Time to attend the call today. I'm joined today by our Group CFO, Matthew Durbin. We will now take you through the results for the half for the half- year ended January 1, 2023, and a trading update for the first seven weeks of H1 FY23. There will be an opportunity to ask some questions at the end. In opening, I'm delighted with the H1 results, in what is the first uninterrupted half in more than two and a half years. The teams continue to focus on customers. Fresh new product and full- margin sales has delivered a terrific result. Group EBIT of AUD 91.2 million is in line with the guidance we provided in our trading update in January, and a very significant increase on the prior year.
As shown in our investor presentation, which was released to the ASX yesterday evening, key highlights include: The opening of 53 new stores, bringing the total store numbers to 805 stores. Our contactable customer base grew by 300,000 customers to 9.6 million customers. Online sales represented 19% of sales and have grown by 160% to AUD 134 million since H1 FY20. While sales in H1 2023 were below the prior year, I'm very pleased that digital EBIT was up 10% on last year due to improved margins and the efficiency drive from the team. Vertical brands and product sales of more than AUD 50 million and 7% of total sales has been very pleasing for us.
The opening of 15 Nude Lucy stores are now trading, and trading, with pleasing results. Significant continued growth in Platypus and Skechers, with 20 new stores opened in the half. We're quite pleased. I will now hand you over to Matthew Durbin.
Thanks, Daniel. Turning to the sales and profit on page 5. Total sales for the half, including TAF franchisees of AUD 825 million, which were up 39% to the prior year. A gross margin improvement of 190 basis points to 55.2%. Our Cost of Doing Business was 42%, an improvement of 470 basis points. EBIT of AUD 91 million was up 200% and the company delivered NPAT of AUD 58.3 million. Adjusting for the 27th week, EBIT is estimated at AUD 81.2 million, representing a compound growth of more than 13% per annum of the undisrupted H1 FY20.
Inventory levels at the end of the half are clean and reflect strong in-stocks of core lines and wholesale stock ready for sales in half two. Moving to digital and online on page 7. Digital sales have increased 160% in the last 3 years. It was expected that online sales would pull back in half one FY23 on the back of store disruption experienced last year. For half one, the mix of online sales at 19% has grown from under 12% in FY20. Half one FY23 was also a record for online EBIT. The focus for online for the last 12 months has been achieving profitable sales through improved gross margin and lower costs in digital marketing and distribution. All the health measures of digital remain strong, with ongoing improvements in conversion rate, average order value, and sessions.
We continue to invest in new and upgraded websites and underlying digital infrastructure. Turning to VIP and loyalty on page 8. Contactable customer numbers grew by 300,000 customers to 9.6 million customers. This continues to be the result of a strong drive to invite customers to provide emails in store, along with the impact of our loyalty programs now in place in TAF, Skechers, Hype, Platypus and Merrell. Company now has 7.4 million members signed to our loyalty programs, driving repeat spend behavior and improved customer value. Our new customer data platform is now live and enabling deeper insights and more effective targeting. Moving on to page 9. Retail, wholesale, and vertical. During the half, 53 stores opened, 13 stores transitioned, and 8 stores closed from discontinued banners. 2 stores closed where sustainable renewal terms could not be agreed.
New stores continue to perform strongly, with 27 new stores opening in Platypus and Skechers. Nude Lucy now has 15 stores all trading well. At least 20 stores are planned to open in half 2 FY23. Wholesale sales also continued to grow in half 1 FY23, driven by existing and new distributed brands. Sales of vertical own brands and products grew more than $50 million in half 1 and continue to support the improvement in underlying gross margin. Coming now to dividends and trading update on page 11. The business has announced a fully franked interim dividend of 12 cents per share, which is a record interim dividend. In terms of the trading update, trade for the first seven weeks of half 2 has been positive.
Like-for-like sales are up 16% on the prior year, and including week 27, for the last 8 weeks are up 24%. Not in the first 7 weeks. Half 2 last year were significantly impacted and we were cycling negative, and we are cycling negative comps. Now back to Daniel to wrap up.
