Thank you for standing by, and welcome to the Lovisa Holdings Limited Fiscal 2019 Full Year Results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Shane Fallscheer, Managing Director. Please go ahead.
Good morning, everyone, and thanks for taking the time to dial in. On the call today you have myself, Shane Fallscheer, Managing Director, and Chris Lauder, our CFO. As you're aware, we published our full year results for the ASX this morning, and we would like to talk you through those results. I will now do a page turn through the presentation, and we're happy to take any questions at the end. If we now turn to page four, we will talk through some of the detail. We've had a solid result in a more difficult trading period than we've experienced in recent times, with EBIT up 2.8% to AUD 52.5 million. Total sales were up 15.3% as a result of the continued new store rollout, with same-store sales more challenging at 0.5% negative like-for-like.
It was pleasing that we were able to return to positive comps in the second half to improve on the -1.8% like-for-like store sales we did in the first half. Our gross margin increased to 80.5% as a result of the benefits of the higher USD hedge rates continuing through the period, combined with disciplined inventory management. We continued our global rollout strategy with a net 64 store openings, with U.S. rollout gaining momentum, with 18 stores opened during the financial year and stores trading in California, Texas, and Florida during the financial year.
We continue to invest in the structure of the business to support our global growth profile as we roll out new territories, including investment into our global operational structure, as well as the upfront investment into e-commerce, which we launched into the Australian and New Zealand markets in October 2018 and the UK in July 2019. Pleasingly, cash flow from operations was again strong, rising 10.1% to AUD 66.7 million for the year, with operating cash conversion of 107%. With that, the board have declared a fully franked final dividend of AUD 0.15, being a lift of AUD 0.01 on prior year and taking the full-year dividend to AUD 0.33, a AUD 0.06 increase on the prior year. We turn to the financial overview on page five. As I noted earlier, revenue for the year was up 15.3%, with comparable store sales down 0.5%.
Just to talk to that for a moment. Whilst we're generally happy with our execution on meeting our customers' product needs, we've not seen the same major trends in the fashion jewelry sector as we have seen in recent years. That said, we are happy that we've been able to deliver strong growth from new stores and are well-positioned to react and to deliver whatever trends prevail in the market. We were also pleased that we were able to deliver positive comparable store sales for the second half. We've continued to make important investments in both people and process to drive the growth of the store network and to support what is an increasingly globalized business, which when combined with negative comp sales growth, has resulted in CODB % being higher than the year prior.
The new store rollout and significant increase in CapEx during the year resulted in a 38% increase in the depreciation, which impacted on earnings, with EBIT increasing 2.8% to AUD 52.5 million, with earnings of AUD 0.351 per share. If we turn to page six, we've spoken to the sales increase of 15.3% to AUD 250.3 million and the factors behind it. This chart shows the progression in the company's sales over the past five years. It's very pleasing to be able to present a sales growth chart showing such a consistent increase. Importantly, we've remained focused during the year on preserving our strong growth margins and have not chased sales at the expense of margins.
On page seven, you will see that we've had growth in total sales across most regions with the exception of Asia, which was impacted by net four store closures in Singapore, offsetting another solid year for Malaysia. While still delivering top-line growth in the Australian and New Zealand market, Australia in particular was impacted by generally softer trading conditions in the first half. As this market has historically outperformed over a number of years, it has led to a result of negative comps for the year. Pleasingly, we were able to deliver positive comparable store sales for this region in the second half. The growth in the European and U.S. markets accelerated in this period, with 14 new stores in the U.K., nine stores now trading in Spain, 18 in France, and 19 in the U.S.
South Africa again performed well, with sales up 9.6% for the period, aided by both comp sales growth and the benefit of additional stores opening in that period. Turning to page eight, gross profit of AUD 201.4 million was up 16% at an 80.5% margin, a 50-basis-point improvement from last year as we continued to benefit from the tail end of higher USD hedge rates in this period. We've maintained our focus on margins rather than chasing sales. We continued focus on inventory management and promotional effectiveness, resulting in a small improvement in margins on a constant currency basis in spite of the more challenging trading conditions. While we've been able to deliver strong growth margins, as you can see from the chart on the right-hand side of the page, we are a fashion business, and therefore our margins can experience some degree of volatility.
