Thank you. Excuse me. Thank you for joining us, as always, thanks for your interest in the business. As normal, we'll talk through the presentation, then allow time for questions. I'll now turn directly to slide 4, the group model. Most of you, most of you will be familiar with this slide, just a few key call-outs. You know our two brands, JB Hi-Fi and The Good Guys, along with their different category leadership positions. Our channels to market, we have a diverse mix, including stores, online, commercial, phone, and live chat, all to ensure we can cater for the different, different customer shopping needs. Our target customer base for JB is generally younger, looking for the must-have latest tech. For The Good Guys, this target customer, while being home-making families, is generally those looking to replace broken appliances.
For both brands, this has shown to be very much less discretionary in nature. Our value proposition is even more relevant in today's environment. This proposition of great value and low prices has been earned over many years via a consistent and always-on promotional activity. The model is underpinned by 4 key competitive advantages, which I'll detail in the coming slide. Over to page 5, or slide 5. You'll be familiar with our competitive advantages, but worth reinforcing. With our scale, number 1 in the Australian consumer electronics and home appliances market, a large, engaged, and diversified customer base across the 2 brands provides suppliers with the ability to execute promotions and new product launches at scale. Younger customer base drives ongoing branding products to suppliers to maximize the sales of new technology and innovation.
Our high value volume website traffic provides significant opportunities to engage with shoppers and provides additional sales opportunities. Our low cost, we have a constant focus on productivity and minimizing unnecessary expenditure. Highly productive floor space with high sales per square meter, and efficiency of the model allows us to respond to market price activity and remain focused on market share, and compete effectively with traditional competitors and new market entrants. To multi-channel. Our multi-channel capability focus on providing the customer with an integrated and frictional shopping experience regardless of their chosen sales channel. Customers can choose how they wish to shop with us, giving them the ultimate choice. Fast fulfillment via in-store shopping, click and collect, or delivery from our store network, including our on-demand delivery via Uber or our home delivery center.
Confidence when buying, with security of knowing after-sales support via any channel. A national commercial business supporting corporate, government, and education customers. Our final competitive advantage there, people and our unique culture. Knowledgeable and passionate team members who put customers first and provide exceptional customer service. Dynamic and flexible environment allows us to pivot the business quickly and adapt to any changing market conditions, and highly engaged teams who have a connection with the business, and a diverse and inclusive workforce. Over the page, and to slide 6, we remain focused on generating long-term sustainable growth for the business and having a positive impact on our people, community, and environment, and have today released our FY23 sustainability report.
Some of our FY23 achievements are: with people, continue to improve the gender mix, gender diversity across the group, with an increase in the number of women in leadership positions. Expanded our Speak Up program by delivering interactive workshops to stores and support office people leaders, to build a greater understanding of their roles in creating a safe, respectful, and inclusive culture. Ongoing focus on safety, including mental health and wellbeing training programs. For our communities, FY23 workplace giving donations totaling AUD 3.9 million and AUD 35.9 million since inception. The Good Guys' Doing Good program received the Best Innovation Award, and the JB Hi-Fi's Helping Hand program, partnership with Sleep, Sleep Bus, received the Silver Award for the most innovative charity-employer partnership.
We engaged with an additional 107 suppliers regarding the impact of modern slavery on our supply chain. For our environment, a 9.6% decrease in scopes one and two, scope one and two emissions, supported by the installation of solar panel generation in 9 stores in FY23, bringing the total number of stores to 24, as the group works towards net zero direct carbon emissions by 2030. We had a 12% decrease in plastic bag usage, with plastic bags to be phased out nationally and replaced with a 100% recycled paper bags. Improved our recycling infrastructure across the store networks.... including dedicated cardboard, paper, soft plastic recycle bins, and expanded polystyrene recycling, and introduced a customer trade-in offer to ensure old devices following refurbishment are given a second life. Now turning to slide 7.
We'll talk through, we'll talk through this in more detail as we move through the presentation, we are pleased to report record sales and earnings per share growth for FY23. In, in this challenging retail environment, we remain top of mind for shoppers and grew our market share by continuing to drive our value offering, leveraging the strength of our multi-channel offer, and maintaining our high levels of customer service. Turning to slide 8, with the individual brand performance. I'll take this as read, as we'll cover in greater detail as we move through the presentation. Now turning to the divisional performance, starting with JB Hi-Fi Australia on slide 10. I'll also take this summary slide as read, as we'll be covering in greater detail over in the coming slides. Turn to slide 11.
For JB Hi-Fi sales results, total sales increased 5.6% to AUD 6.55 billion, with comparable sales up 4.8%. As compared to pre-COVID FY19, total sales were up 38.5%. Hardware and services sales were up 5.8%, with comparables up 4.9%. The key growth categories were communications, which was another very strong year, largely driven by the strong Apple iPhone 13 launch in the first half, with growth in both units and ASP. Audio, with growth across headphones and soundbars. Our airport stores are important to audio growth, and the increase in passenger numbers across our airports assisted this category. Accessories had a solid year with growth across all major product groups.
Games hardware, we had strong growth with good availability of next-gen consoles driving the result, and services category, which are very pleasing, with a strong result in areas such as installation and telco services. It is a great category and a good opportunity for us, and one that will continue to grow into FY24 and beyond. Software sales were up 2.4%, with comparables up 1.9%, driven by the growth in game software and music category, which is partially offset by decline in the movies category. Software represented 4.5% of total sales. Online sales declined by 20.9% to AUD 940 million, or 14.4% of total sales, as shoppers returned to stores. However, as compared to pre-COVID FY19, online sales were up just over 264%.