Thanks, Matt. Whilst we continue to recognize that there is some uncertainty in the economic outlook, up to this point, we have not yet seen any significant change to consumer spending in our categories. Many of our brands target a younger customer demographic who tend to be less impacted by interest rates and the cost of living pressures. To conclude, I'm very pleased with the ongoing progress that has been made on all our key growth strategies as we continue to build a strong defensible business in Australia and New Zealand. Our portfolio of global distributed brands, owned vertical brands, integrated digital capability, and the large store network are all core assets of the group and position the company well for growth into the future. That concludes our presentation today, and we would be very happy to take any questions. Thank you.
Thank you. We will now begin the Q&A session. As a reminder to the audience, to ask a question, please select the Raise Hand button at the bottom of your Zoom screen to be placed in the virtual queue. Our first question comes from Sam Teeger. Sam, please go ahead and ask your question.
Hi, guys. Good morning. Thanks for the presentation. I was wondering, can you comment on how you're finding February trading compared to January?
Good day, Sam, it's Daniel.
Hey, Daniel.
Well, we're yet to see. The only way we can measure it is via the comps. Right now the comps are holding up. February is always a tougher month. The only measure we've got is the comps. So far, we've seen no real difference to date based on what we were seeing in January.
Got it. Based on current sales trends in the business and potentially the consumer weakening throughout the year, you know, how much inventory are you keen to carry over CY 2023, and what's the plans around that?
Given we've not really seen any pullback, and look, indeed, it might come and we won't be immune and all the things you just can't read the crystal ball. From what we're seeing at the moment, we have taken a position that we will not be canceling any stock, forward orders. Essentially it's just business as usual. Our inventory position is quite clean at the moment. Any, I guess, deemed overstocks are in core and they're selling well for us. We've taken a position to not discount any core lines. Really no need at this stage to do anything but trade on.
Understand. The 16% comps you're doing in the trading update period, how much of that would be price? Just trying to get an understanding of what's volume.
Hey, Sam. Matt here.
Hey, Matt.
It's very difficult to unravel price in terms of, you know, if you think about the period we were cycling last year, it was heavily disrupted. We were discounting to clear inventory left over from the period that we'd been closed. There's certainly a fair bit in price, but unraveling how much is removal of discounting compared to how much is price increases is next to impossible, if that makes sense. I can't really give you a sense of how much is volume and how much is price. We can't measure it with any accuracy.
All right. Last question really quickly. Given the success you're having in Nude Lucy, do you think any of your other, you know, new or non-core formats get closed over this half?
No, not at all. Yeah. No, not at all, mate. We've exited anything that wasn't achieving the metrics that we required. Nude Lucy so far is pleasing, and it will have zero effect on any growth plans we've got in the rest of the banners.
All right. All the exits of non-performing formats are done. There'll be no more.
No, not, well, not at this stage. Unless the world changes at this stage, it's all go forward.
Great. Thanks, and good job on the good result.
Thanks, mate.
Thanks, Sam.
Thanks, Sam. The next question will come from Keegan Booysen. Keegan, please go ahead and ask your question.
Good morning, team. First one for me, just on the GMs. Can you talk a bit about the FX impact to GM in the first half? 'Cause it looks like it would have come off a bit in November, December. Just talk around the trend there. Does this unwind in the second half and when would we expect that to go rolling through?
Thanks, Keegan. Matt here. Couple of sort of points on margin for the first half. The increase on the prior year was driven through a few things. First and foremost, again, unwinding the discounting that we did last year to keep our inventory under control. We continue to drive underlying margin improvements with our new vertical programs and our distributed brands. The increased mix on both of those continues to drive that underlying margin. In terms of currency, it was an impact in November and December. Indeed into January. We had planned for levels of currency higher than, you know, low $0.60, which we experienced in late October and November.
