Earnings Call: H2 2021

Sep 15, 2021

Thank you for standing by, and welcome to the Meyer Full Year Results Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. John King, CEO. Please go ahead. Thank you, and good morning, everyone. To investors and analysts and also to the media who joined on a listen only basis, thank you for joining our call today. I'm John King, CEO of MEIA, and I'm joined today by Nigel Chadwick, our CFO. Please note that this call is being recorded. So to the agenda for today, I'll begin with a quick overview of the full year 2021 results, then I'll hand over to Nigel, who will provide you with more details. I'll then speak further on our customer first plan, which is a strategy we outlined and launched in September 2018. After that, there'll be an opportunity to ask questions. The significantly improved FY 2021 results reflect successful transformation of the business achieved under the Customer First plan between 2018 2020 as well as the COVID-nineteen overlay that was introduced in half 1 FY 2020. This result is a testament to our team, brand partners and suppliers and of course a recognition of the loyalty of our customers. It also demonstrates we are starting to see the business thrive despite the extraordinary market conditions. Our FY 2021 results, including growth in profitability for both the first and second half demonstrates the customer first plan is getting real traction. Despite the on again, off again nature of physical retail over FY 2021, we delivered solid profitable sales growth when stores were trading, combined with continued growth in our online business. As we have consistently said over the past 3 years, our focus has been on profitable sales, growing the online business, disciplined management of costs, cash and inventory, space optimization and the deleveraging of our balance sheet. The successful execution of these and many more strategic initiatives have delivered a solid growth across all key metrics in FY 2021 and will continue to drive our business into the future. As a business, we have continued to prioritize the health and well-being of our team members, customers and the broader communities in which we operate. And customers will have seen this with our enhanced health and safety measures in place. We have also supported respective governments across the country in response to their mandated closures. So to our results today on Page 4, The momentum of our customer first plan is clearly visible in these results. Total sales up 5.5 percent, which is over $2,650,000 held back by 4 store closures with over 2,000 trading days in lockdown, including key trade periods like boxing down our recent stock tax sale and of course the extended Melbourne lockdown in Q1. Group online sales continue to grow now 20.3% of our business and importantly, now one of the biggest retail online domestic businesses at €339,500,000 This is up from €208,000,000 in FY 2018 when we started the customer first plan. And it continues to be a key focus for our business. Our margin has also improved substantially with operating gross profit up 10.2%. Importantly, throughout this period, our focus on customer service is paying off with record levels in both in store customer satisfaction and online NPS. COBB was down 87 basis points as a percentage of total sales. And we did receive government subsidies, which ended in September 2020 and only minor rent waivers during half 2. So to our results today, EBIT increased 117.2 percent to £170,500,000 net profit after tax up £65,100,000 to £51,700,000 statutory profit after tax of £46,400,000 up from a statutory loss of $172,400,000 in FY 2020. Implementation costs and ISAs post tax were $5,300,000 We continue to strengthen our balance sheet with net cash of $111,800,000 net debt in FY 2018 of $107,000,000 we have a much cleaner inventory position. However, our dividend continues to be suspended as we manage the current lockdown volatility. The momentum of our customer first plan so now to Page 6. While these are full year results, I'd like to take you through some of the second half highlights, which demonstrate strong finish to the 1st 3 years of the customer plan. We remain focused on the delivery of our customer first plan using the strength of our store network as well as online and responding to the challenges and opportunities associated with COVID-nineteen. We've continued to deliver against this plan. It's clear that it's gained momentum. We are putting customers at the heart of everything we do. It focuses on us providing leading service experiences and brands to our customers whether they shop with us in store or online. It also ensures we're operating in the most productive, efficient and effective way across the business. So where are we from 3 years ago? We are now a more resilient business because of this execution of our strategy, the customer first plan. Second half twenty twenty one was profitable for the first time since FY twenty seventeen and something all Meyer team members can take pride in. Our bricks and mortar network traded well when we were able to