On to slide 12, and the JB Hi-Fi earnings result. Gross profit increased by 6.7% to AUD 1.48 billion, with gross profit margin up 23 basis points to 22.6%, driven by positive sales mix. Cost of doing business was 12.1%, up 68 basis points. However, cost of doing percentage remains below pre-COVID FY19. Depreciation increased by 1.8%, with an increase in depreciation in right-of-use assets, partially offset by decline in depreciation on fixed assets. EBIT was up 1.3% to AUD 551.9 million, with EBIT margin down 36 basis points to 8.4%. As compared to pre-COVID FY19, EBIT remains strong. Now on to New Zealand, on slide 14.
Again, as Australia, I'll take the summary, summary slide as read, as will be detailed in, in greater, greater detail as we move through. On to slide 15. JB Hi-Fi New Zealand, FY23 sales. Total sales increased by 11.3% to NZD 292.1 million, with comparable sales up the same as compared to pre-COVID FY19, total sales were up 23.6%. Hardware and services sales were up 11%. The key growth categories were communication, audio, games hardware, fitness, and accessories. Software sales were up 14.5%, software representing 7.6% of total sales. Online sales declined by 25.7% to NZD 32.1 million, or 11% of total sales.
As compared to pre-COVID FY19, online sales were up 141.9%. Turning to slide 16, earnings for JB Hi-Fi New Zealand. Gross profit increased by 2.4% to NZD 46.7 million, with gross margin down 140 basis points to 16%, driven by price competitiveness in key categories and a negative sales mix. Cost of doing business was 14.2%, up 142 basis points. Rema- remained below pre-COVID FY19. EBITDA was NZD 5.3 million, down 56.3%. EBIT was down 49.9% to NZD 4.4 million, with EBIT margin down 185 basis points to 1.5%.
Underlying EBIT, excluding the impact of impairments in the current and prior year, was down NZD 6.9 million and down on pre-COVID FY19 EBIT. Now turning to The Good Guys on slide 18. Again, I'll take this slide as read, as we'll cover in greater detail as we move through. Over to slide 19. For The Good Guys, total sales increased 0.8% to AUD 2.81 billion, with comparable sales up the same. As compared to pre-COVID FY19, total sales were up 31%. The key growth categories were refrigeration, with strong growth across both bottom out, side-by-side, and French door models. Laundry, with solid growth in large capacity washers and heat pump dryers. Floor care, with growth across stick vacs, robot, and barrel vacuum cleaners.
Personal care, with strong growth in hairstyling led by the premium brands, and audio, with an increase in headphones, speakers, and home, home theater systems. Online sales declined by 14.1% to just over AUD 341 million, or 12.1% of total sales. As compared to pre-COVID FY19, online sales were up 160.5%. Over to slide 20, with earnings. Gross, gross profit was AUD 658.4 million, with gross profit margin up 11 basis points to 23.4%, driven by a positive sales mix. Cost of Doing Business was 12.8%, up 104 basis points. Cost of Doing Business remained below pre-COVID FY19, driven by continued disciplined cost control.
Depreciation grew by 5%, with an increase in both depreciation on right-of-use assets and depreciation on fixed assets. EBIT was down 11.8% to AUD 213 million, with EBIT margin down 108 basis points to 7.6%. However, remaining strong against pre-COVID FY19 levels. I'll now hand over to Nick to talk through the balance sheet and cash flow.
Thanks, Terry. Starting on slide 22, the balance sheet and inventory. As we have always done, we continue to manage inventory tightly and in line with sales. Inventory was AUD 1.84 billion, down 8% or AUD 94 million year-on-year. As compared to FY19, inventory was up 17% versus sales growth of almost 36% over the same period. The resulting inventory turnover was down 5 basis points to 6.8 times, but up 58 basis points on FY19. Payables moved largely in line with the movement in inventory, so they were down 8% or AUD 61 million year-on-year. As a result, as you can see in the bottom of that table, overall networking capital was largely consistent year-on-year. Turning to slide 23, the highlights on the cash flow statement.
Operating cash flows and operating cash conversion continue to be very strong. CapEx was circa AUD 72 million, up 24.8% or AUD 14 million year-over-year, with investment in our store portfolio, online, and strategic initiatives. We closed with net cash of AUD 127.5 million. On slide 24, capital management. We today declared a final dividend of AUD 1.15 per share, fully franked, which is down AUD 0.38 per share or 24.8% on the final dividend last year. As compared to FY19, the final dividend is up AUD 0.64 per share or 125.5%. The total dividend for FY23 was AUD 3.12 per share, down AUD 0.04 per share or 1.3% on last year and representing 65% of NPAT.
Again, as compared to FY19, the total dividend was up AUD 1.70 per share or almost 120%. The record date for the final dividend is the 25th of August, with payments to be made on the 8th of September. We do continue to maintain a strong balance sheet. We're closing net cash of AUD 127.5 million at 30 June. The board will continue to regularly review the group's capital structure with a focus on maximizing returns to shareholders and maintaining our balance sheet strength and flexibility. I'll hand back to Terry.
Thanks, Nick. Moving to slide 26, the FY24 trading update. July sales update for the period 1st of July to the 31st of July 2023, total sales for JB Hi-Fi Australia was -1.9%, with comparable sales growth of -2.9%. As compared to pre-COVID FY19, total sales growth was 38.7%. Total sales growth for JB New Zealand was up 10% with comparable growth the same as compared to pre-COVID FY19. Total sales growth was 27.9%. Total sales growth for The Good Guys was -12%, with comparables being the same as compared to pre-COVID FY19, total sales growth was 22%. July sales are in line with the group's expectations, cycling the elevated period from last year.
While total sales continue to be well above pre-COVID, July FY19, we are seeing increased variability in category performance. We'll now move to a few slides just on the group focus area, focus areas, starting on slide 28. Firstly, our retail execution. Our retail execution continues to be vital, especially in these tougher trading environments. We need to ensure we continue to deliver our value or low price proposition and capture those shoppers who may be trading down and seeking better value. We will focus on growing our market share by attracting new customers to the brand. To do this, we need to stay focused on The first one, delivering value to our customers. That's a constant focus for us. We need to we'll continue to leverage our low price and discount heritage, which we are trusted for.
