Earnings Call: H2 2021

Aug 26, 2021

Thank you for standing by, and welcome to the City Chic Collective Fiscal Year 2021 Results Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. Phil Ryan, CEO. Please go ahead, sir. Good morning, all, and thanks for joining us this morning. I'm Phil Ryan, CEO of I'm joined today by Manraj Daliwaal, our CFO. This morning, I'm going to talk through what was a great year for CCX given the market conditions and the pandemic. Manraj will talk about financials, and I'll come back to discuss the outlook. In what was an exceptionally volatile and challenging year for reasons I don't need to outline, We've managed to grow our revenue by 32.9 percent and our EBITDA by 59.6 percent. And these growth numbers are off a strong result in FY 2020. I've been the CEO now during the pandemic longer than I was outside 1. And from this, I've learned to be reactive and nimble, And we have found a way to continually grow despite the market conditions. It is our people that have delivered this and I'm exceptionally impressed with the way our team has remained focused delivering for our customers despite the many setbacks. She comes first in everything we do from product to customer experience. Our business is structured to make her experience the best it can be given the circumstances. Nothing outlines this better than logistics situation in the USA this year, we shifted all of our parcels for months to express delivery to make up for the COVID induced delays in our warehouse. Customer first is not just something we say at CCX, it's a core of who we are and it drives all of our decisions. As you all know, our strategic vision is to lead the world of curves. In the last 12 months, we've taken huge steps towards this Despite the impacts of the pandemic, we've remained focused on the 3 strategic pillars of plus size, digital and global customer acquisition. And on these measures, we have delivered. We are now 73% digital with over 1,000,000 global active customers in the Plus market, and More than half of them are outside Australia and New Zealand. Our global website traffic is 58,000,000 a year. We are a digital global retailer with an EBITDA percentage of 16.4%. We have strong digital storefronts and partner relationships in our 4 key regions of ANZ, USA, UK and the EU, and we've commenced partner trials in Canada and the Middle East. Our market leading and consistently evolving product assortment spanning varied price points, to deliver our assortment to a $180,000,000,000 World of Curves. Our assortment is broken up into 3 key streams within our business: Fashion through mainly Christy Schick and CCX, conservative through the Aveneu and Evans and now the new Navarre brands And intimate through all of the above brands, plus we do Fox and Royal for playwear and hips and curves for that more everyday kind of lingerie. To design and produce the volume of assortment we do requires creative structures and discipline. That is where my background as a dressmaker comes to the fore. To get a clear creative vision for each of these lifestyles and opportunities, we use some brands within each stream to give the design team that creative direction. We utilize light shapes and fabrications to deliver production efficiencies and give the customer the over 5,000 choices She has on our website now and all of the manufacturers' margin. We are creating a global marketplace of our own brands for Plus Ladies or A World of Curves. Talking through the regions, we continue to gain market share in Australia and New Zealand with 20% revenue growth with only the fashion and intimate stream of product available in the market. We achieved this through range expansion within these two streams And strong online growth of 45%, with online now 54% of our total revenue in Australia and New Zealand. To deliver the conservative strength of the market, we look to our learnings from City Chic's growth in the U. S. We did there what we did there successfully was leveraging the strong existing traffic streams of avenue.com and partners such as Mason's and Nordstrom's to successfully acquire market share for City Chic. Transposing this to Australia, we are using the citysheet.com.auwebsite And partnering with David Jones to bring the conservative stream to market. Given these market conditions, stores have been pleasing At 12% comp store growth in FY 2021, we've also opened 12 new stores. At the end of calendar 2021, we'll have 45% of our Full price stores in the new gold bid out averaging around 130 square meters, so slightly larger than our older store and we'll have 12 in the larger format above 230 meters. The results from these new stores and the largest stores has been very strong and we will continue to refresh our portfolio. It's another strong year in the U. S. With 37% constant currency growth. We achieved this result in what was an exceptionally challenging year. The first half was pandemic and socially impacted, and we really didn't see a recovery till March, April. The result came from improvements we made With all of our 5,000 products across all of our brands now live on avenue.com, the website location. This has materially increased her assortment and drove both traffic and conversion increases. Avenue.com, the website, We've traded consistently above pre acquisition revenue levels and Avenue branded sales on the location are also above pre acquisition levels As we've expanded and improved the offering and our fashion intimates mainly through City Chic streams have