If we turn to page nine, we'll talk to our cost of doing business. As we've said previously, we've continued to reinvest into the growth trajectory of our business, which has put pressure on our CODB percentage throughout the year. We've invested in our senior executive team to ensure we have capability to execute and grow in new markets. Invested for the future in the relocation of our Asian logistics function from Hong Kong to China, and have also had the impact of the launch of e-commerce in Australia, New Zealand, and the U.K. The rollout of stores in new regions has also had an impact on CODB, with opening costs higher than normal store wages through the opening period have an impact of overall cost of operating in newer markets. We expect these newer markets to operate at a slightly higher CODB than our more mature markets.
Remain focused on delivering efficiencies in these markets to manage this. We continue to invest ahead of the growth curve to lay the foundations for future growth while still remaining focused on keeping tight control of the underlying cost structure of the business. I'll now hand you over to Chris Lauder, our CFO, to talk through cash flow and the balance sheet.
Shane. Turning to page 10, you will see that the company's cash flow was again strong, with cash from operations before interest and tax of AUD 66.7 million, supported by operating cash conversion at 107% as we continue to manage our working capital well in the face of the ongoing investment into fitting out new stores. Capital expenditure for the year was AUD 24.1 million, predominantly from new store fit-outs and refurbishments on existing stores upon lease renewal. Overall, this represents an AUD 8.9 million increase on the prior year as we build scale and grow the store network in new markets.
Cash dividends in the period were AUD 12 million higher than the prior year at AUD 33.8 million as a result of a decision to distribute surplus cash to shareholders over the past 18 months, leaving us with a net cash outflow for the period of AUD 10 million and closing cash on hand of AUD 11 million. Turning to the balance sheet on page 11, you can see that our balance sheet remains strong and reflects the significant investment made during the year into the store rollout. Our inventories are up from the same time last year, growing in line with the new store rollout, increased franchise stores, e-commerce, and in preparation for coming store openings with disciplined inventory management an important part of our business model.
As with June 2018, we finished the period with net cash, significant headroom in our covenants, and AUD 25 million of financing facilities available to fund the future growth of the business, which has all combined to allow us to maintain the increased final dividend level from the prior year and increase it slightly in line with the growth in profit at AUD 0.15 per share. As we continue the store rollout in our growth territories, we will continue to assess on an ongoing basis the cash flow requirements of the store opening schedule and make future decisions on both dividends and capital structure of the business as required, reminding everyone that we do not target a specific dividend payout ratio. I'll now hand back to Shane.
Thanks, Chris. If we turn to page 12, a quick update on store numbers. Lovisa finished the year with 390 stores trading, with a net 64 stores opening during the period, which compromises 17 new stores opened and six stores closed, as well as 12 relocations as we continually optimize the store network. We now have 61% of the store network outside of Australia. The U.K. store rollout has continued, with 14 new stores added in the region for the period to take the total to 38 stores. However, momentum slowed in the second half, with only two new stores opening. The rollouts in the U.S. and France continued, with eight stores now trading in France and 19 in the U.S. across California, Texas, and Florida, and a strong pipeline of new stores on the way.
As we have said previously, sourcing quality sites is key, and we will take a measured and diligent approach to moving forward in any new market we enter. As we enter larger new markets, a key learning has been to get leasing people on the ground in those markets right from the start to build a pipeline of sites as quickly as possible. We are pleased that now we have these resources in place, we have been able to drive more momentum in store rollout through this financial year. Turning to page 13, I will now talk in more detail in relation to the U.S. market. As I mentioned earlier, we were trading from 19 stores in the U.S. at the end of the financial year, with 12 stores in California, five in Texas, and two in Florida.
