Thank you
all for standing by, and welcome to the Michael Hill Analyst Briefing for the End of Year Results, Webcast and Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I'd now like to hand the conference over to your first speaker, Mr. Daniel Bracken, CEO.
Thank you, Daniel. Please go ahead.
Good morning and thank you for joining us for the Michael Hill International Limited FY 'twenty one full year results call. It is a pleasure to be speaking to you today. I am here this morning with Chief Financial Officer, Andrew Loew. Together, as set out on Slide 3, we will be taking you through a review of the results and providing you with a strategy update. And as usual, we will end with a Q and A session.
Turning to Slide 4. The Board and management are delighted to deliver record financial results. FY 'twenty one has been an outstanding year with all metrics up, a credit to both the execution of our strategic initiatives and the dedication and resilience of our team. These outcomes were delivered while successfully navigating significant disruption from the global pandemic. Half of our Canadian stores were closed for many months, Victorian stores were closed for more than 3 months and multiple short sharp temporary closures were experienced across our global network.
Focused management of our key Indian supply chain meant that the pandemic impacts in India did not significantly disrupt inventory flow and other sourcing regions across Europe and China were relatively unimpacted. And of course throughout the year, always at the forefront of our minds was the prioritizing of the ongoing health, safety and well-being of our team members and our customers. From a results perspective, the business has delivered both strong sales growth and margin expansion in all three markets, further validating the transformation agenda is on track. We continue to focus on enhancing our digital business, which pleasingly exceeded expectations in its outperformance of FY 2020, increasing by 53% and delivering yet another year of record digital sales. Our reinvigorated retail leadership demonstrated their commitment to further embedding our retail fundamentals, which saw increases in all key metrics, ATV, IPS and conversion were all up.
Our Brilliance by Michael Hill loyalty program went from strength to strength now with over 800,000 members. The team also worked tirelessly to roll out additional omnichannel offerings, including ship from store, click and reserve and virtual selling. I'll elaborate further on our progress during the strategy update later in the presentation. It should be noted our transformation agenda touches every single aspect of our business and I couldn't be happier with how the team is working together to deliver common goals as we further strengthen and elevate the Michael Hill brand. This outstanding result is the culmination of over 2 years of hard work building and executing our strategy, and this is best evidenced by 8 quarters of comp sales growth together with sustained margin expansion.
I will now pass to Andrew to provide more detail on the full year results. After that, I will return to deliver an update on our key strategic initiatives along with an outlook commentary.
Thank you, Daniel. Turning now to Slide 5, FY 'twenty one group results. As mentioned by Daniel, given the disruptive trading conditions, we're particularly proud of our full year results. Today, we announced a record statutory net profit after tax of $45,300,000 for the year. Statutory earnings before interest and tax of $72,400,000 represents a significant EBIT of $58,300,000 on prior year, largely driven by improved sales and margin, delivering a $50,700,000 lift in gross profit to $348,900,000 As a result of government mandated lockdowns, the Michael Hill Global Store Network suffered over 10,000 lost store trading days.
Please refer to the slide in the appendix to this presentation for on the lost store trading days throughout the year in each market. Despite the impact of significant lost store trading days due to government mandated lockdowns and some permanent store closures reducing the global store network, the company still saw revenue growth in all markets with total revenue up by 13.1 percent to $556,500,000 as the company continues to elevate and modernize the brand and transform the customer journey. The company has strengthened its balance sheet with a year end net cash position of $72,400,000 prior year $500,000 and nil debt. During the year, the company also entered into a new financing facility jointly funded by ANZ and HSBC. This new $70,000,000 facility is currently undrawn with a term to February 2024.
Furthermore, the company has strategically reviewed its in house Canadian credit program to derisk the balance sheet. The sale of the credit book and partnering with a new credit provider for our Canadian business is nearing conclusion. Through focused management by our merchandise team, the company delivered inventory levels to the targeted range with a holding of $171,200,000 at year end, a reduction of $7,500,000 compared to last year. We continue our unwavering focus on costs right across the business from logistics and repairs to credit arrangements, labor and leasing. This focus has assisted not just to earnings but also cash flow and working The company continued to actively manage its global store network and landlord relationships.