delivered the incremental growth. This has given me the belief that the world occurs marketplace strategy is the correct direction for our collective. She wants choice and she wants assortment and we can give it to her around the world. The City Chic USA website has returned to pre pandemic growth levels With the recovery in the dress category really in March April onwards, however, CC branded sales on Avenue have driven material growth in the fashion segment in the USA. We've also relaunched on both Nordstrom's and Macy's websites with CitySheet, and they are performing above pre pandemic levels. To start a trial in the Canadian market, we launched a marketplace with Hudson Bay Canada, putting a pool of stock in there Just to dip our foot into that new market as we did in Europe and the U. K. Over the last 3 or 4 years to make sure there is a next horizon of growth. There is so much runway for customer acquisition in the U. S. Avenue.com, the website location, has really only had 4 months of trading post pandemic, And the results are exciting. We will continue to invest in marketing and reactivation strategies as I see years of growth in customer numbers in the U. S. FY 2022 saw the next step in our U. K. Market entry strategy through the acquisition of Evans. The 1st 6 months have been pleasing with the operation profitable over the period. The integration is now complete and inventory levels are back to a commercial level. Sales on the evans.co.uk are above a pre acquisition run rate, a lot faster than we achieved with Avenue. We launched all of our free product streams on evans.co.uk location and have been received well by the customer base. This learning, I believe, is what got us above pre acquisition much faster than in Avenue.com. We took our learnings from the U. S. And we adapted our strategy to get market share as quickly as we could. Our U. K. And European marketplace strategy has been implemented with our brands launching Next, Freeman's Covista in the U. K. It's very, very small times months and initial results are pleasing. We've also commenced a partnership with the Alshaya Group in the Middle East to stop a world of curves in 23 Debenham stores in the Middle East and all of the associated websites that they run. We took the next step from Zolanda wholesale trials for market entry in the EU with the Navabi acquisition. The integration is going ahead of plan and initial reads on the loyalty of the customer have been positive, but it's very, very early days. The inventory levels there are going to take some time to rebuild and we'll position inventory from around the world to try and get some market share in Europe. The exciting part of this is we're learning some new European lifestyles, including the Lagan look, which is a more relaxed longer line fit, Quite European focused, and we're going to incorporate this into our assortment next year, and we'll sell it globally, getting more eyes across more types of our product and offering her the Choice she has voted for around the world. With strong banner brands in ANZ, U. S, U. K. And now Europe and strong global marketplace partners, we are positioned well to continue to grow our business and to lead a world of curves. I'll now throw to you, Manraj, to talk through the financials. Thanks, Phil. Good morning, everyone. I've included more commentary on the financials in the ASX announcement for this result, so I'll just hit the high points now. The full year result is in line with the unaudited sales and EBITDA announced in July last month. Sales of CAD 258,000,000 is up 30 So comp growth in ANZ was 32% with stores achieving 12% like for like growth and online growth in Australia achieving 45% and that was off what was already a high base for our online business here in Australia. Comp growth in the U. S. Was 31%. Avenue.com grew strongly as Phil mentioned particularly in the second half and whilst the City Chic website In the U. S. Was down in the first half given the impact of lockdowns on dress sales, it bounced back in the last quarter as the restrictions eased. So we achieved this comp sales growth of over 30% whilst also improving the gross margin quite materially. The gross trading margin was stronger at 61.8% versus 57.8% last year. This was driven by higher achieved sell Despite the downward impact of the shift in channel mix to online and the lower gross margin avenue business. The cost of doing business increased as a percentage of sales by about 1%. At the income results, you remember I flagged High fulfillment costs in the U. S. During the peak of the pandemic issues. And although these moderated back to more normal levels in the second half, The overall impact on the full year cost was about 1% of sales. Whilst we did benefit From operating leverage of our cost base, we also increased our advertising spend to capitalize on the opportunity to grow our customer base And take market share from our competitors, particularly in an environment where a lot of them weren't as stable and financially back as we were through that period. We added almost 300,000 new customers in the year And over $400,000 if you include Evans. To sum up the financial performance, we've been able to take market share and grow our business around the globe while strengthening our earnings margins. And it was in a year of elevated shipping and fulfillment costs due to the pandemic and also higher Evans Transition Services fees post the acquisition for a few months there between December March. The EBITDA margin