We have now opened a further nine stores in the U.S. since year-end, including our first store in Chicago, Illinois. Results to date indicate that the Lovisa offer is resonating with our American customer. Operating costs in this market have been higher than some of our other markets so far, in particular new store build costs, we are happy with the progress and outcomes to date in the U.S., even though the expansion is putting some upward pressure on our overall CODB and depreciation. We obviously see the U.S. as a significant opportunity and continue to invest in the structures to support this. The eventual size and timing of the store rollout is dependent, as always, on being able to deliver quality stores that meet our internal criteria rather than hitting ambitious store number targets. Turning now to page 14, I will talk to the European market.
At financial year-end, we were trading from 38 stores in the U.K., eight in France, and nine in Spain. Whilst we have managed to open 14 stores in the U.K. during the financial year, only two of these were in the second half. In relation to Spain, we are currently trading from nine stores, with one store opened in the second half as we focus on operational improvement in this market. As we discussed at the half year, our performance in this region has been inconsistent to date, and as a result, we have elected to slow any further store opening until we can deliver on the key metrics required to expand in this market. As a result, we will continue to take a cautious approach to taking on any new sites in Spain, and we'll continue to focus on the stores we're already trading in.
In relation to France, we continue to be pleased with the performance of the stores we opened to date and are focused on sourcing appropriate sites for growth market. We have a leasing manager in place in France to support the growth of this market. Again, we will not sacrifice quality of stores or our operating metrics to deliver on the store number target. As with the U.S., our experience in this market to date has been that operating costs have been higher than our average and the store roll-outs slower than we are used to. Turning to page 15. Operationally, we continue to focus on improving the structure of the business and the way each department operates to best support our growth strategies.
Some key areas we've invested in during the period are supply chain and IT systems, including we have moved our third-party logistics hub from Hong Kong to China to find economies in the picking and packing of orders and to be closer to our suppliers. We've changed our logistics provider in order to deliver a more efficient supply chain. We've upgraded our in-store point-of-sale hardware and software to ensure we can cater for the global languages and integrated EPOS in all regions. We've changed our global store labor management and rostering system to ensure that we can effectively manage the growing workforce we have across our 9 company-owned territories and again in 3 different languages. We've replaced our finance system to ensure our back-end processes are able to keep pace with our store rollout.
In addition to the projects I've just noted, we launched the lovisa.com e-commerce website in October 2018 in the Australian New Zealand market and lovisa.co.uk into the U.K. in July of 2019. We continue to refine our omni-channel operating model before launching to other markets. We've also continued to invest in our operational structure with the appointment in November 2018 of a number of important senior roles, including Chief Operating Officer, leaders in the U.S. and European and African businesses. Each of these appointments bring with them significant long-term retail experience in quality global companies and are already adding a lot of value. We also made investments in regional store management and support functions in our growth markets. On page 16, we'll talk to the trading outlook for the new financial year.
Trading since the end of the financial year has been a continuation of the improvement seen in the second half, with positive comparable store sales for the period back within our target comparable store sales range of 3%-5%. As noted at the half year, currency headwinds have begun to have an impact and will continue to do so through FY20, as our average USD hedge rate is expected to fall below $0.70. We continue our focus on expanding our store network and expect the increase in number of stores in FY20 to be higher than FY19, with 14 net new stores open since the end of FY19, taking the store network now to 404 stores. To deliver this, we'll continue to invest in our support structures, in particular in the U.S.A. to support store network growth and the larger business.
In summary on page 17, we've achieved an EBIT of AUD 52.5 million for the financial year and 80.5% growth margin, being a solid result given primarily from continued store net store rollout, offset by a decline in comparable store sales of 0.5% for the year, with positive comparable store sales in the second half. We've again been able to deliver increased margins benefiting from the higher USD hedge rates during the period. We've invested in resources to support our global expansion and our disciplined approach to working capital management has resulted in strong cash conversion of 107%. We've opened a net 64 stores and closed the financial year with 390 stores trading across 15 countries and 61% of our stores are now trading outside of Australia, with store rollouts gaining momentum in France and the U.S.