During the year, the company opened 1 new store in Canada and closed 6 underperforming stores, resulting in 2.85 stores at year end. Turning to capital at year end. Turning to capital management. The Board has previously stated its intention to restore dividend payments to historic levels as the pandemic recovery becomes more certain. After taking into consideration sales and margin performance, the strength of the balance sheet and while also recognizing the risk of ongoing trading disruption, the Board has decided to declare a final dividend of AUD0.03 0 per share unfranked, fully imputed with conduit foreign income.
This represents total dividends for the year of AUD0.045 per share and lays the foundation for sustainable dividend profile going forward subject to the impacts of ongoing trading disruptions. Turning now to the next slide on key performance results. Following the FY 2020 global store network shutdown, the company delivered significant same store sales growth across all four quarters of FY 'twenty one. For the year, the group delivered same store sales growth of +8.6 percent with Australia up by 13%, New Zealand by 7.1% and Canada by 6.8%. Gross margin increased by 210 basis points to 62.7% for the group.
These results demonstrate the growth initiatives underpinning the 7 strategic pillars are now firmly embedded in the company. These initiatives have created a sustainable platform for sales growth and margin expansion with the success of our loyalty program, continued penetration of our online business, acceleration of retail and product evolution. Setting aside the accounting impacts of the leasing standard, the one off impact of the Canadian credit book held for sale and government grants received across all three markets, the group delivered comparable EBIT result of $56,600,000 for the year, well up on the prior year comparable EBIT loss of $5,200,000 The company's online business exceeded expectations and significantly outperformed FY 2020, resulting in another year of record digital sales of $34,800,000 Digital sales now represent 6.3% of total sales. Website traffic increased by 35.3% against prior year with an increased volume of customers continuing to utilize our enhanced online platform. The company continued to prioritize product evolution and create uniquely Michael Hill Jewelry.
Branded collections now represent 42.1 percent of total sales for the year against 37.3% for the prior year. Moving on now to our segment results on Slide 7. In Australia, all store revenue increased by 17.1 percent to $312,300,000 This result is a credit to the segment as it saw 3,458 lost store trading days due to various government mandated store closures across the country. Gross margin for the year was 62.2%, a significant improvement on both FY 'nineteen and FY 'twenty. At year end, of the 150 Australian stores, 30 New South Wales and 2 Northern Territory stores were temporarily closed.
Currently, 46 New South Wales, 34 Victoria and 4 ACT stores are temporarily closed due to government mandated lockdowns. In New Zealand, all store revenue increased by 19.1 percent to New Zealand 100 and $27,100,000 This result represents significant outperformance against FY 'seventeen, 'eighteen and 'nineteen. It should also be noted that during the year, 16 Auckland stores were required to temporarily close on 3 separate occasions, resulting in 464 lost store trading days. Gross margin for the year was 62.0%, resulting in the strongest margin in the last 5 years. At year end, all 49 stores were trading.
Currently, those 49 New Zealand stores are temporarily closed due to government mandated lockdowns. In Canada, all store revenue increased by 6.9 percent to Canadian 100 $18,400,000 This segment was heavily impacted by temporary store closures in Eastern Canada with 6,525 lost store trading days for the year. By the start of July 2021, all 86 stores are open and have remained trading since, with our focus now returning to the productivity opportunity in the market. Gross margin for the year was 61.3%, a significant improvement on both FY 'nineteen and FY 'twenty. Our margin related strategies are gaining traction in all markets as the business saw gross margin improvement in the range of 180 basis points to 3.50 basis points across all three segments.
I will now hand back to Daniel to provide an update on the key strategic initiatives and then outlook commentary.
Thank you, Andrew, for your insights on the full year financial results. Now turning to Slide 8. As a reminder, our 7 strategic pillars, which are underpinned by initiatives that continue to deliver a transformation agenda focused on sales growth and margin expansion, driving efficiencies within the business, elevating the Michael Hill brand and enabling a true omnichannel customer experience. Turning to Slide 9. The elevation of the Michael Hill brand is definitely gaining traction as it continues to evolve into a modern differentiated omni channel jewelry brand.
Transitioning our messaging from discount led promotions to quality and aspirational brand led campaigns is key to brand led campaigns is key to enticing a broader customer base while generating higher ATV and margin growth. Our messaging will continue to highlight our reinvigorated Australian manufacturing division with an emphasis on craftsmanship and local artisans. Our customer facing messaging will be further enhanced by data and insights from our customer segmentation and personalization programs. Moving on to Slide 10, digital is at the forefront of our transformation with an emphasis on customer experience, product offering and fulfillment. Following another year of exceptional growth, investment in our highest profit margin channel continues to focus on incremental sales, higher conversion rates and increased transaction value.