We bring a lot of our international stock in those months. We're only hedged at about 50%. Quite a chunk of that was bought at those lower rates, which is just what it is. It does start to unwind in the second half. We've popped a slide in the back of the pack which shows you that our hedged rate for the second half sits at about AUD 0.73. Again, we're usually only about 50% hedged, so the final rate will depend on where the currency sits. Certainly as we get into the back end of this half, we're hopeful at this point that currency becomes a bit more of a tailwind where it's been a headwind in the last few months.
That's great. Moving on for you, Dan. Can you talk a bit about the performance of the new stores you've put down over COVID? I mean, you've effectively almost doubled your store count. First of 2023 should be a relatively lean period. Just keen to hear how you're seeing the economics of the new stores stacking up and the performance by region, please.
Well, we've been quite pleased. You know, we did do a lot of work through that COVID period, I suppose, and some of the benefits are coming through now. Where we have opened stores that, you know, we have what we call a PET, a performance evaluation tool we use to decide whether a store should go ahead. We've indeed increased the hurdles on that to make sure that before we sign up to any new store, the hurdles are actually more challenging for the team. That drive has really allowed us to experience some really good new store opening performances. Where we've expanded some stores as well, that's been positive.
As an example, Miranda in Sydney, we expanded that store, took more space on, and that's been positive. We will look to do that in more centers as we move forward. In the main, where we are opening up new stores, not only are we getting the some good outcomes on EBITs out of those stores, but it's certainly allowing us to drive the database harder than ever before and allowing us to capture more and more emails. As an example, There's 300,000 new customers that have joined our database. That's really compelling for us.
That's great. When we think about the economics of the new stores, there's nothing to say that the returns or the margins, even though the sales and the formats may be a bit smaller, are anything different to what the core brands were sort of pre-COVID or before you did this rollout.
No, that's right, Keegan. That's a, that's a very safe statement to make, and we're not seeing it any differently. The new stores are performing well, hitting their metrics, no fundamental change. It is true that some of the regional stores we're opening performing very well, they're on nice low rents. You don't have to hit the same level of sales. You perhaps don't get the same dollar value of profit as some of the big guns in the, you know, the super, you know, suburban stores. However, return on investment's terrific. The rents are very low. You know, that's one dynamic that may well be bringing our average sales down slightly and our average profit per store, but it's not impacting the return on investment.
That's great. Just last one from me. You mentioned before, Dan, around pumping up the return targets that you have for new stores. Just firsthand store growth itself, do you think it's gonna moderate anytime soon in terms of the rollout? If not, sort of what brands do you see growing within the core network? What are the return or ROI targets that you have on those existing stores now, please?
Well, right now, we still see a long runway. That'll be determined by what rental outcomes we can achieve with our landlords. As I mentioned, the hurdles are harder. We've put in harder hurdles to hit before we decide to open the store. In the main, I mean, we still see growth in major growth in Skechers, Platypus. You know, we've got Nude Lucy. We've got, you know, well, all the banners basically. There's growth all over the place. In the main, it's, you know, Skechers has still got a long, long runway. You just gotta take a look at the products we've got in that business. It's in the best shape we've ever seen it.
It continues to build momentum.
Keegan, just to sort of add to that, you know, in-interest rates are higher, cost of capital's gone up because of that. We've increased our hurdles. Previously, we've talked about, you know, at least 20%. The new stores now we're, you know, as you'd imagine, we're sort of 5%-10% higher than that. So around the 30% mark is the benchmark for ROI that we're setting for the new stores going forward.
That's great color. Thanks, team.
Thank you.
Thanks. Thanks, Keegan. Our next question comes from Sophie Carran. Sophie, please go ahead and ask your question.
Hi, Daniel and Matt. Thanks for taking my question. First one, just regarding the comment around your focus on profit growth in Glue Store and Stylerunner. Can you talk a little bit about how the margin performance is in these two banners versus your expectations? I guess a little bit more color on what you need to do from an execution standpoint to get those margins where you'd like them to be.