We are pleased to be able to again increase our dividend, taking the final dividend to a fully franked AUD 0.15 per share. With that, thank you for listening and happy to take any questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up your handset to ask your question. Your first question comes from Sam Teeger in Citigroup. Please go ahead.
Good day, Shane. Hi, Chris.
Yeah.
Hey, congrats on the good result, given the tough trading conditions. Appreciate you guys need to invest in overheads to set the business up for growth, but if you can maintain comps in the 3%-5% target range throughout the year, is it realistic that you guys can fund the investment you need to make, but also shareholders can get reasonable profit growth? Just conscious that Shane Fallscheer, some of your incentives have some pretty big growth numbers as well. Is ultimately your question is can we grow profit as well as grow the business for the future? Is that the question? Yeah. I think if you look at this year, given the comps were quite subdued, it was difficult to get significant profit growth.
I guess if you can maintain comps around these 3%-5% range for the whole year, can you fund whatever investment you need to make and also shareholders can get good profit growth? To answer your question, I just want to be clear whether it's profit growth or dividends, and I'll get Chris to talk how we view dividends. We're confident that we've dialed in the heads to continue to grow our business. Obviously, hopefully, pleasingly, people are going to see that the expansion in France and the U.S. is probably ahead of where we thought we'd be, and with that comes the continuation of dialing in the structure behind the scenes to keep that growing. We're hitting our internal metrics in the U.S. and France.
However, we are finding that it's more expensive to operate in the mature markets as opposed to some of the more developing markets that we've enjoyed our growth in the last nearly 10 years now. We're focused on continuing to grow our business, dial in the infrastructure required to make sure that we have a stable platform of growth, reminding everyone that we've done this numerous times around the world. Then, of course, the flow-on effect will be driving our sales. As you touched on, when we're delivering flat comps, when everything, rents, et cetera, are going up, it's fair to say it's more challenging to provide the profit growth that we'd all be looking for. We'd like to think if we're delivering in the range of like-for-like growth that we've talked to, that that's going to fall through to the bottom end.
Got it. Makes sense. In terms of Spain, do you feel better or worse about the prospects for this market now compared to how you felt at the half year results?
It's a good question. We're probably feeling a bit better. At the same time, we're still not where we need to be, and we've always opened me to the market that there's no one lever to pull, otherwise we would have pulled it. We're focused on that market. Our European manager, James Shepherd, that used to run Swarovski in Europe, is now based in London, putting further focus. We're seeing improvement from where we were. Really, our next step is really get through Christmas, trade Christmas. European summer was good for us. From our point of view, it's a case of get through Christmas and then have another look at where we're tracking in that market.
Got it. Last question. Is the company continuing to research new markets for potential entry? What's the potential for Lovisa to launch new pilots in new countries over the next couple of years?
Yeah, it's a good question. The answer is yes, we're always looking. The way I would look at it is I'd be surprised if you saw another pilot program in the short term. Short term definition being probably next 6 months, but I'd also be surprised if somewhere between 6 months and 24 months, I'd be very surprised if we weren't having other pilot programs in the market. At the moment, our key focus, as you can see with the store numbers, especially in America, with even with the amount of stores we've opened since July 30, our focus really there at the moment. The macro focus of the business is to deliver great outcomes in France and the U.S., rather than go and look at anything else. At the same time, we're doing our research on other markets.
Got it. Sounds exciting. Thanks very much.
Thank you.
Your next question comes from Sean Week at Macquarie Group. Please go ahead.
Morning, guys. Yeah, thanks for taking the questions. Just the first one, probably ask one of Sam's questions a bit of a different way. How should we be thinking about CODB leverage and incremental cost investment in FY20? Will costs be growing in line with revenue, or would you expect to potentially see some leverage?
Yeah. Hey, Sean. Chris here. I think the best way to look at it is, don't assume any improvement in that cost during business percentage for FY 2020. For the reasons Shane was just alluding to before, the newer markets are running at a higher operating cost of just trading stores and existing network. Plus, we've got all the cost of actually rolling out the stores, recruiting team before stores open and actually getting the stores up and running. It's making it quite hard to pull that percentage down in the short term as we're rolling out.