The digital business achieved record sales of $35,000,000 and is now 6.3% of total sales. Also during the year, we saw the launch of our pure play demi fine brand Medley. Our early foray into 3rd party digital channels has provided the confidence to develop an integrated marketplace solution that will be rolled out in the first half of FY 'twenty two. And looking further afield, we have identified opportunities to explore more digital channels and markets. Our digital business is well placed with continual growth underpinned by omnichannel offerings, coupled with an elevated focus on conversion rate optimization.
On to Slide 11. With a portfolio of 285 stores across 3 countries, bricks and mortar retail is at the core of the Michael Hill business. Our retail fundamental strategy is focused on driving increased sales, higher margins, lower costs and a modern differentiated customer experience, all underpinned by our new retail incentive scheme. In addition, roster optimization, visual excellence and increased training continue to be areas of focus for our retail leadership team. The key metrics of ATV, IPS and conversion all increased in all markets in FY 2021 and will continue to be key areas of focus.
Now turning to Slide 12. The rollout of our new ERP platform early in FY 'twenty one was the enabler for omnichannel at Michael Hill. Across the year, we successfully tested and trialed virtual selling, click and reserve and ship from store. Pleasingly ship from store has delivered many cost and customer experience benefits, while click and reserve has contributed sizable incremental sales and in store up selling opportunities. Having already seen the benefits for ATV in trialing new customer channels, these initiatives together with digital appointments will now be progressively rolled out across our global network.
Further connecting our physical and digital businesses, we will be launching Click and Collect for Christmas 2021 delivering already grown to over 8 100,000 members. Acquisition has been our priority. And while this will continue to be a key focus, the business is now turning its attention to the opportunities of activation and retention. Our early insights already provide confidence that the program is resonating with our customers, delivering increased frequency, larger baskets and higher margins. Predictive analytics and increased personalization are being enabled by an investment in data analytics capability and artificial intelligence to deliver further growth in the business.
On to Slide 14, product evolution is the foundation of a customer led retail strategy, and it is critical to continued sales and margin growth. The business will maintain its focus on regular product newness and uniquely Michael Hill branded product as a key differentiator in the categories and markets in which we operate. The business now delivers regular product newness to excite our customers and increase sales with significantly lower margin sorry, with significantly lower inventory and higher margins. Our Australian manufacturing division has been reinvigorated delivering new bridal collections deliver significant margin growth. And the recently relaunched Sir Michael Hill Designer bridal collection, our most premium bridal range, is already showing fantastic results.
As we place greater emphasis on the sustainability of our products, we look forward to providing further targeted messaging and insights in the coming months. And for our last strategic pillar, turning to Slide 15. The company's significantly improved net cash and targeted inventory position at year end demonstrate that a cost conscious culture exists across every aspect of the company. We continue to optimize the global supply chain, improve the global store network and enhance our credit propositions globally, including the upcoming divestment of our in house Canadian credit book. Additionally, the new Canadian 3PL facility will be fully operational for peak Christmas trade, servicing both online customers and stores, optimizing inventory, reducing logistics costs and enhancing overall Canadian productivity and customer experience.
And now moving to outlook on Slide 16. While the company experienced loss sales in the 1st 7 weeks of FY 'twenty 2 due to lockdowns in Australia, strong early performances in Canada and New Zealand contributed to plus 17% same store sales for the period and plus 20% against FY 2020. These early results further demonstrate of the brand. However, the increased disruptions in Australia and now New Zealand are significant and concerning in the short term. The company has already lost over 2,700 store trading days during the 1st 7 weeks, resulting in minus 2% total store sales for the period, with an estimated impact on earnings of approximately $5,000,000 compared to management expectations prior to the lockdowns.
Of course, we continue to prioritize the health and safety of our team members and customers during these challenging times. On a positive note, to support our strategic roadmap and to further advance our digital transformation, I'm delighted to announce the appointment of Keith Louie as our first ever Chief Digital Officer. Keith brings a wealth of retail experience, e commerce leadership and digital strategy to the Michael Hill business. His appointment alongside the recent arrivals of Amy Snitzer, Chief Retail Officer and Joe Feeney, Chief Marketing Officer adds significant expertise to our already high caliber leadership team. Despite the current trading disruptions, we entered FY 'twenty two with a strong financial position, providing a stable platform to continue our transformation journey, elevate the brand and further explore new growth opportunities across all channels and markets.