Utilize our scale and supplier relationships to continue to create best-in-market offers and promotions, to ensure we can appeal to those customers looking for best value or low price. Use our breadth of range, brands, and price points to give customers a choice to trade up or down. Leverage our unique, entertaining in-store experience with our knowledgeable team members who can educate and engage shoppers. Finally, stay focused on constantly proving our great value to shoppers, using our significant reach via our, via in-store, online, social media, press, or TV, to constantly reinforce the value we can give to shoppers. The second part of the retail, execution is to leverage the efficiency of the model. Retailers are facing cost pressures, and we have a culture of managing our costs tightly.
We will look to continue to maximize our low-cost culture with a focus on minimizing unnecessary expenditure while balancing the longer-term needs of the business. We'll leverage our scale and productivity to manage costs. Wage productivity will always be a focus, but again, we'll balance this with the longer-term needs to maintain our trusted service levels. Benefit from our diverse product categories, brands, and store locations with well-managed stock positions, with high stock turn and low weeks cover. We constantly manage stock in line with sales and promotions to maintain efficiency of our stock in hand. A flexible business model with the ability to respond quickly to changes in the consumer, the customer environment. We have a track record of being able to flex when necessary, and this will be important over the coming financial year.
Over the page to multi-channel, on 29, expanding our reach and attract more shoppers to the brand. Again, as shoppers hunt for value, we need to ensure we are easy and convenient to access. We're focused on in-store experience and engagement with constant category and store layout evolution. Remaining relevant to shoppers by encouraging visitation to explore will derive future purchasing opportunities. We had 5 new JB Hi-Fi stores, JB Hi-Fi Australia stores open in FY23, with additional new store opportunities in Australia and New Zealand in FY24. Our significant web traffic can be further leveraged to drive additional sales opportunity. We'll focus on improving customer conversion and online spend. We are always evolving our delivery options to provide a greater choice and convenience to shoppers.
We launched the national launch of JB Hi-Fi Perks membership program for JB Hi-Fi Australia, with around 820,000 engaged customers joining the program since its launch in November 2022. The Good Guys continue to utilize the Gold Service Extras membership program, which currently have 1.2 billion active members, and expand our reach and convenience to our customers. We'll continue to implement We'll implement, I should say, personalized promotional campaigns using our substantial customer membership data. We have added the addition of online chat, The Good Guys online price beat, and utilize the JBTV and Good Guys Facebook pages. Over the page, our third focus opportunity, which is New Zealand, will continue to grow and expand the business.
We've refreshed our store network to deliver an improved in-store customer shopping experience and engagement. 7 existing store relays completed in FY23, and the relocation of stores at Queen Street and Hamilton in early FY24. Increased focus on the retail execution is delivering strong market share gains. Actively identifying potential new store opportunity to expand our reach. We're targeting 3-5 new stores per year over the next 3 years. We are also evolving our multi-channel offer, the re-platforming of JB Hi-Fi New Zealand website to Shopify in FY24, and developing commercial sales channel. We've invested in key hires to strengthen the local capabilities and support the growth, and continue to focus on learning and development for our team members. Over the page to 31, commercial.
We've spoken about this in the past, but we continue to evolve the brand to align with our key market segments, JB Hi-Fi Business, JB Hi-Fi Education, and The Good Guys Commercial. Tapping growth in small to medium-sized business sectors. We offer a national proposition in a fragmented market. We're leveraging the group's retail proposition of best brands, big range, and low prices, as well as the group's store network, supply chain, and marketing capabilities. Augmenting this by access to extended business ranges, value-added services, and expert teams to support business and education providers. We'll continue to invest in our sales team, continue investment in e-commerce program, integrating legacy platforms, and enabling self-service transactions, expansion of our product range, integration, product range, integration with supplier catalogs, improved stock availability, and fast quotations.
Fast online fulfillment, order tracking, and integration with store click and collect. Finally, over to our 5th focus area: continue to invest in our group supply chain, ensuring we continue to deliver better customer offers and experiences. We are highly focused on customer delivery solutions. The continued growth of JB Hi-Fi, Australia's on-demand delivery service, in partnership with Uber, with an average delivery time of under 60 minutes, with a launch of Uber in The Good Guys in FY24. Also launched improved delivery options for The Good Guys customers, focusing on increased certainty, transparency, and choice. Newcastle home delivery center opened, and Brisbane relocated to a larger facility in the second half of FY23.
Perth to relocate to a larger facility in FY24, and continue to review the supply chain network to ensure it remains fit for purpose, evolves with our multi-channel strategy, and continues to improve the customer experience. In closing out the presentation, I'll just turn to slide 34 and our investment checklist. I'm sure everyone knows this by now, so I won't cover in detail. However, I guess as always, just a few comments that are especially relevant in, in the current retail environment. We have unique and relevant brands that have a trusted proposition of great value pricing, which means we remain very relevant to our existing customers and can also appeal to those who may be new to the brand and looking for great value in today's tougher retail environment.
Our flexible business model, not only do we have a history of category growth and development, but also have demonstrated the business' ability to adapt to changing market conditions. With our diverse categories, for JB, that is many, many of them are highly desirable and less discretionary, as they are so important in our, in our target customers' lives. Our Good Guys home appliance business is skewed largely towards the replacer customer, but the value offers will also appeal to those looking to trade down in today's market. With our scale, we'll continue to leverage to deliver the best-in-class promotions.
The final one to call out is the experienced management team, who have been through these tougher retail environments before and understand how to manage through this while continuing to think longer term to ensure we emerge as a much stronger business. Thanks again for your interest, and we can now go to questions.
Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Tom Kierath with Barrenjoey. Please go ahead.