I'll take the first part of that. It was pleasing that those banners, you know, were hit positive EBIT for half one, Sophie. It's, you know, very honestly though, the margins still aren't where we'd like them to be in those businesses. We were still, yeah, clearing through some product and, you know, we're probably, you know, we've still got a bit of a way to go to get that right. I might sort of throw to Daniel just to talk about some of the things that are underway, 'cause there's plenty of activity going on.
Yeah, well, all of it will lead to margin improvement. We are reviewing all the store base. As you're probably aware, if you take the business of Glue Store, we purchased it. We were very disrupted in that business. We bought products, then we ended up being closed, so we had to deal with all of that. We have a made a change in terms of management. Steve Cohen is the Divisional CEO of that business, as well as Stylerunner. Some of the changes that are going on in there when you measure KPIs are very encouraging.
We continue to, I guess, explore where we think there's a niche in the market that allows us to grow a whole lot faster than just doing the same as what the market's doing today. There's a lot of work going on in that space that includes some refits. You know, are we too masculine? Are we too feminine? All of those type of measures are being reviewed at the moment, and that takes a little bit of time. The KPIs are encouraging.
Great. That's helpful color. Thank you. Then just a sort of follow-up to the previous question. Can you just give us a little bit of color around sort of lease discussions and landlord contributions on store fit-outs, and just how that sort of balance between the landlord and yourself is going when it comes to opening new stores?
Yeah, look, a good question, Sophie Carran. The centers are full. Their vacancy rates are better than they've seen them for a long, long time. I think that's a great thing for the industry overall. It's buoyant. Thankfully for us, we've got, you know, a lot of banners that work in a lot of the shopping centers. We're able to, I guess, negotiate, you know, some key locations, at least we think some fair outcomes on commercials. So far, you know, it's basically business as usual. What that does moving forward, I'm not sure.
We certainly have not had to slow down store growth because the commercials are not as good as they were. That's, that hasn't occurred yet.
Excellent. That's helpful. Just one final question from me, just around the like-for-like sales performance through the first weeks of the second half. I guess just any sort of color you can provide around particular strength among different banners. To what extent do you think that's benefited from some of the back to school support, particularly thinking around The Athlete's Foot?
Well, The Athlete's Foot had a great back to school period. Very pleasingly for us. A lot of the products that sold for back to school were in the vertical bucket, i.e., products that we now make and own. One of those brands is named Alpha. That is wholly designed by us, made by us, and sold through our stores. That's allowed us to enjoy better margins, and that program continues to build year on year. In terms of what's going on across the industry, through COVID, a lot of the brands almost held back some releases because there was no feel and touch.
Now that we've got all of our customers, or 80% of our customers going back into the stores, a lot of our brands are releasing products that they probably withheld from the market. That's been fantastic for us. We're full of fresh new product. There's some fantastic trends going on. If you take a look at a brand like Crocs, for those of you that may have bought a pair of those shoes in the past, I'm not gonna argue whether they're good looking or not. The market is loving them. Platypus has been the number 1 seller of that trend in Australia and New Zealand. I can't bypass Skechers. It's the most on-trend we've ever seen it.
We have 2 or 3 silhouettes that are just trending super well. We've got a lot of intel from what's going on around Northern America and Europe about what some of the wins that Skechers are having worldwide. We're simply the beneficiaries of all that. We're very pleased with what we look like in store. It's probably the most on-trend I've seen the Accent Group in all of its banners in a long, long time.
Great. That's very helpful. Thanks for taking my questions.
Thank you.
Thank you, Sophie. Our next question comes from John Hynd. John, please go ahead and ask your question.
Good morning, Daniel and Matthew. Thanks for your presentation and taking the questions. I'm just perhaps drilling down on a couple that have been asked already. On the Slide deck, there's an FX rate slide in gross margins. It sounds like in the first half 2023, sounds like what you're telling us, there was still a little bit of pressure from currency that's and purchasing that's rolled through into second half. You're sort of suggesting that with $0.70, $0.73 currency now, hedged, that there might be sort of upside to the fourth quarter margins. Is that what you're indicating? Are we talking about margins closer to first half 2020 when the currency was $0.73 again?