That brings us to the end of our presentation. I would once again like to thank you for your continued interest in Michael Hill, and we are now happy to take any questions.
Thank you. We will now begin the question and answer session. Our first question comes from Guy Hooper at Forsyth Bar. Please go ahead.
Yes. Hey, team. Congratulations on the strong results. Maybe I could just start with the outlook commentary. You're keen to clarify just what's included in that $5,000,000 impact?
What's stepped it into it? Is it loss days to date or kind of loss days already announced?
Good morning, Guy. That is effectively actualized lost sales against what we anticipated achieving through those 1st 7 weeks. So effectively, it's the 2,500 lost trading days and the impact that, that has on profitability.
Thank you. I guess you've obviously gone through a few lockdowns today. Has there been consistent pent up spending when you've exited? Or has that started to weigh?
I think after doing this for 15 months, I think we've got examples, absolutely examples of that and probably more often than not that's the case. But we definitely do, don't we, Andrew, have examples where regions or stores reopen and there's a slow rebuild. That certainly happened in some of our earlier lockdowns in Canada last year. But I think coming out of the longer, more sustained lockdowns, so Victoria last year and then coming out of the Ontario lockdowns in early July this year, we definitely saw what you're talking to there, pent up demand and energy from our customer to reengage with our brand.
Just on the, I guess, the digital third party play mentioned in the release, what does the rollout look like? And I guess, what sort of ambitions do you have for it? And there's also, I guess, you mentioned of new markets as well. Is that for the 3rd party digital offering? Or are you talking about taking Marco Hill's kind of online brand into new markets?
I think we've talked about this before, Guy. That was specifically without calling it out, but that was specifically referenced to our early wholesale trial with an Australian, New Zealand based fashion marketplace called the iconic. We're moving away from a wholesale relationship and we're in trial test and trial with them for a fully integrated marketplace model. So effectively, we populate their website with our product from our offer. So it's a much broader offer that gets populated to their customers.
And that demand then flows back through effectively our online trading platform and then for us to fulfill to the customers. So we're pretty excited about that. We had positive good early trials and insights from the wholesale relationship and we're looking forward to rolling that as an integrated model. I think the reference to further opportunities is kind of both of what you said. So there are obviously digital marketplaces in every country around the world.
But just focusing on the countries we already operate in, there are clear leaders in both of those markets outside of Australia, so Canada and New Zealand. And we're absolutely interested in exploring those. So once we've built one marketplace integration, it will be a lot easier for us to then roll that out to other third party marketplaces. But equally, as we get through the first half of the year and post Christmas, we do have aspirations for looking at our digital offer outside of the 3 markets that we currently operate in.
Okay, great. Thanks.
I will leave it there
for now. Thanks for taking questions.
All right, Guy. I think we're catching up later today anyway. So we'll look forward to that. Thanks.
Our next question comes from Sam Tighe at Citi. Please go ahead.
Hi, Daniel and Andrew. Thanks for the presentation. Of the $15,000,000 in grants you've received in FY 2021, can you talk about the mix between Canada, Australia and New Zealand? And based on what you're seeing right now, how much do you think you might be receiving in FY 'twenty two?
I don't think we break that down publicly, Sam. I think it's fair to say we got slightly more in Australia than the other two markets. But as the Canadian lockdowns continued, the Canadian contribution to that number definitely increased through the second half. I think we are clear that we are getting support from the New Zealand government for this current lockdown. I think that's about to kick in because we're about to kick into the 7th day of that lockdown, which was a key determiner for that.
Canada, we haven't got any lockdowns in FY 'twenty two thus far. So that's, I guess, at this point, a mute point. And Australia, of course, is no longer a job keeper program. It's the disaster payment plan, which is from the government directly to our team members, which we think is a lot cleaner. We obviously are delighted when the government announced that, that was a tax free payment, and that flows directly to our team members in Australia, and we don't get involved in that, which is much simpler and more straightforward.
All right. Cool. And when you talk about entering new markets via the online channel, just be interested in your thoughts in terms of how much you're prepared to invest ahead of the curve in marketing and customer acquisition?
No, I think the reason I said second half for that, Sam, outside of our existing markets is we need to do the legwork and decide exactly where we want to place those bets. We have certainly in all three markets today got a strong sorry, not today, historically had a strong tourist trade with our brand, particularly Asian consumers. So our brand does resonate with Asian consumers. That's not to say that's where we'll go first. But that's certainly probably one of the priority areas for us to form a view on.