increased to 16.4% and EBIT margin increased to 13.9%. EBITDA growth was 60% on last year and 70% on pre pandemic FY 2019. The business generated strong operating cash flows of $24,000,000 on a normalized basis. CapEx of CAD4,700,000 came in slightly under budget and really allowed us to rotate into more newly fitted out stores and invest in our e com infrastructure. Going back to July, August last year, we raised CAD111 million to really strengthen the balance sheet and Set us up to accelerate our growth. In December, we used $40,000,000 of those raised funds to acquire Evans. And as flagged at the time of the acquisition, we needed to invest in inventory after buying that brand out of administration. And that investment of $8,000,000 was made in the second half. It not only restocks the Evans brand, but importantly it also includes City Sheik and Avenue product that is now selling on evans.co.uk and to new partners in the region. We also use those raised funds to repay CAD17.5 million of debt in the first half. So we finished the year with CAD71,500,000 of cash and no debt, which you'll see turning to the balance sheet on Slide 24. As mentioned, we have invested in stock for expansion into the U. K. And Europe as well as for the launch of the conservative stream in Australia through Avenue and Evans, the launch of global marketplace strategy and strong organic growth with Avenue.com. We've also built some additional buffer into stock lead time to mitigate against the current delays in shipping that Phil will talk about in a second. The rate at which our footprint is growing around the world means there is a stream of organic initiatives being executed and potential inorganic opportunities. And whilst we go through this phase, it makes sense to keep some financial flexibility. And the Board has not declared a dividend for the period. A dividend will again be considered at the interim results. And on that, I'll hand it back to you, Phil. Thanks, Mike. In the first I'll just give a bit of an outlook now. In the 1st 8 weeks of Slide 22, we've continued to deliver strong positive top line and comparable sales growth. Evans and Avenue are trading And I'm materially above what was pre acquisition levels. The CC USA location is back to pre pandemic growth levels And our partners are also showing that pre pandemic level in the U. S. With the Niwavi, it's really too early to make a comment. We haven't had any real Time isn't yet. In Australia, I'm pleased to say we're still gaining market share with online growing close to historical levels. Australia has been materially impacted by the temporary store closures with a loss of 33% of available trading days. Stores that are open are trading well and that gives me the confidence for a bounce back like we experienced last year when we open up again. The impact of the closures is approximately $1,000,000 a month to our bottom line. There is still uncertainty surrounding the pandemic, especially around the Australian lockdowns and the timing we're going to come out. Our diversified global footprint helps us manage through this uncertainty as regions are at differing points in their recovery from the pandemic. As I said earlier, we've taken the learnings from USA City Chic market entry And we use existing traffic and partners to acquire market share for our conservative stream, mainly the Avenue and Evans brands And get the product into the Australia and New Zealand market. Yesterday, we launched A World Occurs on the citysheep.com.au website. I'm sure you've all followed the emails and gone to the website today and had a look. I think it looks pretty good. And the customer response was strong at a sales level yesterday. That brings the conservative product stream onto the City Chic website. And today, we have 800 products now live with up to 2,000 launching through Christmas. As I said, the customer response is good. I would even say better than what we saw on avenue.com with the City Chic product. To complement that strategy, we signed a partnership with David Jones in Australia for World Occurs Avenue and Evans and all of the sub brands to go into a concession format in 14 stores and most importantly onto their digital marketplace. This will launch in the first half of this year. The physical presence is really there to support the market entry and to drive awareness. We learned from our USA experience that this is the best way to gain market share, and we see DJs as the natural fit for this product range, And it's quite light in capital expenditure as well. As I've said previously, I see this segment, the conservative value segment of the Australia and New Zealand market as a key building block in our growth story. In September, we'll go live with many new partners around the world, Walmart in the U. S, eBay in Australia, Debitems in the U. K. We have integrations underway for Veri U. K, Zalando in Germany, Amazon in both the U. K. And USA. We are dealing with them now wholesale, but we want to get it onto a marketplace and also target in the U. S. We've expanded on the partnership with Upshire And we moved towards a franchise model. We are now franchising 2 their 23 stores and associated websites. That is happening now. As we are growing around the world, we've got to know a lot of the plus size businesses, and we are putting ourselves We now have 24 hour customer service and live chat with offices throughout the globe to make sure we are there to talk to our lady whenever she wants to interact like a strong global digital