Given the, I guess, investments you've made recently in the, you know, back to core focus, is there a little bit more upside from that, you know, 57 level for the fourth quarter?
Thanks, John. Good question. As you described, the shape is a very good way to think about it. As those AUD 0.73 hedges come rolling into the inventory, and we get into the fourth quarter that, I'm very hopeful, we're very hopeful that will become a bit of a tailwind to margin. We tend to have a half one, half two split of margin. If you look historically back to some undisrupted years, half one tends to be a little bit higher than half two. Part of that's because June sale is a good time to, you know, clear the decks, and historically we've used that to make sure we clean up any ills before we go into the new year.
Look, without trying to predict the future, I don't think we'd get a half two result, at that level of 57. We haven't had that historically. Let's trade it and see. We're certainly hopeful that half two, you know, will be a bit better than last year and we'll get some improvement.
Yeah, thanks. I guess taking that one step further, you know, you've got a very clean inventory position now. You hosed a lot of the, I guess, clearance items in this half.
Yeah.
you know, perhaps there is that risk with that fourth quarter, you don't have as much that needs, I guess, stock that needs cleared out in June.
Yeah. That could well be the case and, you know, it comes to how trade goes over the next five months. As Daniel said, we're not seeing anything we didn't expect at the moment.
Yeah.
We're planning for a reasonably good time. There was some clearance, just to clarify though, into January. you know, the Christmas sale starts in on Boxing Day, but it goes for about three weeks. There's a couple of weeks in the second half where we were churning through some of that discontinued stock.
Yeah. Actually, thanks for the reminder there. Just another one or two if that's okay. I noticed that also in the pack you've consolidated the emerging brands in the store count slide. Is that a formality or is it a change in strategy on how you're thinking about those new brands given how strong the underlying and legacy business is at the moment? We normally talk to Glue a lot as well, and I guess it's 'cause the store count's a bit higher and it's new. On top of that question, I guess can you also talk about Nude Lucy? You know, you're saying that you've done 15 stores there. What sort of pathway do you think you've got there?
Do margins compare to perhaps Stylerunner or are they more attractive?
I can answer the Nude Lucy part. The margins are higher, are higher than Stylerunner by some. The reason for that is that we actually completely design the product, make it, retail it, wholesale it and of course, put it through our digital site. In terms of, you know, we've got 15 stores there. I'd be quite disappointed if we didn't do a few more very quickly. We're working on that. I guess we've now got some stores in the west, Western Australia, Queensland, Sydney and a couple in Melbourne, and we're just trying to make sure that it's absolutely right in, you know, in all areas of Australia. At the moment it's feeling quite pleasing.
Of course, it's a, it's a competitive space, so, you know, as far as we're concerned, it's lumbered into our, I guess, vertical drive across the Accent Group. Right now it's pleasing.
John, to pick up on your question of why we've consolidated those three together. In part it's because those businesses all have a, you know, a fairly significant apparel element to them. As Daniel alluded to earlier, we've now got a very senior competent guy running all three of those businesses as the divisional CEO. We just felt that it was appropriate to put those together. It's the first time we've talked about Nude Lucy as well. Previously that. Yeah. It's that and other. Yeah, I wouldn't read anything more into that other than that's how we're thinking about it.
Sure. Thanks. Just a further question on that. Perhaps that for you, Daniel. 15 stores with Nude Lucy. You've talked about competition. Would one of the larger competitors in the space be Universal's Perfect Stranger stores? Is that where you're seeing competition at the moment? I think they've talked to having seven stores by the end of the year as well.
No, I think they're after a different customer. Our customer, we feel, our customer, it's much more in the comfort/fashion area. You know, call it the resort wear, if you will, compared to I think their customer is a little bit more streety and younger. Yeah. I don't see them as competition. You know, every fashion retailer has got an element of what we're doing in terms of this comfort fashion, but we've managed to put all under one roof. We feel the stores look appropriate, and we've got a great team in there driving not only product, but also systems.
We, we hope to see, you know, 4, 5, 6 stores pretty soon, to increase that to get over 20 stores very quickly and see what happens.
