost. I guess you haven't generated revenue out of that yet. To what extent is Glue a drag on your EBIT this year as well, please?
Yep. In respect of Sports Direct, immaterial in the second half, which is why we sort of haven't called anything out in the accounts in respect to that. Clearly, there'll be some transaction costs associated and so forth, but nothing that's worth shouting out. Glue remains a drag on the EBIT for the second half. You know, we'd like to be able to say that it's better, but it was loss-making in the second half.
Great. Thanks, guys. Appreciate it.
Thanks.
Thank you. We have a follow-up question from Garth. Garth, please unmute yourself to ask your question. Garth, can you hear me? You just unmute if you can hear me. It looks like Garth might be having some audio issues. I will just remind our attendees, if you did have a question, please use the raised hand function. I'll just pause briefly to see if we have any additional questions from our attendees.
Hello.
Hi, Garth. We can hear you now. Thank you.
You can hear me? Oh, terrific. Thanks for taking the call, guys. Just on the loyalty program, it looked like there was a partnership with Live Nation recently. Could you just talk to whether there's a big cost to yourselves to do that and any margin impact that we should expect? If that is, just how your, maybe, the response to that has been?
Yes, there is a cost to that. It's within the Platypus budget in terms of what they're doing with their marketing spend. In terms of what it'll do for us, it's essentially Platypus teaming up with the music side of what happens in the youth market, in the youth area. Platypus has always been synonymous with what goes on with music. It's just an exciting time. Yes, there is a cost going.
Okay. Maybe if you could just, one last one on Sports Direct, just the license, although the royalty fee that you've got to pay them, can you give us a sense of how impactful that is going to be to your gross margin going forward? Previously, you'd highlighted a goal of hitting 57%. Is that 56.5% as a result, or can you give us a sense of that?
That target that you referred to is at a group level being 57%. I don't think we're backing away from that ambition in the mix of our overall business. Having said that, if Sports Direct does what we want, it may well be difficult to get to that sort of percent, but that won't be a bad thing. I'm not going to comment on the royalties other than we feel as though we're going to be able to generate a decent gross margin in the Sports Direct business because of the mix of our distributed brands and the Frasers brands and what they'll do in that business.
Terrific. Thank you.
Thank you very much. We do have a follow-up question from Wei Wang. Wei Wang, please unmute yourself to ask your question.
Hi, guys. I just wanted to go back to guidance again very quickly. High single-digit growth, it's not necessarily dissimilar to kind of where the market is at the moment. I just really want to understand, I guess, what your confidence level is of achieving that. The other thing, follow-up question was, you guys don't typically give guidance a year ahead. I guess, why have you decided to give guidance this time around?
Yeah, that's a really good question. I'm happy to answer that part of the confidence level. I'll tell you in January that if we didn't have some confidence, it would be irresponsible for us to put that out today, Wei Wang. I'll leave that there. The reason that we've elected to put guidance out this time is to make sure that we're not dealing with, I'm going to say, overambitious forecasts. We wanted to base everyone realistically around last year is seen as a new base for us. We had hoped that wasn't the case as we set our objectives for FY 2025 off FY 2024. However, it's clear that it is. We wanted to flag very strongly that people should only expect high single-digit growth off that and not more. Indeed, not less so than the other way. Yep.
Okay, cool. Thanks so much.
No problem.
Thank you very much. As we have no additional questions, that brings our Q&A session to a close. I'll hand back to the Accent Group team for any closing remarks.
Thank you all for your time. I hope you have a great day and a great weekend. Thank you.