Morning, guys. Just a question on the cost growth. I think in the second half, it was kind of 8%-9%. Firstly, is there anything unusual in those numbers? Then secondly, how are you kind of thinking about that into 2024? Obviously, there's a few pressures out there on costs across the retail space. Thanks.
Yeah. Cost growth, as you are, as you're well aware, the largest cost in our business is wages, and our staff are on the, the general retail award. You've got those award increases washing through, through FY23, and obviously, they will come through effective from 1 July 20 24 as well. That, that's an element of the cost growth. You've also got, and particularly Good Guys, some increased energy costs coming through in the second half. You know, Good Guys stores are pretty big stores to heat and to cool, so that, that's an element of it.
It's a little bit tricky to see these days the way rent is accounted for, but you do have rental agreements, sort of circa 50% across the group of stores. The group stores do have sort of CPI-linked rental agreements. You've got those rental agreements.
That's right.
I don't think, I don't think it's unusual, Tom. I think it's all the things we expected, but we, you know, we do acknowledge a lot of that, those costs are elevated at the moment, and that is, you know, that is obviously something we need to manage closely going forward.
Yep. Yep. Thanks. Thanks, Nick. Just on The Good Guys, I think from memory, you'd said that you thought that gross margins would settle kind of 100-150 bps higher than pre-COVID, just on the structural changes you've, you put through. Like, does that still hold? I mean, you're kind of up about 300 bps now on, on pre-COVID. Just trying to get a sense of, yeah, what, what structural changes might have happened since you made that statement.
No, look, we still feel that's going to be the case, you know, especially in the environment where, you know, a lot more discounting is returning to the market. That's consistent with what we've been saying over the last 3 years.
We anticipated it would settle back, back down, sort of between that 19 and, you know, the, the 23 mark. Yeah, look, we remain. We still believe that's, that's where it will settle.
Yeah. Cool. All right. Thanks, guys. Appreciate it.
The next question comes from David Errington with Bank of America. Please go ahead.
Morning, Terry. Morning, Nick. Terry, Nick, can you go into a bit of detail with regard to... You, you say, Terry, you know, this current retail environment, but your sales numbers still look very tidy. Is that volumes holding up, or are you starting to see pricing-- yeah, in other words, volumes holding up, but pricing's coming off? Or is the pricing not coming off as quickly as what we might be thinking? Can you go into a bit of detail as to what's happening across both JB and The Good Guys, particularly with what's happening with volumes and what's happening with pricing? Because it looks to me like, particularly JB Australia, you know, your sales are still very strong.
Yeah, look, it was a little bit different between, you know, what we saw last year in July, but only, only slightly. If we, if we just address how that may look for, you know, for, for the FY23 sort of figure there, JB was up in, in volume and, and flat on the ASP. The Good Guys were slightly down on volume, but up on ASP, a little bit different. Being up on the ASP was, was a bit of mix. I think more importantly with July, you know, so obviously, you know, it's, it's, it's a little bit harder, but JB was, was down slightly on volume, but up on ASP. Again, that's, that's mainly due to the ASP being up is mainly due to sales mix.
It's gonna be, things like stronger, you know, gaming consoles during that period, for example. Where The Good Guys was down on their volume and slightly up on their ASP, again, more due to sales mix, and that is the mix, a higher mix of the home appliances categories, relative to, to, to the CE categories.
Nothing untoward, Terry. I mean, things are holding up pretty well by the sounds of it so far. I mean, so far, so good. Consumers are still out there spending. Is that, that's, that's still relevant?
Well, yeah, I mean, as you can see by the, the figures, I mean, The Good Guys, you know, was down. I mean, we are, you know, still up on an FY19 basis strongly, and, and, you know, we are cycling at, at such an unusual period last year. Yeah, look, it was within our expectations as combined. You know, we would've thought The Good Guys was down a little bit more than we'd hoped, but that was really a function of some weather-related events that we were also cycling that had a, had an impact on sales. Yeah.
look, I come back to the fact that we're a, you know, we're a value retailer, we're a discount retailer, and that's, you know, that will be resonating much more strongly in today's market, with customers. If they're considering buying, then we're definitely gonna be on their shopping list.
Great. Following up, the second question I've got, Terry and Nick, is the second half, I mean, the, the gross margin in JB is bouncing around like a ping pong ball. I think the first half was up 108 basis points. The second half was down 70 basis points. Can you just, I mean, it just seems to be that's just, we haven't had much clean air, I suppose, with COVID. Is it the best way to look at the gross margin on an annual basis rather than a half on half? Because, you know, there's some people in the market thinking, "Oh, the second half momentum is weak." Is, is that, is that not the right way to look at it?
Is it better, you know, is it just to look at the full year, gross margin as opposed to the movements into half?
Yeah, I think it is, David. Like we, we always said, the thing in JB that impacts, the biggest impact on gross margin is the sales mix. it does It does bounce around a bit depending on the mix in a half. I think if you look at the absolute numbers, look, I appreciate it's down in the second half, but it was a, it was cycling a big gross margin, the year before. I think, you know, I think it was still 23.3% in the second half, and I think we said, you know, pretty consistently, we, we think JB, that's where gross margin typically runs around that low 22%. I think, yeah, it does bounce around a bit by half based on sales mix, but I think you just look through it and go, you know, consistency around that 22% level is how we've always thought about it.
Boy, you're looking at--
Well, thanks, Terry. Thanks, Nick.
Your next question comes from Michael Simotas with Jefferies. Please go ahead.
Good morning, guys. Can I follow up a little bit on gross margin, and maybe we can talk about JB Hi-Fi Australia and The Good Guys separately. Is the underlying trend on a category-by-category basis pretty consistent, or was there a little bit of decline starting to come through? There's been a lot of promotion out there, but obviously, it's hard for us to tell how much you guys are funding versus how much suppliers are funding. Any sort of color on that would be very helpful.