If they're growing together with each other, like revenue and expenses, that's not a bad way to think about it?
Yep. That's right.
Yeah. Okay, cool. Just on gross margins, how should we be thinking about the FX headwind into next year? What's the opportunity for price increases providing some sort of offset there?
It's Shane here. I'll talk to the first part of that, and then I'll get Chris to talk to currency. We constantly review each market, each style, and how all of that interacts with each other. It's fair to say that we're constantly looking at price and what we can do to affect price and offset some of those currency things against it. There's probably some small wins for us as we mature in the Europe markets and U.S. and get to know a bit more about the markets. There's probably some slight wins there. At the moment, the way we're looking at it as a business, maintain our margins by strong product management and minimizing markdowns and being disciplined how you take with ranges. Funding all the wins in the business, find ways to increase our margin there.
We are foreseeing that there's going to be a gap between our price increases and the currency decline. I'll just get Chris to talk to that, if that's okay.
Look, mate, the currency decline, it's basically what we've been talking about for a while. It's probably a bit bigger decline than what we talked about at the half year, because as everybody's seen, the dollar's dropped further than from where it was. It's now sitting in that AUD 0.67 range. In the release, we've said that we expect our hedge rate for FY20 to drop below that AUD 0.70 level. At the moment, we're sitting around that mark of that, but the exposure of the second half that we've done unhedged under our hedging policies. Given where the spot rate is, we've seen that drop down below AUD 0.70. Obviously that will have a reasonable impact on margin in the absence of any price impacts.
If you look at the numbers that we've disclosed in the release today, AUD 0.05 or AUD 0.06 of currency decline that we've got to get back, which is about 35 basis points of margin for each AUD 0.01. There's a reasonable impact there coming, which is consistent with what we have been talking about, probably a little bit more than what we said at the half.
Yeah, no, that's helpful. Just final one for me. You've obviously called out expecting to grow store numbers ahead of FY19. How should we think about that in the context of the current run rate? It looks quite strong, 14 stores in six weeks. What's your expectations around, I guess, a 1H versus 2H SKU in the rollout?
Look, I think history is the best way to look at first half, second half splits, and I haven't got those numbers in front of me, to be honest. I think historically, if you look at the way the stores roll through first half, second half, it may change, but if I was having to draw a line to anything, I'd probably point towards that as the best guide I could give you. Reminding everyone that Europe's just been on holidays for 4 to 6 weeks. They don't work too hard through August, which basically slows down any opportunities that they already have in the pipeline. Then you get into the Christmas season, which again sort of delays our ability to sort of activate new deals into January, February, March.
Again, the guidance we've given is that we'll open more stores than we did last year, and that's been consistent over the last three to four years. I think the percentage split first half, second half is the best thing I could point towards.
Great. Thanks very much.
Your next question comes from Josephine Little at Morgans. Please go ahead.
Morning, guys.
Hi, Jo.
Most of my question's been answered, perhaps a little bit more operationally in the U.S. Maybe just a bit more of a feel, Shane, on your experience dealing with the landlords to date. How many you're dealing with? Is it three to five store sizes? Just those store operating costs, are they still running at that almost double the mature markets at AUD 250 to AUD 300?
Yeah, sure. Just to recap, each market, the way the landlord structure works is differently. In the U.S., it's really predominantly, give or take, four landlords that control a large percentage of the shopping centers that we're attracted to be in. As always, there's been early adopters, being landlords that embrace our brand before others. That's been a positive and probably set a standard. We're now getting, as you can see with the numbers that we're rolling through, we're getting some serious traction in getting stores open, and again, the momentum sort of builds from there. I think, Jo, maybe six months ago when we may have spoken, we said we're sort of getting some landlords embracing our concept and others sort of standing off.