trade, which I touched on earlier. Our team members continue to deliver outstanding service in a challenging environment as measured by record customer service satisfaction scores, more on that later. Our inventory has never been in a better position. As also mentioned, we remain in a net cash position throughout FY 2021. We continue to progress key initiatives to deliver benefits as we continue the evolution of our plan. Online is now $500,000,000 plus business. We have done this faster than we expected with growth plans in place and an aspiration of $1,000,000,000 business in the medium term. As many of you would know, we announced our new National Distribution Center or NDC, as I'll refer to it going forward in July, which will provide further online efficiencies and the name of stock to be allocated to our stores in a more efficient way. I will talk more about this later. We exited our Knox store in July and relaunched Cairns, Belconnen, Morley, High Point, post space production. Customers are loving these re layered and refurbished stores, and we are seeing it in the numbers. In summing up this slide, I get asked a lot about the challenges of retail and what Meyer faced. And I can say the challenges that I spoke about at the half previously remain. We continue to be impacted by reduced footfall associated with the pandemic, particularly in our CBDs from mandated closures, remote working and lack of tourism, which all drive city retail. However, the remaining business is performing strongly and it positions us well to capitalize as we move to a new COVID normal, where a lockdown strategy isn't the only strategy to combat the pandemic. And we are closely monitoring our supply chain to minimize any disruption during peak trade periods. But what I would say to those on this call is we have bought cleverly and early with locked in supply contracts, so we expect disruptions will be minimal to us. I will now hand over to Nigel to go over the results in more detail, and we'll join you later on. Thank you. Thanks, John, and good morning, everybody. If we can now move to Slide 8, please. As this is our 2nd year of reporting under AASB 16, we've presented our results on a post AASB 16 basis. Obviously, as this is a 53 week year, every single line item will have been affected to some degree by the additional week. I don't intend to attempt to normalize for that as we go through as there are probably a 1000000 different ways you could construct that 53rd week. But for those who are interested, we have done one construct in the appendix, which shows an estimated impact on EBIT of about $400,000 so immaterial in the scheme of things. Overall, considering the operating environment, this is a solid result and reflects the work undertaken during the past 3 years to improve the fundamentals of the business. Clearly, total revenue and GP were severely impacted by the temporary closure of various parts of our store network, particularly in Q1 and Q4 compared to last year, where the entire store network was closed for April and most of May. In total, we lost approximately 9% of trading days this year compared to 15% of trading days last year. And whilst in the first half, total sales were down just over 13%, we finished the year up 5.5% following a strong second half, which was up 38.3%. As we mentioned at the half year, the year on year revenue differential in the COVID impacted Q1 was roughly $125,000,000 compared to 1H20, which was unaffected by COVID closures. In terms of this latest lockdown for June July, revenues were down approximately $75,000,000 against the same 2 months in FY 'nineteen, which unlike last year were also unaffected by COVID closures. Generally, during FY 'twenty one, when stores have been open, trading has been solid. For example, if we look at those stores that were open for the full months of June July this year compared to the same 2 months last year when we were open across the country, these stores traded up about 15%. In terms of comparable sales, which excludes periods where stores are closed or under refurbishment from both years, a strong second half saw us finish the year with a 0.9% increase following a 3.1% decline at the half year. Given the weighting of our year towards the first half, that means that comp sales in the second half were up strongly at 8.4%. Clearly, the sales growth also impacted OGP, which was up just over 10%, and we'll discuss that in a bit more detail in a couple of slides. Costs of doing business finished the year up 2%, reflecting the company's success in ensuring costs were kept to a minimum. But also, of course, it reflects the support we received from the government in the form of JobKeeper in August September 2020 as well as the support from our landlords in the form of rent waivers, which again were received mostly in the Q1. Excluding both these items, so CODB declined slightly year on year, and we'll go through that in more detail later on. So that brings us to EBITDA, which was up 27.7 percent to $390,000,000 for the year on a post AASB 16 basis and before implementation costs and