At this point though, probably the next foray will be how do we expand our initial integrated marketplace model into our other existing markets. And then after that, start to consider markets outside of our 3 core. Again, more than likely with a digital marketplace play in advance of our own direct to consumer play, because we think that's probably the best way to avoid significant incremental costs in building brand awareness, use of the 3rd party marketplace player to help drive that brand awareness.
Okay, cool. And how should we think about new stores and store closures in each of the 3 markets for the FY 'twenty two?
Hi, Sam. It's Andrew here. I think looking at each of the markets separately, Canada at 86, we're comfortable with that store profile. So we'd anticipate hovering in that mid to low 80s. Maybe there's a couple that close.
New Zealand, we're very comfortable with the 49. Each of those stores is profit making. There's some new opportunities that we're exploring, but that may be a relocation or may just be an incremental 1 or 2. But we're pretty happy that we've well and truly saturated that market there with our premium sort of brand level. In Australia at 150, there continue to be stores that we're monitoring.
Might we see 3 to 5 closes of Australian stores at a borderline perhaps? Obviously, the disruptions at the moment are
not the right time to be making those decisions and we would ordinarily be trading through Christmas in any stores. It's the most profitable portion of the year. I'd just build on that, Sam. The whole business has lifted significantly across the last couple of years. Yes, online has been a key plank of that growth, but it is still a small part of our business.
So our stores are lifting in all markets. So stores that maybe a year ago or 18 months ago might have been seen as marginal, have effectively lifted and in most cases pulled themselves out of that. And I think Andrew is right. We're probably at towards the end of that now in Australia. We're comfortable with $145,000,000 to $150,000,000 And as Andrew says, in fact, in both Canada and New Zealand, there are probably 3 or 4 other new store opportunities that we're considering.
But now is not the time for that.
Got it. Yes, that's clear. And when you talked about the $5,000,000 impact to date in this financial year, to what extent are you starting to discount to drive sales?
Well, it's funny you should ask that. Our answer to that is the complete opposite. We are delivering higher margin in Q1 this year than we were in Q1 last year. We are sticking to our strategy, focused on elevating our brand and having successes in continuing to increase margins. So we are absolutely not driving promotions to drive those comp sales that we just talked about.
Those comp sales are really the continued elevation of our brand connection with the customer, our loyalty program and customer segmentation strategy is really kicking in. So we are not using promotions to drive those same store sales growth. If anything, our margins are ahead of same time last year.
That's good. And just on the margins, with this marketplace strategy you're pursuing, it's clear you're going to be making more money from it, but potentially there's a margin headwind that you got to pay the iconic and other marketplaces. Do we see that at the gross margin or the EBIT margin level? And can you roughly talk about how much you get to give away?
We've done some pretty lengthy modeling on this as you'd expect and we really don't anticipate it diluting our digital margin. That's certainly our view at this point. We're going to manage the product mix accordingly. And as you know, we've got a very, very wide variety of margins across different product categories at Michael Hill. And so by using product mix and offer, we can effectively mitigate any loss of margin by picking up that incremental channel.
So we're pretty confident it won't have an impact on digital. If it does, it will be a minor, minor impact, but we're not anticipating that at this point.
Right. And would we see that at the gross or EBIT margin?
Gross.
Okay. Thank you.
All right, Sam. Thank you. Chat later.
Our next question comes from Paige Hennessy at ACC. Please go ahead.
Hi, guys. Just a couple of questions from me. First of all, as the lockdowns extend in Australia, are you seeing any willingness from the landlords to provide rent relief this time around?
Good question, Paige. I think the word willingness is an interesting choice of words when it refers to landlords. We are certainly in some significant discussions with all our major landlords and we are confident that we will find mutually acceptable outcomes.
Okay. And I know you've only had 7 weeks in Canada, but are you seeing the sales strength strong all the way through? Or has it been accelerating as we get out into the quarter?
Probably getting slightly stronger as we go, to be honest. I mean, it came out strongly in early July. I think we've increased marginally, increased momentum. I mean, we're probably the last 3 or 4 weeks a sustained level, but certainly sort of weeks 4 to 7, we're probably slightly ahead of weeks 1 to 3. And look, we've always maintained, Paige, as you know, that there's a productivity opportunity in Canada.