retailer would. Our shipping globally is increasing in price and delays are really consistent. That's where being a pandemic CEO comes in handy. You learn to adapt. We've built a couple of months into our lead time during COVID for many reasons, and this should mitigate shipping delays unless the situation deteriorates. In regards to cost, the scale that we've grown in production volumes at this stage has been able to net off the increase in shipping. Now where rates are and factory costs are now, I can see that continuing, but this cost is evolving monthly. We've also built up our inventory across all regions for growth, and we were able to fill that to cause any delays we do with the late shipping. I just like to talk about ethical trading because I am very proud of what we achieved. This year, we published our 1st Modern Slavery Act, but everyone had to do that. On top of that, we achieved a green rating in the COVID-nineteen fashion report. We rolled out worker surveys to our top 24 factories and almost 7,000 workers, We received an 89% worker satisfaction. We have worked on we are now working on tracing Q2 and Q3 of our suppliers And we've actually looked to trace our 1st cotton to the farm, which is a big step for us. And we've updated and strengthened our cotton region bands. And we're looking to introduce cotton DNA testing so we know the origin of that cotton to really, really tighten up the regions we're buying our materials from. The pandemic has taught me how important relationships are with team and with our customers. We have to keep the business adaptive And always learn from our experiences and change our path to what the customer and environment is telling us. And I think we've been doing that quite well. I'll now open up to questions please, operator. Thank you. Your first question today comes from Naveen Patna with EMP. Please go ahead. Good morning, team and congrats on a great set of results for the year. First question I had was just in terms of U. S. Sales, obviously, this year, as you mentioned, there were sort of obviously strong growth, but obviously adversely impacted by some currency. But if we This is some quick back of the envelope caps and I might be wrong because it's just because of time, but it looks like first half really accelerated. It looks like it was sort of Constant currency up 23%, half and half in first half and sort of up, it was up, I think, about 12% in the second half. So I was just interested, those workings sound roughly ballpark to you? And if so, is there just some seasonality within the That we should be thinking about or any other factors there? Navin, our Avenue annualized 3 months without our Yes. No, that does, mate. I was just sort of referring to the So half on half rather than versus PCP. So yes, so the half on half, right? The December half 21 on the prior half on the half on half. So just not versus P2P, just what it was up to 23% and then the June half on the December half Up 12% in constant currency. Or maybe you can get back to me just on that. Yes. I think Sure. Look at we can I can come back to you Naveen, but at a headline the second half in the U? S. From about March onwards, we saw a strong bounce back as restrictions eased. So we saw an acceleration of both Avenue and City Sheet growth kind of in that last quarter. However, January through to March Was still pretty heavily impacted. Okay, great. Yes. I think also the dropship and wholesale business materially was down sort of $8,000,000 $9,000,000 and That would have impacted that as well, which is now back up and running. Okay, fantastic. Thanks for that color. And just on inventory, it was really helpful just in terms of you mentioned that there was sort of I think you mentioned on the call there was $8,000,000 of build related to growth initiatives. So it looks like as a percentage of sales probably increased slightly over the year, but not much. So reading between the lines, it sounds like you're Pretty happy with your inventory levels at the moment in terms of not meaning to discount or have markdowns. Is that fair? Yes. We have a clean inventory bill. That is the comment I would make there. Okay, great. And I was just interested in whether also just lastly whether you could provide some high level comment as to how the run rates From a margins perspective for the various geographies attracting, obviously, Nevada is pretty early, but maybe from the Europe within U. S. A U. K. And U. S. Perspective, how from a margins run rate we should be thinking about things going to next year? I'll let you take that, Manoj. Yes, sure. With the bounce back in the U. S. In the second half, Gross margins returned to more normal levels. We've previously mentioned to the market that the CitySheet Product here in Australia sells the gross trading margins north of 60% and our international business being Primarily Avenue, but now also Evans trades in the 50s. That has The gross margin bounce back in the second half has continued into the 1st 8 weeks in the U. S. And also in the U. K, however, the U. K. Was a few months behind the U. S. In opening up. And of course in the U. K, we had an initial period where we were moving warehouse and we're clearing some old stock that we acquired with the business. But Overall, the Evans business actually achieved a gross margin higher than the Avenue business in the U. S. So going into this New Year, it feels like the gross margins or the level of discounting is back to a more normal level. We've got the stock for