individually significant items or ISIs. Depreciation was down slightly, reflecting lower net CapEx spend in recent years and prior period impairments of right of use assets. Net finance costs were down $2,000,000 reflecting lower interest from leases as we exit floorspace. So the bottom line was a net profit after tax before implementation costs and ISIs of $51,700,000 compared to last year's net loss after tax of $13,400,000 Implementation costs and ISIs were mainly space exit make good costs and associated asset write offs, whereas last year, we had significant non cash right of use asset and brand name impairments. Statutory profit was $46,400,000 compared to a loss last year of $172,400,000 following the impairments I just mentioned. We now move to Slide 9. I don't intend to spend too long on this slide, but here we've presented the P and L on a pre AASB 16 basis. As you can see, the bottom line is almost the same as on a post SBS 16 basis at $50,700,000 which is slightly better than the trading update we announced a few weeks ago and is the best full year results since 2017. You may recall, we reported a net profit at the half year of $43,000,000 So for the first time since 2017, the second half delivered a further net profit of nearly $8,000,000 which is also the best second half result since 2016. In the notes on the right, we referenced $51,000,000 of JobKeeper and rental waivers we received. This compares to a total of $66,000,000 in 2020. There are two points I'd like to make here. Firstly, other than $1,000,000 of rent support, all of this year's support was booked and reported in the first half when revenues were down over $200,000,000 or 13% and operating gross profit was down $90,000,000 compared to the prior year. So for Meyer, the trading fallout from store closures was significantly higher than the net support received in the first half of 50,000,000 dollars And secondly, contrary to some commentary, our pretax profit this year was $74,000,000 So if we simply adjust the total $51,000,000 of pretax JobKeeper and Rentware out of the results, we would still have been profitable for the year. And that's not counting the sales and GP fallout I mentioned earlier. The final point I'd like to make on this slide is in relation to rent waivers. As I mentioned, only $1,000,000 has been recorded in the second half as we continue to discuss the potential for rent relief with our customers. So if agreements are reached, they will be booked in FY 2022. Moving to Slide 10. As you can see from this slide, OGP, despite being down $90,000,000 at the half year, finished the year up nearly $100,000,000 or 10.2 percent. And with OGP margin, the highest we've seen in 5 years. And our view is this would have been even better without the 4 store closures in the last quarter. As you can see, volumes contributed $56,000,000 reflecting the higher sales revenue for the year. Rate improved as we took lower discounts, particularly in the second half, reflecting a much lower level of clearance inventory sales as a result of our continuing efforts to improve the merchandise cycle. Rate was also impacted by improved margin in home related categories due to strong demand and therefore less need to markdown. FX provided a marginal unfavorable impact as did lower advertising subsidies and supplier support reflecting reduced purchases and tighter inventory management. In the other COGS bar, shrinkage was down again by nearly $6,000,000 from the prior year to $19,500,000 and is now down over $12,000,000 from the levels we were at in FY 2018. Shrinkage now stands at 0.9 percent of wholesale sales. And we expect to continue to manage this down through investment in technology to detect fraud and broader implementation of RFID. These savings were partially offset by higher MYA-one costs reflecting the improvements in MYA-one tag rate. Lastly, we also had a negative movement in margin rate from a mix shift to concessions from National Brands and MEBS. Moving to Slide 11 on CODB. On Slide 11, we've excluded the JobKeeper and Rentwave support out of the numbers. And as you can see, CODB has stayed relatively flat as we continue to look to offset inflationary increases and the effect of higher variable costs from online sales with other cost reductions. As I mentioned earlier, we did qualify for the JobKeeper subsidy from the federal government, and this provided us a net wage subsidy of $32,000,000 in the first half of the year compared to $52,000,000 in the second half of last year. All of these funds ultimately found their way through to employees either as a direct pass through to top up their wages to the required $1500 per fortnight or in the form of subsidized wages as we readied the store network and brought staffing levels back up for reopening. Had we not received JobKeeper, we would likely have made very different decisions about how we dealt with the effects of the pandemic. And just as a reminder, we did not qualify for JobKeeper 2.0. We also received support from our landlords during the period with $18,000,000 recognized in the first half and a further $1,000,000 