We've done a lot of work there on the leadership team. In fact, we've done a lot of work on the whole team there. We've done significant work during about a year ago to really get everything set for when the business fully reopens. And we're delighted by the sales results, but they are the sorts of results that the market has owed us. I think I've long said to analysts and investors, the Canadian market owes us another 15%, 20%, 25% in productivity, and we're starting to see that, which is great.
Okay. And in terms of Canada, the distribution facility, the logistic costs, is that a short term saving? What was the COVID impact?
Andrew, do you want to take that as it's near and dear to your heart?
Very near and dear to my heart. There's a few aspects to it, Paige. So at the moment, we replenish our stores in Canada and an and an e commerce customer from Australia. So if you imagine as a Canadian consumer, it's a 10 day, 2 weeks sort of wait for product. Launching this in market takes us to a 2 day turnaround on orders, so very different customer experience for the online shopper, but also in terms of the speed at which we return inventory to a store at that 2 day mark.
So there's definitely a customer experience piece there. What the reshaping of the supply chain also means is taking product directly into Canada. We derive an upfront benefit on the freight costs and the duty costs and related things. So it lets us access different taxation treatments on the way in there of importing those products. So it will be
a run rate thing that will be enduring. And Page, think about that point Andrew made about next day or 2 day replenishment to stores. On key volume lines that we often certainly at the higher end of the price range may only have one of those items in any store. The fact that it wouldn't have had that best selling item for 10 days previously, they're going to have an extra week of that stock being in their stores and it does provide incremental selling opportunity as well. So it's not just a cost and a customer experience story, it's also an incremental sales expectation.
Thanks, Guy. One last question from me. In terms of your inventory levels, are you guys still comfortable what was the Australia and New Zealand lockdowns? And are you also comfortable going into Christmas?
Yes, absolutely. We did a lot of work with our I guess, the key suppliers India in particular to make sure we had the volumes coming through that we require for Christmas. Our product doesn't age. It doesn't go off. It doesn't drop out of season.
And because we do have deep relationships with those Indian suppliers, there's some flexibility that we can build into those to lift and drop orders or perhaps reface as we require. So yes, there's some lockdowns in the moment in Australia and New Zealand, but we're comfortable that we can manage through inventory levels, I guess, getting that balance right, having enough for peak Christmas but not over committing on the profile in the short term.
All right. Cheers. Thanks for that guys.
Thanks, Paige. Thanks, Paige.
Our next question comes from Bruce McCleary from Burrell Stockbroking. Please go ahead.
Good morning, Daniel, Andrew. Congratulations on the result. Just one question from me. And as regards to the digital sales, significant growth percentage wise year on year. Just wondering, one, is there a particular region that's leading that growth?
And also, I guess, secondly, have you got a target in mind in regards to percentage of sales that your digital can get to over the next couple of years? Thanks.
Bruce, good question. I'd say all three markets are growing at significantly positive rates. Australia may be slightly ahead because that is the market we tend to test and trial. Lot of our omni initiatives, the ship from store and click and reserve and virtual selling were pioneered first in, I guess, our home market. So that would put them slightly ahead.
But generally, all three markets are showing significant growth. And obviously, lockdowns up and down change the profile of growth. But of course, in FY 2020, we lost 20,000 trading days. So again, we were comping the most unbelievable digital sales in Q4 last year 2 years ago. So that kind of led to our view that we were really thrilled with the outcome this year.
The second part of your question, look, we have an aspiration to get north of 10% in the next couple of years as a percent of sales. We're on track for that. Is our long term to be 15%, maybe even 20%, yes. But we also have a huge belief because of the product category we operate in and the price point we operate at that stores are much more valuable to our future than maybe they are, say, a fashion business. Our average transaction values are 3, 4, 5 times that of fashion businesses.
And customers, in many cases, when they certainly want to go through those romantic purchases, They want to do them in store. They want to meet a diamond expert. It's often a number of appointments that they go through. Yes, they definitely do their research online, and we see a huge amount of our in store sales now coming from digital. But we see bricks and mortar having a very, very significant place in our business now and in the future.
Okay. Thanks. That's all I've got at this stage.
Thanks, Bruce.
Thank you. Our next question comes from Andrew Ott, who's a Private Investor. Please go ahead.
Good morning, guys. Congratulations as well from me on the result, and thank you for this presentation. Just a question on if you could just expand on your roster optimization and the new retail incentive scheme. Are those actually sort of in place across your store network? And are you able to sort of give any quantification as to how that would be helping on the margins?