growth. So we're not having to pull back on promotional activity. It's a more normal level. Okay, great. Very helpful. And just sorry, just a last question, a follow-up from that one. That's helpful in terms of gross margins perspective At a high level versus at a geographic level, are there any major differences there on the EBIT EBITDA margin side of things relative to those gross margins. I imagine you're probably still in investment phase in the U. S. On marketing and sales or what have you. So is there any extra color you could provide there to the EBITDA level margin? That's exactly right. It's the digital businesses internationally at an earnings margin level Are stronger relative to the omni business here in Australia If you exclude the marketing investment, but when you include the marketing investment in where we're driving Customer acquisition and market share growth in those new markets, then that brings The international markets EBITDA margin more in line with the Australian business. Okay, great. Thanks, team. Appreciate it. Thanks, Timmy. Thanks, Tim. And your next question today comes from Monique Lyssard with Macquarie Capital. Please go ahead. Good morning, Sheila and Manraj. Well done on another excellent result. I have a question around, I guess another one around working capital. The payables have declined since the balance date in December. I guess Can you give I understand that would have built up in response to building up inventory for Evan. But kind of what As we build you've got to build up inventory to pass for the Novartis. What's the sensible kind of way of thinking about your payables? And have the total supplies changed recently just given some of the bottlenecks and headwinds? Look, I'll definitely say to get things through and fasten things on, we've done some things with payment To really be the preferred producer and make sure we're using our working capital, the best way to make sure we can secure the stock, Marty, would be My first comment to say wholesale have the pay and payable changed, I would say not really and we'll see That more normalizing, but I've definitely gone and dealt with factories and where appropriate use payment terms as a big lever To get the product and put us to the top of the queue in many ways, especially as we've grown into new regions and new factory bases with different type of products, We use we produce the avenue around the more knit garments than what we would see in the CC woven. That's clear. And just 2 more for me. Just in terms of, I guess, DJ's, that looks really interesting, obviously, 14 bricks and mortar stores. Can you talk to like the margins you'd expect to get out of this? Because it's like in terms of like I'm thinking you'd probably have to put in some capital contribution to the fit out And this is helpful. Bonnie, the capital is immaterial in those like 1,000 of dollars, not even tens of 1,000. It's not a material capital investment. Look, we are there. They are there to drive market awareness, and That is the key of the strategy as Macy's did on a wholesale level with 150 stores in the U. S. For many, many years, driving So many people to learn about our new brands. What TSheet was a new brand in that market and the amount of anecdotal We people had told us on our customer line that they found it at Macy's and they Googled us and came to us. As I said, over many years is phenomenal. But I do we're not looking we are very aware of the department store situation in Australia. We think DJs are strong and are a good partner, but hopefully we can even supplement their online marketplace Sales through having some physical presence with them. So really, I'm not that is the key to that strategy. It's not about A huge driver of level of growth, what I see is the conservative product streams in the Australian market is a huge building block. And For those of you that have been part of our story for some time, prior to Avenue, the entire stream of product was started to do that in Australia because I saw And that's been positioned Avenue and then Evans in time and it's sort of this launch has got kicked down the road a few times And now it's here. And I think DJ's are a great capital lightweight to bring some physical presence into it and also launch with their marketplace. And on City Chic, we'll put it in other places we see correct see appropriate online as well. Yes. So just I understand that from From the balance sheet perspective, it's very capital light. But just in terms of the P and L, like, is it I don't see it as a big driving block money. It's not there to be the building block is my comment. I don't see it would go backwards, but it's part of a broader strategy to bring them to market. Those 14 stores are actually trading such as our City Chic stores, if that's a more direct question. Okay. Okay. And then with Refinitiv, That's quite a Scandinavian and conservative style. Do you think there's obviously those both brands, both what profinitiv is a sub brand, Avenue and Avenue and Evans are new brands. It's showing there's sort of synergy benefit there? Yes, correct. We will be putting all of those Products as we see fit to get some of the brands out to market physically through DJs and then also through our worded curves on both our website, which will mold into A World Recurve and also the DJ's marketplace and other places we feel are Okay. And just one final one for me. Just on the tax rate, I can see that's gone down, what, 1.3 percentage points year on year, but just in terms