in the second, which compares with $14,000,000 recognized in the second half of last year. So when we look at CRDB excluding both of these, store operating costs including wages and other store costs increased marginally by $6,000,000 to $511,000,000 which included EBA increases. As you can see, the increase in variable costs from online, where revenue has grown from $420,000,000 last year to $540,000,000 this year, has been offset by reductions in store operating costs, such as store wages and other costs associated with space reductions. Further net cost savings of 7,000,000 dollars were achieved in the support office across the majority of central functions and carefully managed all the discretionary costs such as marketing and travel. Moving to cash flow on Slide 12. We've also presented our cash flow statement on a post SSB 16 basis. As you can see, operating cash flow grew 67,000,000 dollars to $365,000,000 Whilst last year's cash flow obviously benefited from JobKeeper received, rent withheld and permitted tax deferrals to the tune of around $100,000,000 dollars This year, the effects of those things resulted in only a net cash benefit of around $4,000,000 So that makes this year a really terrific outcome off the back of the improved sales and margin achieved. The unfavorable working capital movement is largely due to the higher inventory levels at period end caused in part by the lockdowns in Q4 'twenty one, but also reflecting the significantly reduced intake in the last quarter of last year. This was offset in part by lower receivables, mainly reflecting the receipt of JobKeeper for July 20 in August of this year and the movement in payables arising from the rent withheld last year and tax deferrals. Cash CapEx, net of landlord contributions, was down again to just over $32,000,000 as we controlled our projects, whilst we assessed the impact that COVID might have on the business. On the right of the slide, you can see the broad categories of spend, and in particular, our weighting towards online and systems. We expect this trend to continue as we look to continuously improve the customer experience online. Subject to how the response to the pandemic evolves, we expect CapEx for FY 'twenty two will return to something between $60,000,000 $80,000,000 as we continue to invest in our online business, roll out a new point of sale system and proceed with our announced national distribution center. However, this will be an area that we continue to manage carefully and adjust in response to the operating environment and expected returns. Moving to the balance sheet. So here again, we presented the balance sheet post SSP16. As you can see here, the big movements were inventory at year end was up $50,000,000 or 19% year on year, due largely to store closures in Q4, but also reflecting the fact that last year was abnormally low as we responded to the unknown potential effects of COVID. In comparison though, inventory is still down 12% from FY 2019 levels and is down 17% from FY 2018 levels. Other assets and liabilities are down $70,000,000 primarily due to receipt of accrued JobKeeper receivables at the end of last year and movement from a tax receivable position to tax payable position and an increase in provisions mainly related to employee entitlements such as annual leave and loan service leave. Fixed assets and software intangibles are both down reflecting depreciation during the year. And net cash, again, we were in a net cash positive position of $112,000,000 which is up $104,000,000 from last year end. In terms of inventory, despite the slowdown of sales in Q4, our stock is very clean with only 5.6% of stock being clearance inventory compared to 8.2% last year and 13.2% in FY 2019. And just 18% of inventory is more than 6 months old versus 36% last year and 28% the year before. On the right of this slide, you can see where we are in relation to our banking covenants with each measure easily achieved at year end and with ample headroom. Moving to debt on Slide 14. On this slide, you can see the progression of our net debt or net cash balance over the last few years and the impact of our efforts to focus on cash and costs and to deleverage the balance sheet. In the bottom chart, you can see where our net cash position has been and our gross debt against our borrowing capacity throughout this financial year. As shown and as we have said on the right, we've only been in a small net debt position for a total of 21 days during the entire year and have been net cash positive for the entire second half. Peak net debt was just $30,000,000 compared to 210,000,000 in FY 2020. And peak gross debt this year was $70,000,000 compared to $265,000,000 in FY 2020. So clearly, we've had and continue to have significant headroom and liquidity within our existing facility, which has now been extended out to November 2022. We've commenced a process to review our financing requirements moving forward, which is progressing well. And we will make further announcements on that over the coming months. So to summarize, before I hand back to John, we've