So I'll do incentives second, Andrew, and come back to roster optimization. Our new incentive scheme, we trialed across the second half of FY 'twenty in a gradually increasing number of stores. I think, Andrew, when we first tested it, we did 30 odd stores and we grew it to 50 or 60 and got it to 100. And we were about to press the button on rolling that out worldwide and along came COVID 1.0, let's call it. So we put press pause.
We relaunched it effectively at the start of FY 2021. It moves us away from, if you like, single focus on sales to a balanced scorecard model with a much greater emphasis on margin. And I think it's fair to say a lot of our retail KPIs are included in that balanced scorecard, and you can see the results of that broad focus coming through in these results. So we know it's delivering increased margin as well as increased sales and we know that it's doing that through driving a greater focus on key retail KPIs. So it's in all stores.
It's been in all stores for about for the full year, and we can obviously continue to refine it. But we're very, very happy with the role the important role it plays in our retail business. On roster optimization, I think in the second half of FY 'twenty one, we rolled out a new traffic counter methodology from a business called Kepler Analytics. So it uses GPS mobile phone technology to track the foot traffic through your stores unlike the old traditional click if someone walks across your lease line. This allows us to put a much greater level of clarity on our customer traffic into our stores because we can exclude people that literally are just in the store for 15 or 30 seconds.
We can analyze and do a deep dive on customer, how many customers were in there for over half an hour and you could naturally assume those customers are probably bridal customers because of the late for their transaction. So we've got this new traffic data that's relatively new in our business, kind of some stores completed rolling out around the start of Q4. But that data is incredibly rich and I would call it the missing piece in our roster optimization puzzle. As our retail leadership team become increasingly familiar with that, as the patterns evolve, we're able to apply a much greater level of science to how we roster. So this is not about taking labor out.
Let me be clear, because labor is something we hold very, very near and dear at Michael Hill. We're a highly focused 1 on 1 sales business. This is about optimizing labor, so we've got the right labor, the right salespeople on at the right time of day and the right day of the week to maximize sales and efficiencies for the business. So kind of more to come in FY 2022 as we really get our arms around the benefits of that.
Thank you for that. And that's all for me.
Thank you, Andrew. Tara, it looks like we've done all the questions. Do you just want to check if there's any last oh, no, looks like one might be back.
We have a follow-up question from Sam Tighe at Citi. Please go ahead.
Thanks. Just a quick follow-up. Just regarding corporate costs, so in FY 2021, it was around $44,000,000 How should we think about this in FY 2022 given you've added a couple of new management roles?
I think, Andrew, do you want to comment? I mean, my view is our corporate costs will broadly hold flat through the year. We're constantly evolving our organization model to reflect the changing demands of our customer and our strategy. Sam? So Andrew?
Yes. I think so that's the intent, Sam. It's one incremental executive role, but with a deliberate focus on digital, which is at the core of our growth and has that deliberate and quite direct sort of payback on it. So I think our intent would be to be looking to hold flat on corporate.
All right. And can I just explore the comment Daniel made earlier in terms of landlords, in terms of what's acceptable? From your perspective, is an abatement or a deferral more acceptable? And I guess, if it's an abatement, should we expect that this comes with lease extensions?
Yes. Good question. I think it's fair to say a lot of those negotiations have got a bit of a pause pressed on them right now. Both retailers and landlords are waiting to see how long this runs for Sam. Our anticipation would obviously and our preference would obviously be towards abatements and not towards deferrals.
And obviously, our ambition and preference would be not to tie them into tenure. But look, these are commercial discussions as you know. It's always done ultimately ends up as a store by store question. We do have a number of stores again as you know coming up every year that are in holdover. So it's how we use our cards, play our cards best to get the best possible outcome both across tenure and in the short term across rebates.
So I think it will follow a similar profile to how it has thus far through the pandemic would be my view.
Got it. All right. Thanks and good luck.
Thanks, Sam. Tara, do you want to just give everyone one more chance?
Certainly.
Okay. All right. Thank you all once again for dialing in and thanks also for your ongoing support of the Michael Hill business and interest in the Michael Hill business. For those that we're chatting to over the next days weeks, look forward to more detailed conversations. But other than that, thank you for dialing in and have a good day.
Thank you.
Thank you very much. This does conclude our conference for today. Thank you all for joining. You may now disconnect.