It's fair to say that, as you can see with the store numbers rolling through, we're getting closer towards having most of the major landlords embrace our concept. As far as store builds, yes, they're still expensive. They are costing nearly twice as much as they're costing in other markets of the world in order to get those stores built. Got a whole lot of crew working on that and finding ways to find economies there. The reality is, that the cost of building stores in America is higher than the average, hence why it's sort of affecting our depreciation. The positive in all that is we're still hitting our internal triggers and numbers to satisfy our internal business to expand that market. Every market's got its idiosyncrasies, and this one seems to be that, unfortunately, it's more expensive than we'd like to build stores.
Okay. Yep, makes sense. Just given the potential size of the U.S. market, can you give us some kind of feel of how much has been invested in that market outside of stores? Just to give us a bit of feel on that overhead structure or support structure outside of stores.
Yeah. The benefit of having company-owned stores around the world, we sort of probably don't carve out cost per market because there's no real need to. To give you a guide, there's no doubt the support team in Australia has layered up in order to support the market, and then in country, not in stores. If you threw a net over people either running what we call regional managers that are running groups of stores, the territory managers that maybe sort of, at the moment, we've got one on the West Coast, one on the East Coast, and one in the middle. If you threw a net over all of those guys, plus the people in support centers getting the shop built and HR teams, we're probably running at about 15 heads above store management level.
The store managers that are copped into the stores, we've probably got at least 15 heads with an average salary, call it $120 as an average, would be the best guide I could give you off the top of my head.
No, that's great. Thank you. Perhaps just lastly, a further on from Sam's question about new territories without wanting to get ahead of ourselves given what's going on today. I imagine Canada is a natural extension of the American market at some point.
It's an interesting one. It comes up every now and then, and to be totally honest, because it is a different landlord structure, we probably just haven't gone there yet. I would imagine somewhere in the next six months, we'll throw some effort at having a bit of a closer look at Canada. It's fair to say, a bit like Australia and New Zealand, it may be a logical progression, but I wouldn't go out and make that assumption as much as logic would say we'll go and have a good look.
Great. Thanks so much, guys.
The next question comes from Sam Haddad and Bell Potter Securities. Please go ahead.
Good morning, Shane and Chris, and congratulations on the result. My first question is on the U.K. Are you still comfortable with the 100-store target that you've previously published?
We've published that we believe that the density of 100 stores or the capability in the U.K. is 100 stores. How long we take to get there really comes down to which deals come through and how frequent. Yes, we still believe there's an opportunity in the U.K. for 100 stores.
Okay. Just in Malaysia, that seems to be trading very well. You are now at 25 stores versus your target of 20-25. Have you sort of reassessed what that target potential could be in that market, given the population size there is larger than Australia?
The short answer on targets, you may see that we've probably taken targets out of the presentation because if you take Malaysia as an example. Initially, we always thought that Lovisa would trade and trend well in KLCC and the surrounding sort of suburbs. We're now pushing out into regional Malaysia, which are still big, substantial shopping centers. Pleasingly, and again, for those of you that followed our stock from the start, I think when we came to market, South Africa was around 25-30 stores, and we thought the capacity was not far from there. However, we keep pushing ahead. Malaysia is a very strong territory for us, and we sort of keep saying, like, Let's go to the next tranche of stores. Whilst we still get strong returns, we'll keep pushing that out.
Malaysia is not a 100-store market, probably not even a 50-store market. It's a case of keep going until we sort of get the feeling of, well, we're not getting a decent return, but we're not there yet, pleasingly.
Just on fashion trends, you've just had been a strong period of favorable fashion trends, and congratulations on the result, notwithstanding that. What are you seeing looking forward in terms of your visibility?
These things can come from anywhere. We've talked in the past when we've had some very strong years that we've had some tailwinds there from different categories which we've talked about. I think the pleasing thing to correct our result for the year that 0.5% negative like-for-like was really off what we'd call a normalized period without any substantial tailwinds, and we're still in that place. Really for us, from a product perspective, it's just about working with what we've got, getting creative internally. We're not foreseeing as much as we'd love them to come around the corner tomorrow. We're not foreseeing any tailwinds to sort of give the business that extra kick that when we get that kick, we enjoy and that sort of profit fall through.
Okay. That's great. That's helpful. Thank you very much.