returned the company's profitability despite the impacts of COVID. And importantly, this includes a return to profit in the second half of the year, which was the first time since 2017. The second half profit had no JobKeeper and just $1,000,000 of Rentware to support. We're continuing to invest in the key aspects of the customer first plan, including growing our online business, further improving our in store customer experience and strengthening both our fulfillment and store networks. The combination of our network of bricks and mortar stores in key locations, combined with a leading online business, has represented a significant asset throughout the pandemic as customers switched between channels and lockdowns impacted different locations. Finally, our disciplined focus on costs and cash positioned us well to deal with the ongoing effects of the pandemic, and our balance sheet remains strong. We had net debt for just 21 days during the year. Managing costs, cash and our balance sheet will continue to be top priorities during FY 2022, and we are well positioned to take advantage of the peak Christmas trading period. On that note, I'll pass it back to John. Thanks, Nigel. I'd like you all to turn to Page 16 now. I've touched on the Customer First plan before, but I'd just like to speak on a couple of things in more detail. As I said previously, our customer first plan has a focus on profitable sales, disciplined management of costs and cash and inventory, deleveraging on the balance sheet, all of which combined to underpin our delivery of growth across all key metrics in FY 2021. We fervently believe this is the right plan and it's gaining momentum. And if we look at the left hand column on the slides, you'll see the 6 key categories that we have outlined: accelerating online, accelerating our factory to customer, in store experience, refocusing merchandise, rationalizing property and reducing overheads. And you can see the progress that we've made against those. I don't intend to go through all of them, but I just want to call out the strong growth and scale of our online business now making one of the biggest in Australia. The customer satisfaction scores are materially higher in the mid-80s now compared to the 70s when we launched the plan 3 years ago. 8% reduction in space with a lot more to come and costs and overhead and clear deleverage of the balance sheet. Moving to Ladies and gentlemen, this is the conference operator. We have temporarily lost connection with the speaker line. Please continue to hold and the conference will resume shortly. Hi, everyone. Many apologies for that. That's the first time that's happened since COVID and lockdown. So I'll just thank Nigel and turn everyone to turn to Page 16. I'll touch on the customer first plan before, so I'd speak on a few things in a bit more detail. As you know, our customer first plan has a focus on profitable sales, disciplined management of cost, cash and inventory, deleveraging of the balance sheet, all of which help combine to underpin our delivery of growth across all key metrics in FY 2021. If we look at the left hand side of the slide, our 6 key areas of focus in the Customer First plan: accelerate online, accelerate factory to customer, improving our in store experience, refocusing merchandise, rationalizing property and reducing overheads. A couple of key call outs there for us. Production in space, 8% since first half twenty eighteen, pipeline more of opportunities, more on that later, higher margins and faster stock turn in merchandise. Our 3PL facility opened NDC to come, improved customer metrics and the strong growth and scale of online really is pleasing. Turning to Page 17, looking at online, accelerating online building on success here. So as we mentioned, we've had strong profitable growth for online, scaling this business significantly, now representing more than 20% of our business. We have an aspiration for this to be $1,000,000,000 plus business in the medium term. And to put it simply, Myronline is now one of the biggest online retailers in the country and has increased its share significantly and profitably since FY 2018, and we are going to build on this success. To put this into scale with a few other retail examples, Davy Jones at 365, BIG W at 415, Adaire's 187, compared to our 539 and growing. And from a pure play perspective, which had a lot of press, and while we're very respectful of them, Tantaline Webster is at 326 and Dolby G is 179, again showing the scale of the business that is now growing over the previous years. We continue to improve the experience for our customer. We've launched a number of enhancements across our navigation, filtering, search and product sequencing, including the launch of RedHuffle in the last month. It's another step allowing us to leverage data and automation to create a more personalized customer experience. We now have one of the largest non grocery product catalogs in the country. Helping customers find the right product is key, and our focus is on creating what our customers want to and when they need it. Our Net