From our perspective, categories are all pretty consistent. I keep coming back to, I know it sounds like it's, you know, I say it a lot, but it is. Mix is the biggest, the biggest impact on gross margin. It is very promotional at the moment, but it is still largely supplier funded. I think we're doing a good job of working with suppliers on executing those promotions. We would say, you know, the stock availability challenges that we had over the last few years have definitely normalized, and suppliers have stock that they are looking to move, and so we are working with those suppliers to create offers to move it. Acknowledge it's promotional. Aren't seeing significant variability in categories, but mix definitely still impacting.
Okay. Is that, is that the case for The Good Guys as well?
Yes. Yes.
Okay. All right, then a, a somewhat related question around market share. It's good to get It's hard to get a good read on industry trends, but it looks like you guys have taken share, especially in JB Hi-Fi Australia, acknowledging that the category mix is, is different. Are you seeing any response out there from competitors to try to stem that market share loss?
Well, yeah, look, we, we, we definitely, the, you know, as stock is returning to normal, it's getting a bit tougher out there, then, yeah, we, we are seeing, you know, individual retailers ramp up that promotional activity. You know, to Nick's point, a lot of that is supplier funded. However, there is a little bit of they're going out on their own to, to fund, promotions. You know, it, it's, you know, it's not, not really. You know, it's a market we're used to competing in anyway. I mean, this is really sort of getting back to what it was probably pre-COVID, in, in that respect.
Okay. Thanks very much, and well done, guys.
Your next question comes from Ben Gilbert with Jarden. Please go ahead.
Morning, guys. Just, Nick, could you just help us have a think about just the, the delta of the cost increases, sort of all else equal for next year, and how much flex you have to do things like adjust staffing at a store level back, if sales were to be weak? Because obviously, you guys have done such a great job around CODB, just to talk to them in the lakes. Like, all else equal, do you envision sort of CODB up, what, sort of circa 5%, then you'd try to do a bit of work around to adjust that to sales?
Yes, it can be transparently more than that. Like, if you work through, award wage increase, that's from July 1, that's 5.75%. You've got another 0.25% of super. There's some payroll tax and WorkCover increases in Victoria. There is, there is cost growth there. We do have, you know, deliberately, we do have flexibility in our, in the way we roster, so we do try and maintain a level of sort of flex in, in the rostering. But as Terry called out, and, and we can go there, and we've demonstrated previously, we, you know, we can, we can manage that to sales, but in the current environment, we want to make sure that when people come into the store, they get a good experience, and they get service.
We just need to be very mindful of, of making sure we don't cut too hard into hours. That would ultimately, longer term, damage the business. We're managing it closely. I think we've got a good track record of doing it, but no doubt there is some, you know, pretty material increases coming through in, yeah, full FY24.
Simplistically, and obviously, we're sort of all looking out for it, I know you guys don't give guidance, the second half FY23, your costs are up to 9.2%, and your sales are down about sort of 0.5%. Is that a 10% difference between your costs versus your sales? Your costs are obviously stepping up more into FY24. Should we be thinking about thinking on that sort of delta, or should we make out some assumptions around costs are up 6%, you might be able to take 1% off, and then make margins around revenue?
I'll, I'll wait for you to come up with that one, Ben.
I thought that might be the response. Maybe just the, the second one for me is just around staff productivity. You sort of talked to the fact, which is helpful, that you, you still, you're saying so still a decent amount of co-funded promotions. What's happening to staff productivity at the moment? It obviously looks like people are coming into stores more broadly, cross-retail, the conversion rates are down, the shuttering out more for bargain, et cetera. How are you seeing sort of store conversions, and then also, are you having to offer more discounts in stores, people haggle a little bit harder with the staffing, just think about that with the price promotion?
Yeah, when it comes to conversion, conversion, we don't measure it in a great detail in, in JB, in, in the sense of door counters, et cetera. We do a select number of stores. To do that. The Good Guys, we, we do it across. The Good Guys has, has maintained its conversion rate. You know, that's, that's the one we can confidently speak about. JB, very similar. It's not a- We're not seeing any conversion challenges as far as that is concerned. You know, that second part about customers coming in, there is a, you know, discounting on the floor has definitely increased. I mean, that's, that's, that's what we are seeing. We've always called that out.
As stock got back to the hope for back into all the channel, then we would start to see that, and that's what we are seeing now. Discounting has increased on a on-floor basis. Again, you know, that's, that's an environment we're used to. It's getting back to sort of how we may have thought about it in FY19, just being competitive on the floor.
Fantastic. Thanks, guys, appreciate it.
The next question comes from Lisa Deng with Goldman Sachs. Please go ahead.
Hi, thank you. I've got 2 questions. The first one is around inventory. We mentioned that, you know, the suppliers are looking to get rid of inventory. We're working to, with them to get through it, but our inventory days still look pretty lean. I think on average, we're looking at 53 days for the year. How are we thinking about that going forward? What, and what does it mean, I guess, in terms of, you know, when we restock potentially, on the gross profit margin? Thanks.
Look, from our perspective, it's no change to how we manage inventory. You know, we're still, we're still managing it to when I call it out in the presentation, I call it out as sort of backward sales growth. We're still managing it to forward sales, forward weeks cover. We'll continue to do that. We want to make sure we have the flexibility that if there is opportunities to, to buy stock, that we have the capacity to do it. From our side, no difference to how we've always done it, Lisa. We're very comfortable with where our position is today.
Okay, comfortable at current levels. The second question relates to, the lease assets, like the right of use assets. It seems that we've had a large addition, this year, and just wondering why and how does it impact potentially the occupancy costs, going forward as well? Thanks.