Thank you.
Your next question comes from Simon Lu, private investor. Please go ahead.
Hi, guys. Just a quick question here. Obviously, we're expanding in the U.S. Just a question around the U.S. trade war with China. If there's any escalations in the trade war, have you got any sort of plans around mitigants around tariffs or potential banning of importing materials from China?
Look, we keep an eye on that. Our simplistic view is that we'll deal with it if and when, as the rest of the world will. It's fair to say there'll be a lot of people that have to react accordingly if something like that happens. There's only so much you can prepare with the sort of mass media bouncing around with all different sort of connotations of where it's going to land. The short answer is, if something's going to affect us, it's going to affect everyone, and then everyone en masse will have to react accordingly. I'd like to think we're small enough and nimble enough to react faster and get the best outcome we can achieve versus some of the bigger guys in town that probably a bigger beast to move if they have to move.
We're relaxed in so far as we'll keep an eye on things if and when we'll react. We're small enough to react probably faster than most. That's all I can probably say on that point.
Okay. Sure thing. One other question. The same-store sales, is the overall same-store sales, is that localizing in any particular area, or are you seeing a trend more on a global scale?
Look, as I've talked to in the past, it's very rare for us to get any major outliers. It's usually within a reasonably tight cluster of performance from the highest to the lowest, and that's reasonably consistent, being again, reminding everyone that we create and generate our own product. As much as we have differentiation in ranges around the world, the bulk of our ranges go out around the world at the same time. Because the world's become very global in trends as well, so if there's a trend for the good or bad, that washes around the world at the same time. The movement between markets on like-for-like, there isn't a huge amount of variance between the highest and the lowest.
Okay, cool. Thanks, guys.
Thanks.
Your next question comes from Julian Mulcahy in Evans & Partners. Please go ahead.
Hi, guys.
Hi, Julian.
Shane, you mentioned that in the U.S., there's still some landlords that are not quite embracing the system. I recall in the U.K., it took a while for them to get it, and they got it, and then they were throwing stores at you. When do you think that tipping point is reached in the U.S.?
Throwing stores at us" is your words, just to clarify. I think I probably answered that question earlier with Joe. When you enter any new market, you've got probably the believers and you've got the non-believers, and then you've got the people that they're too small to worry about for now. As you gain momentum, produce your results, pay your rents on time, deliver great-looking stores all the way down to delivering great team behind the counter that are adding value to the overall shopping center, then it's fair to say that anyone that's sitting off usually comes to the table.
I'd like to think with the numbers that we've shown you, the fact that we opened another group of stores in the last six weeks, it's fair to say that most of the landlords are starting to come around who we are, what we can deliver to the market. Ideally, add value to the market, add value to the customer base shopping in their mall. We're probably seeing that now after a fair bit of heavy lifting, a lot of meetings, a lot of presentations on who we are and what we bring different to the market.
In the offerings they're putting up, are they still including a bunch of dud sites, or are they giving you a better mix?
Again, your words, not mine. It's fair to say some of the standoff is about the certain centers that we can't afford to go in in order to, as much as we want to expand across the U.S. Just to recap for the other people that may be dialing in. There's a lot of shopping centers in the U.S. We've highlighted the malls that we want to be in as a first round of expansion. Again, part of our discipline is that typically won't take stores in order to get the ones we want. We're not a fan of package deals. Again, Lovisa in the U.S. simply can't afford to take on a center that make much money in case it works for him. If it doesn't work because we can't afford to weigh ourselves down in fees.
The operating platform that then comes to run those stores, if they're not producers, we believe can hinder our growth. The long-winded explanation for that is we're not willing to take some of the smaller stores that the landlords may would like to see us in order to get to the ones that we want to be in to set Lovisa up for growth in the U.S.
Yeah. Just finally, you look at across your markets, some in there are fairly mixed economic conditions, mainly weaker, and you've had no tailwind of a fashion trend. Would it be fair to say that you're pretty much immune from consumer spending because you're basically dealing with kids that probably not necessarily worried about the overall environment?