Promoter Score online has improved by 97% since the start of our Customer First plan in 2018, and conversion is also up 84 basis points, showing this investment is resonating with our customers. We have made improvements to fulfillment. Many of you know our 3rd party logistics center has been operating since October 2020, getting product to our customers in a faster way, ensuring a better experience and material cost efficiencies for this business. You will see that it delivered more than 2,200,000 units with a 6% reduction in cost per order. We've improved our range online to continue to integrate brands through our drop ship vehicle marketplace offering and introducing more options with a data led range of brands and products in response to performance and customer feedback. Just one example is our new turbocharged sports and athletic offering with a new and expanded range of sports, mostly in demand brands. To wrap this slide up, our online business is outpacing our peers. It is a focus of the business to make online even better and bigger, being more data driven in our approach to engaging with our customers. We have a clear focus to expand and drive more value in this space with key strategic investments. Moving to Slide 18, factory to customer. Headline there, the NDC is transformational for Mire in many more ways. So getting products to our customers in the quickest, most efficient way is a priority for the business. This is why we announced in July this year that we have secured a lease of a new 40,000 square meter facility in Victoria as our NDC for both stores and online fulfillment. The NDC represents the next phase of the supply chain factory to customer initiative following the enhancements to online operations that were undertaken last year. Having an NDC is incredibly important as we ensure we can accommodate the growth of our online business, providing the service levels our customers expect from MYA, whether they shop online or in store. There is widespread customer benefits and efficiencies anticipated for both the stores and the online business. It will allow us to be more data led in stocking our stores to allow stores to draw on the NDC as they meet demand, not the push model of old, ensuring we continue to fulfill the stores more efficiently to meet where the end to meet where our customers are demanding of buying the product. Today, this is largely pre allocated out to stores with a more limited availability to move stock around. This will provide huge benefits to our business. It will ensure through automation that online purchases are serviced even quicker. In the meantime, our current online DC partnership with Australia Post continues to perform well, which I've mentioned earlier, and this operation continues to play a key part in supporting our online growth as we transition to the NDC over the next 12, 18 months. If you could move to Page 19, touch on customer loyalty and personalization. Getting closer to our customers and being data driven in our approach with them and rewarding their loyalty is at the heart of what we do with this program. MYOBE 1 is a pivotal pillar of our business, and we are seeing significant momentum and have delivered some standout results, which resulted in our members receiving more value from MYA in return for increased engagement in the program. By improving the new member joining processes, both online and in store, we have seen a significant rise in acquisition in the last year. In hard numbers, this is 168% higher than what we achieved last year or over 860,000 new members in the last 3 years, formed with our significant promotion. We've also sought to engage the customer in the MYOB1 program in every interaction that they have with us. Our increased focus on driving MYOB1 in store and online experiences and process more relevant exclusive promotions and greater rewards have seen MYOB1 engagement improve significantly in FY 2021. MIO1 sales improved to 69.7 percent of total sales, up from 64.9% in FY 2020. In response to customer feedback, we also enhanced MIO1 value proposition to provide customers more value by reducing the thresholds for receiving a reward card from 2,000 to 1,000 shopping credits, meaning that customers now only need to spend $500 to receive a $10 reward card. This has meant that in FY 2021, we were awarded 2,200,000 more customers than FY 2020. And in turn, this resulted in total sales from redemptions of reward cards increasing by 60% versus the prior year FY 2019. We are increasingly using our customer data and own channels such as EDMs and SMS to provide our customers with relevant payment offers and promotions and have embarked on a program to accelerate the deployment of always on strategies that optimize customer lifetime value. Combined, these initiatives have increased incremental revenue delivered from owned channels communications by 55.3% since FY 2019. And to our future plans, MYA-one is part of the fabric of MYA and core to the customer first plan. It is part of the work underway of being a customer data and insights driven organization. As such, we've