Yeah. That, that makes sense. Just one more, sorry, from me. The dividend was pretty, was a pretty nice dividend. Reflects a pretty full payout ratio. I guess, how does the board make that decision? How's the board thinking about the second half as well placed?
I think you'd have to read it as a positive, obviously. We've stated in the past that the business, if we don't need the cash in the business to do what we wanna do, and we can do all of it based on what our current cash flows show, then we will pay it out to the shareholders and reward shareholders. You know, we've had a great half. Cash flows show that we should be rewarding shareholders, and we will continue to do that. The day will come when we want to put up another 100 or 200 stores and that dividend may change, and we may need to keep it. Right now, we're in a very strong position in terms of cash flow.
Our balance sheet is very solid, and we took a decision to reward shareholders.
Great. Thanks. Thanks, Daniel.
John, if I-
Yes.
I'll just add to that. People shouldn't see that as any sort of reflection of, you know, we're not gonna deploy cash in the business for growth either. You know, the nice thing at the moment with a half like that is, you know, you can, you can pay out a good dividend. We've also got, you know, some pretty decent facilities in place that we did at great pricing, you know, 18 months ago. It's not a, it's not a choice between investment or dividend, if that makes sense. It's actually both.
Yeah. You're in a great position to be able to do both.
Yeah.
Thanks very much, Daniel and Matthew, and congratulations on the strong result.
Thank you.
Thanks, John.
Our next question comes from Chamithri Ratnapala. Please go ahead and ask your question.
Hi, Daniel and Matt. Thanks for taking my questions, and congratulations on a very strong result. Just on vertical sales, I mean, we are around that AUD 50 million mark at the moment. Just keen to hear your thoughts with those the new banners coming through with good growth. Where do you see vertical sales over the probably next six, 12 or 18 months?
Yeah. Hey, Chami. How are you? It's certainly a very pleasing performance for vertical and, you know, as you can imagine, Nude Lucy is driving a bit of that with 15 new stores. Stylerunner continues to grow as well. Indeed, vertical is growing in all our banners through socks and accessories and the school shoe, the upper school shoes, insoles. I mean, we previously, I think, you know, if I go back 12 or 18 months when we were probably giving out more targets than we should have, we were calling out a hope that vertical could get to 10% of our sales. There's no reason to think based on the trajectory that they can't.
You know, we've also talked about margins being significantly higher when we're dealing with vertical product than third party. You know, we've been on this journey about three and a half, four years. We're still learning a lot. There's a lot to learn when we're in lots of different categories of those. You'd expect that the underlying margin in those products would improve if, yeah, as we get better over time.
That's great. Thanks for that.
Chami, you're aware, obviously, I mean, that is one of my, you know, not particularly my biggest driver with my teams on the field that this area here has become very exciting for our business because, one, it gives us exclusivity, but also you get the margin drive. Matthew's called out, you know, socks and, you know, you think of socks as just a little add-on sale here and there, but it's super strong. We're very, very pleased with what's going on there. The GP AUD coming out of that is very, very pleasing.
Thanks for that. That's very helpful. Just to clarify, in the 20 stores for the second half, could we fairly assume that 3 to 4 would be Nude Lucy or... Hello?
Chami, Sorry, just, could you mind saying that again? You just broke up.
Yeah. Okay.
Thank you.
Sorry about that. For the second half, with 20 stores, is it fair to sort of assume that Nude Lucy could be 3-4 there or?
Yes, that would be fair. Yes, that'd be a fair assumption for sure. four or five will definitely be Nude Lucy.
Perfect. Thanks for taking my question. Thanks.
Thanks.
Thanks, Chami. Our next question comes from Shaun Cousins. Sean, please go ahead and ask your question.
Thanks. Good morning. Just the first question, just on cost. Just can you talk a bit about how you're managing the labor cost sort of pressures with, you know, just with the broader inflation there? Just remind us around how the CPI linkages play in your leases. I believe they might be 25% of stores, but if you could just remind us of that, please.