It's just, the right of use asset, it is just timing of when we're signing leases. We are just renewing. It's just obviously, there's a few new stores in there, about 5 new stores in JB, it's renewal of, of leases that is adding to that. It shouldn't, you know, it, it is obviously the What I called out earlier, the CPI increases will impact the depreciation and the interest, but the actual additions themselves, I, I suppose it does bring forward a little bit of the expense, but shouldn't be that material.
Okay. A large part of that increase year on year is more like the number of leases that were renewed versus rate of increase. Is that right?
Yes. Yes, that's right.
Yes.
A lot of renewals in there.
Got it.
Yep.
Had a lot of renewals. Okay, got it. Thank you.
The next question comes from James Wang with Citi. Please go ahead.
Morning, morning, Terry. Morning, Nick. My, my question is around The Good Guys. Just want to understand the profile for that trading update. Could you provide some comments on the exit sales run rate for that July period and whether that's weaker than the 12% reported? How's the inventory at The Good Guys positioned in terms of the category as sales weaken? Let's assume... Written sales. That-
Yeah, that, I'd say Look, James, it's one month ago. I don't run rate through a month. It's, you know, there is obviously-
I assume you're referring to the written sale versus the delivered sale. Is that correct? Is that you're saying...?
Well, it, the, I guess just the 12% reported in that, in that July period. Like, if, if we say, okay, well, looking through the, through the period, is the towards the, towards the end of the period, is that weaker than the average or that, that you reported?
No, look, it was, it was reasonably consistent along during the month, so, no, there was nothing there that sort of said it was, it was necessarily deteriorating during that time. It was more in line, you know, week to week with what was going on with things like the weather events versus last year. That's, that's the reality of it, you know, with the varied, you know, we've got a lot of wet weather in Queensland, New South Wales, and Vic last year, so it had more to do with the timing of, of, of that coming through. As far as the stock, the stocks, you know, the, the stocks, you know, continues to be well managed in that business. There is no, you know, we're not concerned about the stock levels in there.
Again, because we have that ability to flex quickly, you know, if we have got a little bit of extra, we just slow down the ordering, you know, during this month to make sure that we rectify that.
I've got, I'll just call out, I know it's -12 on the one year, but I think it, it is important to anchor back to that FY19 number. You see it, you know, 22% up on FY19, and it's pretty consistent with what we had in Q3. From our side, we haven't seen a significant change.
Okay, great. Thanks, guys.
The next question comes from Shaun Cousins with UBS. Please go ahead.
Thanks, good morning, guys. Maybe just a question, just further on July. You've spoken in the results regarding the second half of FY23 on category performance. Can you just maybe call out some of the categories that are doing better for JB Australia that don't seem to be helping The Good Guys, where they may have a lesser representation there, and then also maybe some of the categories that are contributing to some of the sluggishness on The Good Guys there? Just, I guess this question is particularly with reference to your comment on the volatility and, pardon me, the variability in category performance, please.
Yeah, yeah, with JB, you know, it continues to be those products that we've, we've referenced in the past about feeling like a little bit less discretionary, and mobile phones continue to be, to be solid in, in JB during that time. Relative to The Good Guys, computers was, was better than, than The Good Guys. I think you could anticipate that. So it was really that tech, and there was some, still some, some continuation of some gaming that came into the good, the good JB results, sorry. So that was really the driver there.
If you go to the weakness in The Good Guys, just to come back to some of the things I've called out, if you think of the HA categories, the real weakness came out of laundry, which was, which was driven by the, you know, the wet weather last year, cycling the wet weather last year on a one-year basis, and seasonal, which is the heating sales, was, was down. Then overall, it's CE was down more than obviously JB was. It's not necessarily top of mind on the for consumers with the CE categories.
Great. Maybe just two very quick questions. You've, you've highlighted market share gains. Did you achieve that across JB Australia, JB New Zealand, and The Good Guys across all three brands divisions, please?
We're thinking of the brands independently there. Nothing. New Zealand, it had its market share gains. I mean, that's, you can see that from just the sales results we've, so far, we've seen reported in New Zealand. We're definitely seeing some good results there. JB continued to perform extremely well, and The Good Guys, with the HA categories, performed well.
Gotcha. Finally, just around CapEx. Nick, can you maybe, you know, your CapEx is up some just under 25% for FY23. Store rollout is sort of ramping up in New Zealand, you know. But can you maybe sort of provide some indication of where we should think about CapEx going forward? Should it be flattish, or should it actually step up a wee bit again in FY24, please?
Yeah, it will step up again in 2024. To your point, we've got new stores coming in New Zealand, so we didn't open any new stores in 2023. You've got, calling it out, 5 stores to open in 2024 in New Zealand. We've still got new stores to open in Australia as well, so we sort of expect to open a similar number of stores in Australia in FY 24 as we did in FY 23. Yeah, an, an extra step up, I suppose, largely driven by New Zealand into 2024, Shaun.
Great. Thanks so much. Thanks, Nick. Thanks, Terry.
The next question comes from Bryan Raymond with JPMorgan . Please go ahead.
Thanks, guys. Just my first one's actually following on from Sean's around, around the CapEx, particularly around the store network. What sort of longer-term opportunities do you see in terms of store network? You've had very little in Good Guys and starting to ramp up in New Zealand, and now Australia's accelerating a bit. With online having stabilized in that low-teen range for most of the businesses, how do you think about investment in bricks and mortar from here? Is that something that you see more of a medium-term runway, or is that more just like an FY24 view? How much should we extrapolate that beyond 24 into the thinking about the network expansion? Thanks.
Oh, you know, I think you'll see that just what we've done over the last few years, probably just be fairly consistent. You know, when I think of JB Australia, we're in, you know, just about all the major shopping locations. There is a little bit of regional growth there that we think there is an opportunity to do. As we continue to see suburbs expand out, that'll, that'll open up, you know, a few opportunities. You know, not it, it hasn't changed our thinking now that online has stabilized, because we always believed that the store network was vital regardless of the online. That's JB.