of the trajectory moving forward given you've got you'll have a full 12 months of EBIT and And you'll have, Novavie on the books as well? I'm not even taking that one, Madras, that's you. Yes. So look, the tax rates in both the U. S. And the UK Lower than Australia at the moment. And as those businesses grow, the effective tax rate will come down. We expect it to settle somewhere above 25% to 30%. Okay. Thank you very much. I'll jump back in the queue. Thanks, Mani. Thanks, Mani. Our next question today comes from Waseem Kisarwani with Jordan. Please go ahead. Yes. Good morning, guys. Phil, can I just ask about your comments regarding Avenue.com? I think you described the results as Exciting. Can you elaborate perhaps on some of the indicators that you're seeing in customer behavior and engagement And kind of what's working really well and how you assess that avenue opportunity now Versus when you first bought that business? Yes. I think the learnings for us, I'll give a bit of background on that. When obviously the world hit a hurdle last year, we decided to move all of our warehouse to one place very quickly Because Avenue is obviously bigger than CC at the time, we at that stage had to very much keep the separate sort of Brands and put a little bit of CC on and try out how it's worked. The way that customer has taken to the CC product Is what is exciting to me. And the next thing, and I said it in my speech then, we've also not just beaten pre pandemic levels with The CC is the building block to get there, but the Avenue branded product has beaten what it was doing a few years ago. I think with our increase in assortment and our increase in Range and improvements, I'll say, in what they were doing, we've been able to drive better results through the And then second Question from me just on some of the growth initiatives. Obviously, you're well capitalized at the moment and you've talked to Inorganic and organic growth opportunities. Can you elaborate on some of those organic opportunities And then in terms of M and A, can you comment on the availability of flight deep targets That that you're that you're looking at at the moment? Yeah. Look, I'll talk to organic and then rush and talk to the inorganic. I think, If I go by region like I did the U. S, I think we've really just begun with a bit of air and space and I'm very excited As to what that can throw as inventory normalizes, we get more product into market than we did this time last year because I didn't say to Naveen, the first half in America has Black Friday, which is their biggest trading period, right? And last year, given all of the Confusion and delay that happened at the beginning of 2020, we weren't stopped the way we'd like to be. We're ready for it this year. And I'm really excited. That's probably the first and biggest organic block. I think the next one is bringing our conservative value stream to Australia. As I've just mentioned through to Marni or whoever else asked that question, I think that's probably very exciting. Then you've got Maximizing the Evans, bringing her the full product range. I think there's 3,000 products up there now. So there's a lot more range. We haven't gotten to her yet. And the Barbie hasn't got one of their garments yet. So if you look at those four key areas, there's strong levels of organic growth for a period. Then we've got Middle East and Canada as our trials so that we can be sure that once that there's something else boiling in the background. So, yes, really confident in organic. And I'll throw to you, Minraj, for the inorganic. Yes. Look, I mean, it was only a month ago that we were talking to market about the new acquisition of Navabi. So the focus right now is absolutely on integrating that business, getting that restocked, Setting up the team with our operating structures, a lot of that has already been executed in the last month, but that's the focus So now, look our approach to inorganic, it isn't an aggressive acquisition strategy. The strategy is the strategy and we see inorganic as a way to accelerate that strategy. And so our approach is, and we're lucky that the plus size market is quite a small market in terms of the prominent Players in each of the regions that we would do business. We know them. We're talking to them And about trade, about trends and if there is an acquisition opportunity in those discussions then We'll be ready to execute. But look, right now, the focus is on betting down Navarre. And we're in the conversations we need to be is the comment. Good stuff. Thanks, Scott. Pardon me. Your next question comes from James Casey with Ordman Net. Please go ahead. Good morning, James. I jumped on the call late, so my apologies. But I just wanted to check with The entry into the conservative segment, I'm just interested why you chose 2 brands instead of 1. And I can't see it in the presentation. Is there a plan to put stores on the ground in either of those brands? James, my take on that is you're looking at it wrong. A brand to me is a segment of product within a market. And I think what I've seen through the customer globally is that they are looking for different lifestyles and different choices all in one place. So I think the old school, the brand has got to open up a shop, right, and I've got to get that Thinking is not in my head. The brand is about what is the segment of product that a customer likes and how can I deliver that to market most efficiently? While we were all talking, I know I shouldn't be looking, but I got the