Yeah, I think the macro trends are always going to affect the retailers en masse. Keeping in mind our average transaction values hovers at around AUD 20 around the world, it's fair to say that going shopping in Lovisa is probably the equivalent of a movie ticket in a lot of markets of the world. Again, our success across places like Malaysia and South Africa as opposed to France and the big developed markets. It's fair to say that our average customer, whether it's a 15-year-old girl or a 45-year-old girl looking to buy some fashion jewelry, then it's fair to say that the market we seem to have found that niche in the disposable income and/or the willingness to spend around the amount of money that I just spoke to isn't probably significant in most of those markets.
Again, if you look at South Africa, we've got around 50 stores in a population of over 6 million. Whereas in Australia, we've got 150 stores in a population of less than half that. It probably shows you where our brand sits in the position of that and who it's going to.
Right. Cool. Thanks, guys.
Your next question comes from Matthew Obera at Environment Capital Management. Please go ahead.
Good morning, Guys. Congratulations on solid progress developing the brand. Just a question on the cash tax expense. Just noticed that that's ticked up a fair bit in relation to the same sort of metrics at FY18. Just wondering, is that just timing issues? Can you just walk us through that?
Yeah. All right, Matthew. Chris here. Yeah, definitely timing issues. Just for balancing payment from the previous year. We had extra tax payments in relation to 2017 that came through in 2018. Sorry, 2018 in relation to 2019. We've basically paid all the tax for 2019 within the financial year. You'll see the tax payable on the balance sheet's pretty low at the end of the financial year. It's just realignment of the timing of payments.
Okay. Should we expect that cadence to pretty much remain the same, do you think, going into the next financial year?
Yeah.
Okay, brilliant. Thank you very much.
Your next question comes from Sam Teeger at Citigroup. Please go ahead.
Good day. Just some very quick follow-ups. Can you just provide a bit more color in terms of what's driven the improvement in the like-for-like in FY 2020 so far? Is it price volume haircuts or something else? To what extent are you seeing like-for-like momentum build each week, particularly as more and more Australian consumers are getting their tax refunds?
Keep in mind, tax refunds are isolated probably to Australia this time of year, and with 60% of our business is not in Australia these days. I'll try and answer your questions best I can. The recovery in like-for-like sometimes just as simple as what we were cycling the year before. From memory, we're cycling tougher numbers first half than second half. Therefore, to recover in the second half, as in the 6-month period just closed, we're cycling easier numbers to cycle over in simple terms. Combination of where did that recovery come from? It's really always going to be a combination of everything. Price, as I said, we're constantly looking for opportunities to increase our price. There'd be some gains there. Volumes have slightly increased as well.
Slight marginal increase in price and volume are giving us the outcomes that we're seeing there. As far as like-for-like growth in the first period, I think we're comfortable to say that we're trading in our range, but we don't want to start giving commentary on week to weeks and whether that's trending up or down over such a short cycle of time.
Sure. Last question, just how many store closures would you anticipate in FY 2020 versus FY 2019?
We give a net number. We've said the net number is going to be larger than last year. As far as store closures, the way to look at our business, if we have an average lease tenure around the world of around five years with 400 stores, that's give or take 80 leases a year that get renegotiated in some way, shape, or form. That's not an exact number. That's just very rough math. We're not looking down the barrel of anything significant. It only takes a few of the negotiations not to go our way.
The thing that we're determined to do is not renew leases that aren't commercially viable for us and if the offer isn't commercial and we don't believe it's a fair and reasonable offer for the site, then our history says that we'll walk away from that site and come back when the rents in line with what we believe it should be for that location. It's a hard question to answer, but again, history is probably the best guide to what will happen in the future.
Okay. Thank you.
There are no further questions at this time. I'll now hand back to Mr. Fallscheer for closing remarks.
Thanks for your time this morning. Conscious you've got a very busy few weeks. Again, I'll look forward to seeing a lot of you over the next few days as we get out and on the road. Thanks again, and talk soon.
That does conclude our conference for today. Thank you for participating. You may now disconnect.