JB New Zealand, you've, you've, you know, we've got a lot of growth opportunity there, and you've heard of that three to five a year mark that you'll see over at least the next three years. Then with The Good Guys, you know, we do see some growth opportunities, but that's more Northern Beaches, Sydney, you know, where it's really landlocked. It's, it's all gonna come down to finding the right property, you know, for that business. You know, it's not gonna, you're not gonna see a real substantial, well, we haven't done many, so it's hard to say a substantial ramp up, but you won't see a, a great deal of stores being rolled out with The Good Guys.
Okay, that's, that's helpful. Thanks. Then just on the, on the loyalty side, seeing some good growth there in member numbers for Perks and Gold Service. Like, can you help us understand sort of how meaningful that is as a percentage of sales basis, like, what's that able to do for you in terms of customer insights, maybe ranging, you know, ways you can utilize that in terms of suppliers with, with, you know, extracting terms out of them, like, what's, what's the sort of the end game around loyalty, and, and how is it helping you?
Yeah, I think if, if you go to the end game, the end game is, you know, if we want to be a, you know, a, a true omni-channel retailer, it's understanding, you know, our, our customer's transactions, regardless online or in store, and then being able to utilize that data into the future, to mine that data, so to speak, to be able to then work with suppliers to have some really highly personalized and targeted offers to go to those customers. Not only will they potentially get deals above and beyond, like they might get early access to, to Black Friday promotions, they'll, they'll be able to get that, but they'll get these really highly targeted promotions into the future.
Right. Are you happy to share sort of whether it's a material part of your sales mix at the moment in terms of the program?
No, look, I mean, we have a large engaged database of something like about 9 odd million customers who asked to receive emails from us. So that, that is a very engaged database. So we use that constantly to promote and just keep updated with what's new, what's hot at both brands. So that's a meaningful part of sales. This next layer, which is the concierge and or the Gold Service Extras, I should say, and Perks, is all about getting, starting to mine deep into that customer's purchasing and purchasing habits, what they purchase, so that we can work with suppliers to be a lot more targeted in the promotional activities that are really relevant to that individual in that program.
Okay, great. Thanks, boss.
The next question comes from Alexander Mees with Morgans Financial. Please go ahead.
Thanks very much. good morning, gentlemen. Just a couple from me. Just with regard to online sales, I think you talked about a stabilization of online sales post that normalization following lockdown. I'm just wondering if we should expect positive growth in online sales as a percentage of overall revenue in FY24?
I think FY24, you might find that it's probably a little bit more stable, but no doubt, over time, online will continue to, will continue to grow as a proportion of overall sales. You know, I struggle to see it being, you know, a real significant part of sales. The reason I say that is because, you know, consumers in Australia are, are, are so well-versed on the fact that you go into store, and you can negotiate a deal. You know, that access to, to that in-store environment is very easy for consumers as well. You know, consumers still will want to go in store to, to negotiate a deal.
You know, I think you'll see FY24, it probably just remains stable, might grow up, a little bit, and then just slowly grow over the, over the coming years. You know, I struggle to see it really, changing meaningfully over the next 3 or 4 years, 3 to 5 years.
That's helpful. Thank you. Just secondly, just wondering what's changed in New Zealand to give you the confidence to, to increase the pace of store rollout the way that you've indicated?
simply the, you know, we've, we've got now the, the management talent over there, talent and passion to, to be able to do this.
Simple as that. Great. Just finally, if I can, just with regard to, the cost of doing business percentage to sales, I think you refer in the divisions to, to that ratio being below FY19. The charts show it on a statutory basis, so obviously pre AASB 16. I'm just wondering, for clarity, if the cost of doing business to sales is below 19 on a, on a like-to-like basis?
Yeah, it is. It is. We never published that number, so we didn't put it in, but yes, it's still on a like to like basis in each of the brands. It's still below FY19.
That makes sense. Thanks, mate.
Your next question comes from Craig Woolford with MST Marquee. Please go ahead.
Morning, Terry and Nick. just the first question, you've obviously flagged the challenge you're dealing with wage costs, and then you've alluded to the rental cost impact. If I hear it correctly, you've got 50% of your leases are tied to CPI, and if so, is that partially offset when you do rental renewals, that you're getting some negative leasing spread, or, or should we be thinking about that coming through to, to that, to that extent, given the CPI-linked leases?
Yeah. On the CPI, you're right. Yeah, it's about 50% in JB Australia. It's actually a bit more in Good Guys, more of that is CPI linked. Yes, you know, that's absolutely how we think about it, is if those CPI increases get-
... ahead of what we think is the market rate, then yeah, absolutely, we'll be looking to, looking for maybe straight on renewal. The beauty is we do have, you know, a pretty short lease term or weighted average lease expiry, so that we can face into those challenges when we get there.
Got it. Okay. Then just with regards to the performance in market share, do you feel in, in this, particularly the January to June period just gone, do you, do you feel the company's market share gains can be retained? Or are there some factors where you've, you know, JB Hi-Fi and The Good Guys have managed inventory better than competitors in the period just gone that may reverse in some future period?
No, I, I don't think there's, I don't think there's anything that, anything that we did differently during the period other than we're just constantly, you know, it, it's just, we just, we have we're known for value, and I think that's something we've done all during COVID. You know, we were constantly out there advertising promotions, deals, and just staying top of mind for people, on the fact that they can get a great deal at either JB or The Good Guys. You know, when it start, when it, you know, the market started to tighten up, pretty confident we saw customers flow to us, but we're trading down a little bit.
Right. You don't cause there, there has been some supplier perspective that would suggest that you had a better in-stock position of the fresh and, and new inventory. You obviously able to engage 'cause you weren't dealing with an excess inventory position, so.
Yeah, I think that, yeah. I think, you know, when you think about that, it was probably over, the, the computer category would've been the main one that, that, that flowed through.