best sellers from WaterCurve's products in Australia today, and they're the same as they were in America. The taste levels are very, very similar globally. So I don't look at a brand like I've got to open a shop called Evans or a shop called Avenue. I look at these are a segment of the market that I can deliver through a global or physical storefront to offer her the choice that she has shown me she wants around the world Would be my comment to that. Okay. So no stores planned at this stage in We have 14 DJ stores. Yes. Concessions, right? I'm we're we will go with the customer. I think that's part of what I said about being flexible and Standing, James. You've got to, you know, you've got to move with what she says. If if this is where it goes, that's what we'll do. There's no plans to open in this half, I can say definitively, right? But after that, to me, stores are 20% of our business now, James. And the assortment in King County stores is materially less than the 2, 3000 of that product mix I can measure online and through our marketplaces globally. To me, getting this product across both UK, EU and now Australian eyes is the store rollout of the future Where you're getting it to customers in a different way where they can shop in one place, this breadth of assortment that really drives conversion and Perfect. And that's how I see it playing out. Okay. Thanks, Phil. No worries, mate. And you seem to cut the operator off, James. Thanks, And our next question today comes from Alex Yao with Kebalser Management. Please. Phil and Manoj, congratulations on the strong results. I have a few questions. One is on fulfillment costs. It seems that it's kind of like 16% of e commerce revenue roughly speaking for fiscal 2021. So I'm just curious on the order or parcel level, how much is human cost as a percentage of quarter value for instance. And the reason I ask that is, I've seen other e commerce players have their own warehouses and start getting into trouble in the sense of their warehouse are reaching overcapacity and Kind of the logistic cost is kind of like inching up. So I'm just curious like how are you able to Keep the logistic cost in control because you've had a phase both long lag Yes. Look, I'll answer the strategy questions and I'll give Manraj on the cost world. To me, we're very good at making dresses and understanding that Discussion that James and I had about delivering different segments of products to market. We don't own any warehouse Facilities around the world at this stage, we are all 3rd party. For that reason, I'm aware of what we and the company are very strong at And we focus on that. I'll throw to you, Manoj, around the costs. Yes, sure. Look, it's different by region that the way we are charged for those services On a per unit level or per activity level. So, yes, I think and I can always Come back to you with all the detail by region, but it is different by region. And the service prop in toll, We have a fully automated facility with extremely good SLAs. In the U. S, it's more of a manual facility And the U. K. As well. So hopefully without going into the detail of every region, we are charged By activity and it's a fully variable cost. And do you see that? And that also Sorry, that also gives us the flexibility. Someone who specializes in warehouse is a lot more like is a lot Faster to flex up and flex down flex up hopefully never down with us as we grow. And we've set those expectations with our partners. Got it. And do you see that in recent discussions, do you see that shipping cost kind of trending up even more or it's kind of at least stable at the current level? The shipping part of it is there was an increase in the first half where there was a lot of bottlenecks in the U. S. That has since abated and it's back to more normal levels As the U. S. Returned to more normality, there is still a small surcharge that FedEx is charging us in the U. S, But it's quite immaterial compared to the big surcharges out charging in the first half at the height of the pandemic. I see. So what's the sorry to another question I guess that I have is that I think During COVID, kind of everyone moved upsize 1 or 2. So there's some kind of non plus size brands that start offering more Selections around the edge kind of like the size 14 or 16. Do you see kind of more competition around that range? Look, that's a yes, look, that's a I don't think COVID has driven that. I think that has been something that's started over many, Many years, many people have done it. Prior to COVID, you had J. Jill, you had LOFT, you had Anthropologie, you had Urban Outfitters all do it before then. Most of them have dropped it in that time. I think in my almost 15, 16 years experience in this market, There's always been people trying to get it. Forever New Curve did it, and it was everyone wanted to talk to me about it 18 months ago. Today, they have less than a 100 products on their website. Right? So it is not yet like I'm very aware of it, And I follow and look at what everyone does in order to make sure I'm aware of the choice for our lady. I put her first. I want to know where else she can look. I'm not going to say it's not something we aren't aware of. I don't think COVID induced this is probably my overarching comment. Those market conditions have played out for many, many years and we've been able to find growth in that period either way. And thank you. Our next question today comes from John Heinb at Wilson. Please go ahead. Hi, good morning. Phil and Manraj, thanks