Yeah. Thanks, Shaun. Good question. Lots to unpack in there. If I may, I might just talk quickly about how we achieved some of the cost improvements. We've certainly had a very strong efficiency drive in costs, in particular around the costs associated with digital. We've been very focused on reducing performance marketing costs, leveraging our customer database, rather than paying, you know, paying external providers for clicks. That efficiency's been terrific in the last six months. We've also had a very strong focus on distribution costs and changes to charges for delivery, driving click and collect in store and indeed increasing our delivery thresholds. And customers, we've observed, have been prepared to accept those.
That hasn't missed a beat either. If I come to the question on team costs. The GRIA, you know, award increase was effectively 5.3% for this year. You know, we experienced that through the first half. We were able to continue to get, you know, wage costs, keep wage costs under control, even in regard to that increase that we've passed on to all of our team members. Correct, about 25% of our portfolio is exposed to CPI increases. Again, we clearly had a number of those come through in the first half where leases came up for expiry.
I'm fairly certain if you take our lease costs and look at them as a percentage of sales, you'll see that we've gained some efficiencies over the prior year. You'd expect absolutely that we would have over the last two years where we had stores closed. I now think we're sort of back even under levels experienced in previous years. Efficiency, cost efficiency is a strong drive for us. We've also called out that we felt that team costs in support office grew ahead of the curve through COVID. I mean, we're very conscious of getting those team costs back to where they need to be on the basis of the sales that we're doing.
Great. Then maybe just, more broadly, you've touched a little bit around how you're optimizing your performance marketing there, just how effectively do you believe you're engaging with your 9.6 million customers? How can that sort of further be optimized sort of going forward, please?
First and foremost, it's a huge, a huge project for us in terms of doing better with our databases. We've put some work into particularly our Athlete's Foot database, which is very, very strong, and the outcomes have been very, very pleasing. That's starting to happen across all other banners. So we see upside there as we move forward. I guess what's happening is, we, you know, we're getting all these databases together. The fact that our banners are just becoming better known in the market is allowing us to spend less on, you know, tryna, I guess compete for the likes of Google and so on.
you know, if they think Platypus, well, they're going straight to Platypus, or Skechers and so on. That's really helping us, you know, save the cost there. To answer your question, there's a major drive on what we do with our loyalty programs in particular for the database as we move forward. It'll be a big, big player in what we do. This has been our strategy all along to get to, you know, a pretty big base of customers where you can really drive, you know, promotions, exclusive products. The likes. To be honest, it's one of the most exciting parts of what I think will see us grow in the future.
Great. Just finally, just around The Athlete's Foot there. Just assuming the performance there has gone rather well, particularly with a strong back to school there. Just do you see any sort of changes there in, you know, taking on as a corporate some of the franchise stores or your franchise base? Just curious around how you're seeing the movement there, please.
No, it has been very positive. You know, that we've got some 65, 70 franchise stores out there. In the main, they're great operators. You know, we've now got a larger portion of that network as wholly owned by us. Those stores are performing very well. Margins are up in those stores purely because there's a major drive on, you know, the continuous drive of vertical products in there. We've also got some great growth strategies in there with at one end, your fill outs, and two, the product mix going on in there. I mean, you're aware that we distribute and own the distribution of the Saucony brand.
That's been very, very strong, and we're simply delighted that we've got the distribution for Hoka, which is one of the fastest growing brands of the world. That's become a big, big driver in that business, and the results have been fantastic. That'll continue to drive that banner. In the main, you know, with Athlete's Foot, it's simply, you know, we just keep on the current trajectory and strategy. It's very pleasing.
Fantastic. Thanks, Daniel. Thanks, Matt.
Thanks, Shaun.
Thank you, Sean. Our next question comes from Mark Wade. Mark, please go ahead and ask your question.
G'day, guys. Thanks for taking the question. Just starting, Daniel, the results are very strong. I'm just trying to get a sense of, you know, why wasn't the 6 months to June as strong as what we've just seen in the 6 months to December when it felt like as an outsider was, you know, the macro was pretty similar environment. Yeah, just can you try and give us a cogent explanation on the sudden improvement there?