Good. Thanks, Terry.
The next question comes from Ross Curran with Macquarie. Please go ahead.
Hi, team. just a quick question around your outlook on wages, particularly into Christmas. the, the market's expecting consumer to continue to slow into the end of the year. I'm just wondering, how much flex do you have around hours worked, trading hours around stores, casual workforce into Christmas that might help you manage some of that, that wage bill over, over the next six months?
coming into the, that, that peak trading period, we obviously ramp up our casuals significantly. I guess, you know, we'll do that based on what the, the sales volumes we think are looking like. I guess if, you know, that's, that's a time that we can have a little bit more flex, you know, with the business. Casuals, you know, represent about 30 odd % of our headcount. So, you know, that's something that I guess that gives you a bit of an indication of, of the quantum there. However, I'll still bring it back to the fact that we've just got to make sure we maintain customer service. You know, we will, we will roster to ensure that we're maintaining that customer service. You know, that's, that's, that's gonna be our absolute key.
We do have, we do have some flex. I would also think, though, that coming into the, coming into that period of Black Friday and, and Boxing Day, we're, we're, we're pretty optimistic around that period based on the fact that, you know, consumers are really hunting for value and seem to be waiting for promotional periods. You know, if any, you know, with some of the things we've seen with some of our promotions, that really resonate well. You know, it's gonna be an interesting time, going forward to see just how that Black Friday and Boxing Day play out.
Thanks. Then, and then just finally, just in relation to New Zealand and the write-down that you took in FY20 around that business. As, as you reinvest in the business, as you relocate stores, should we expect, you know, those rent costs to come back on the P&L?
Yes. Yes, we will.
Look, we're trying to be pretty transparent with that. That's why we do present that underlying EBIT on that slide, to show you what it would be if the rent costs were on that P&L.
Great. Thank you.
Think we've just got two more people who have unanswered questions, so we'll just take those two questions and wrap up.
All right. Your next question comes from Phil Kimber with Evans and Partners. Please go ahead.
Hey, guys. I'll just, I'll just keep it to one question, sorry to harp on about it. It's on the cost line. You do provide at the group level a, an expense breakdown, there's sales and marketing, every half for the last few years, it's sort of grown 9% or 10%. Similar in the second half this year, it was nearly 11%, the obviously the sales were a lot weaker. I just wanted to understand that flex issue a little bit better. Are you managing... I mean, one, in that period where, you know, it was pretty volatile, it's hard to, hard to know which way things were going. You know, did you sort of take a conservative view and keep the service levels up?
Then as a second question, when you say you manage to sales, are you mainly managing to volume? So therefore, you know, we need to think about, you know, you know, if, if we do move into, say, more price deflation, we shouldn't assume that labor will flex down as much because, you know, you're actually managing to volume, not nominal sales.
No, we manage to dollars, probably not, you know, the most technically correct way, but we do manage to dollars.
Okay.
That last bit.
Yep. Sorry, then the first bit, was there, you know, a reason why the, the sales and marketing line, which is largely employees, you know, grew nearly 11% in the second half, and, and yet sales were down? Was that, was that a, a case of just, you know, holding back because the environment was volatile? Or is it just harder to flex, you know, that labor cost down to sales? I guess that's the bit I was trying to explore, because it's quite a big difference between, you know, sales going backwards and sales and marketing costs going up 11% in the second half.
Yeah, I, I, I must admit, you'll wind up, let's have it. I've only got that sort of growing 9% in the second half, and sort of 12% in the first half, 9% in the second half, so I'll have to check it. No, look, it's, you know, to Terry's point, that line is predominantly wages, where it's, you know, most of our marketing is supplier funded, so that line is predominantly wages. We are, as Terry said, just managing it as a % to sales. Again, when I look at that, I, you know, it's, it's messy, obviously, first half, second half, so we just keep anchoring back to looking at how that compares with FY19. As a % of sales, our wages are still running well where they were in FY19, and even in that second half.
Okay. All right, thank you.
Your last question comes from Mark Wade with CLSA. Please go ahead.
Hey, guys. thanks for the opportunity to ask a question. What would it take, if anything, to, to get sales back to pre-COVID levels? With that in mind, around the, you know, just that sheer volume of the install base being so much bigger, are you starting to see any benefit from that?
Are you saying what level of decline we need to see to get back to 2019?
No, I just, I just meant more like what kind of general kind of market conditions would give rise to seeing sales back at pre-COVID levels? Like, is that theoretically possible, or is it just, we're just so far above, and we've just moved on in the world, partly because of, you know, some of the work from home trends and how much more install base you've got in the, in the, in the consumers' households?
Yeah, look, I think it's definitely a hard one. I mean, if I maybe just, you know, when I think about something, a business like The Good Guys, it's just such a better business than it was back in FY19 as well. I mean, it's, you know, it's just got a far better mix of premium, premium products, both products and suppliers, brands in the store. It's much more efficient model in there. You know, it's just a much better business than it was back then. You know, I'd like to think that, you know, if it ever wants to get back to 19, it's outperforming the rest of the market, getting back to 19, if that makes sense.
Yes.
Look, you know, just think, you know, the categories that, that JB got and how important they are, to your point, with the working from home. You know, our phone sales are significantly up over that period, too, and that means a bigger install base, which means a much more larger opportunity to see a replacement, of those customers. Those customers understand we've got it, they have trust in us. You know, I think there's a lot of positives that come out of the last, last few years, that should mean structurally there is some benefit there to us.
Yeah, and I think you guys have, you know, run the business really well, and you'll be there to capture it, so all the best. Thanks so much.
Thank you.
There are no further questions at this time. On our handbag for closing remarks.
No, I just want to say thank you again for everyone for, for their time today on the call and look forward to speaking with, I'm sure many of you, over the coming days. Thank you.