for taking my question. I just probably after some more color on the smaller parts of the business, the marketplace and wholesale. Phil, I'm interested on how you see that those 2 channels looking in 3 to 5 years. Wholesale, obviously flat half on half and down year on year for the half. Marketplace is starting to show some improvement. What can that channel look like going forward? Yes, John, that's a good pickup. Look, I've said to you guys For years that we had profitable marketing in the U. S. With our partners, where we are really looking at that differently. I see it morphing predominantly to a marketplace model because I think that is the way she shops. I think that is the way, Yeah. And that, hence, the water curves in Australia. I want to own the marketplace if we can. But I really see the marketplace as the future there, John, not the wholesale. There'll be a little bit. There's some people like your Stitch Fix, you know, who are who are only wholesale, so we'll have a bit. The partner business and what's their name? Al Shire in the Middle East. Excuse me. Well, there'll be bits, But I do see a lot of the marketplace being the focus, and I see it as sort of not decreative at an earnings level. I don't see it as Massively accredited to our percentages, but I do see we can get the growth of our margins over time as we get with partners All around the world who already have those eyes. Thanks. So you're saying that wholesale is At the end of the day, it's a little bit of a drag. Is it a drag at the same level we see revenue? Like is it a $2,400,000 drag every year? And When you say drag when you say drag, John, mate? Sorry. What do you mean? On on on costs, is it a is it does it fall down as a cost? No. No. There's no cost to it. It would have the same EBIT earnings as we do it overall, both of them would, but they're not You obviously have less gross margin, but I'm leveraging other couple of people in the sales division that's selling product all around the world. I've really repositioned that to become a marketplace division where we're trying to structure the partners of 1 or 2 pools of stock in the market so that we can Leverage our entire range to get a much more choice. In wholesale, like, Zorando bought 12 items from us a month, maybe 15 if we're lucky. Now we produce a lot more than that, and I believe getting that across the market will drive our revenue. And the way to do that is offering the marketplace because I never buy into all of our assortment, yet we are prepared to do it. And if we can then leverage that to other marketplaces as well as now outside, you know, Navarre gives us a foothold And with the volume basically to get all of our assortment in there and then we can leverage that to partners in Europe, do the same with the UK In Evans and obviously it's a well tried policy in the U. S. I think what you're seeing year on year is very hard. All wholesale, we dropped $9,000,000 And what was growing, I think Nordstrom's came back in April. I I held tight to get a better deal Because I wanted it to be profitable even though we could have probably gone live October, November last year. I wanted to make sure it was future Where I saw it in the future, I'm not going to take it to make a lot more money, but at least not earnings decreed. So that's why you've seen it not Come back as fast as it otherwise could have. I want to set it up for future. Sure. Thanks. And just one more, just perhaps Silly question, but the DJ's revenue that will from this concession stores that will fold into Australian stores, it won't go into wholesale, will it? No. That'll be stores because we'll own the stock because the concession, We'll staff them. We will it's a concession time. So Yeah. As I yes. But look, they're not going to be a big that's not a big block In my mind, it's there to help our market expansion. I think it'll be great for DJs. They're the natural partner, and I want to give them a plug too and say they've been great throughout this, The vision from Bridget and the fashion team to for their plus customer to bring them that width of assortment really, really like thinking. I think it will really ramp up their digital, our digital partnership as well as the stores. Thanks very much. And once again congratulations on a good result. Thank you. And we have a follow-up from James Casey at Ord Minnick, please go ahead. Hi, guys. Just one follow-up. Just in your outlook commentary, just A and Z top line sales were in line with the PCP. So I suspect online is picking up the slack from the closed stores. Can you just give me an idea how many stores Closed in Victoria and New South Wales at the moment. Yes, sorry. Yes, sure. Just over 10 in New South Wales And 'nineteen, 'twenty in Victoria. Thank you. There are no further questions at this time. I'd like to hand the call back to Mr. Ryan for closing remarks. Thank you, everyone. There's no doubt the current situation in Australia is Playing on my mind as it is everyone's a lot. We are lucky we have that globally diversified revenue streams where people are at different levels of the pandemic Across different countries and different stages of their recovery. The rates in current stores that are open have given me Confidence that when this does bounce back, it will do what it did last year. Let's just hope the stores can get open soon. It has been another great year, and I'd like Thank you to all our shareholders and to all our team. And I look forward to many more. And thank you for your support.