Well, it, you know, as we come out of Omicron last year, which was, you know, I mean, we were trading okay. Of course we're getting a little bit of a tick there, for simply doing it right. As I mentioned, a lot of the brands did hold back product. As that product was released to us, we saw almost instant, and was almost overnight, customers really biting at that new color, at new trends. As I just mentioned, Hoka has been very strong for us, and it's a new brand for us. I'm gonna put it down to product, but I also got to put it down to the team. I mean, we feel our stores are looking on point.
We're very driven towards the old customer service, which, you know, people talk about, but we're really putting a lot of effort into how do we serve our customers better and produce an environment that is exciting in that space. To expand a little bit on product, if you take a look at the Skechers business, it's been very strong for us, purely driven on product. We haven't had to do much but, you know, put the product in in our customers in faces. They're biting. You know, they're voting with their wallets. They're hungry for new products.
I see, there's the shift from, you know, the brown shoes market to what we do in terms of comfortable, fashionable footwear, at a fair price that's continuing to trend up. You're hard-pressed now to go into the market and see too many people not wearing a brand. Thankfully for us, it's usually a brand that we either distribute or we have great relationships with a third-party operator.
That's been helpful. Thank you. On the wholesale business, we're no longer getting separate sales for that. Can I just get a sense of how do you feel like the customers, your wholesale customers are reacting at this point, you know, given with, you know, things could get a little bit tighter? Are they reacting kind of as expected?
Yeah, Mark, the wholesale channel has been very, very strong indeed and we get forward visibility through sales, you know, up to 6 months out into that channel. It continued to experience growth. Certainly the forward order book is in great shape. Daniel called out Hoka as being a, you know, a strong addition, and we wholesale that brand. Frankly, those Skechers performance and Dr. Martens and our core brands in wholesale have been very, very strong as well. It feels like we just continue to get a bigger share of shelf space with our wholesale customers. You know, it's very positive.
No, good place to be, long, Matt, last. Just lastly, Matt, on the, on the back end, the consolidation of some of the systems. I know at one point you're looking to cut down the number of ERPs you have from about 3 or 4 down to 1. Just give us an update there if you can.
Yeah, absolutely. We're flat out full steam ahead doing a conversion of Glue Store onto the core platform. We've already done some of the lifestyle brands that we acquired as part of that as part of that transaction, you know, including Nude Lucy and some of the other banners that are on AP twenty-one. We're flat out doing Glue Store at the moment. We're gonna move to The Athlete's Foot after that. It's going well. These things take time. They're complex, and we wanna get them right.
Okay, good update. Yeah, spectacular results, keep it going.
Thank you, Mark.
Thanks, Mark. Our next question comes from Keegan. Please go ahead and ask your question, Keegan.
Thanks for taking a follow-up, team. Just last one from me. You paid down about AUD 20 million of debt in the half. Just keen to get a sense of how comfortable you are with the current level of gearing, and particularly in the context of your comments, Dan, around funding growth, and also returning capital to shareholders. You know, things are going really, really well now, but how comfortable are you with the level of gearing through the cycle and sort of, i.e., should we expect further pay down in debt or that capital to return?
Thanks, Keegan. Great question. The governing thought is we're very comfortable with the level of debt. A gearing ratio, you know, half a, half a turn is very comfortable on any measure. You know, if there's cash available, you know, the intent is to both pay dividends and pay down debt over time. We don't wanna slow investment though. We'll see how we go in the next 6 months. It is possible that you could expect more debt paid down over that period, yes. You know, things are strong and we pay to their shareholders and pay to the banks as well.
Thanks. Thank you for the question, team. Thanks.
Thanks, Keegan.
Thanks, Keegan. We have no additional questions at the moment. Daniel, I'll hand it back to you for closing remarks.
Well, if there are no further questions, we will get on with doing what we do. Hope you guys have a great day and thank you very much for taking the time to listen to our update.
Thank you.