increasingly focused on utilizing the data to provide insights that drive customer driven decisions and provision of a personalized experience and offer its customers. To enable this, we will progressively invest in building our data sciences capability and technology, including upgrading the technology to enable seamless interface between maya.com.au and the Maya One programs. This investment will underpin our program to accelerate the deployment of always on strategies that optimize customer lifetime value. Over the next year or 2, we also plan to relaunch the MYA-one program with an enhanced overall customer value proposition with the aim of further boosting customer engagement and increasing the membership in the program. This will require an upgrade of the underlying technology infrastructure. MYA-one is one of the country's leading retail loyalty programs. Our aim is to make it bigger, better and more rewarding, and our future plans will deliver on that. Now to Page 20 in relation to merchandise. The fundamentals are strong, and our focus is on growth. As mentioned, we are data driven. When it comes to merchandise, we respond to what our customers want and need. This has led to more than 100 brands going and 200 brands coming in. We will constantly evolve our product mix to ensure we are delivering for our customers. With COVID, we have shifted more into the in demand categories such as casual, activewear and home to name a few. And we've also changed merchandise models so the results are a better offer for our customers and for ourselves. For example, Wittenberg converted to Shoe HQ, which is now Meyer's biggest concession within the business. Importantly, our inventory position has ever been better, ensuring continuing newness for our customers. We have put in place a more disciplined merchandise cycle, and we continue to strengthen partnerships with key brands. As you know, we make the big brands bigger and we'll continue to do so. Some new brand introductions include Gucci Beauty, Lauren by Ralph Lauren, Barber London and many more. And we'll also launch exclusively Martha Stewart and Myer Home. These are much sought out traditions to our portfolio. Last week, we also launched MVMT Amaya, representing new brands or brand extensions of the brands people love across sports, lifestyle and technology, making it one of the more formidable lifestyle offerings in the market. This is launched online and we also unveiled a landmark store destination in our Meyer Melbourne store with more stores to follow. So going forward, we'll continue to remove our performing categories, add brands our customers want and expand one for the popular. We'll accelerate rollout and scale of existing key women's, men's and kids brands, for example, Levi's Tommy Hilfiger Champion, Polo Ralph Lauren, just to name a couple, across our store network. We've had great success with our beauty events. They continue to grow in popularity, and we'll do more of them next year. We are the home of everything beauty. We want to cement this over the coming year. We continue to invest in our net brand propositions, which our customers are noticing, and we explore new ways to curate our merchandise, like our partnership with LI Virtual, allowing us to curate great international and local brands through a truly multichannel experience. These new additions are just a small proportion of the breadth of exciting innovations and exclusive launches, which will ensure customers continue to choose NYHA as their favorite Australian department store. We can move to Page 21. We've seen the customer experience in store materially improve. We know the customer experience online and physical stores is key. It's a given. We had again recorded our highest levels of customer satisfaction results with our in store team members 83%. And our innovative mMatrix app is driving continuous improvement. It was great to see Myer named Department Store of the Year by Roy and McCoy and Morgan once again, as well as being rated as the 7th most trusted brand, up from 10th spot last year. Across our stores, we are continuing to improve the customer experience with redevelopments and relayering taking place across the country with more than 20 stores relayed over the past year. We have responded to our customer and their changing behaviors, providing new brands and formats in stores like Werribee, Hyundai, Eastland, just to name a few. Our currently up major refurbishment is complete as well as other major refurbishments that are downsized Cairns and Val Collins stores. Eastland and Morley stores have been downsized, relayed and refreshed. These stores look fantastic, and the customer response has been positive. We're also relaying and refreshing our store at Chadstone, which will be completed by November 2021, and further improvement works are planned for our Albury, Toowoomba and Ballarat stores. All of these targeted works are aimed at giving our customers the best possible in store experience when shopping with us. We're also continuing to invest in technology to improve the efficiency of our store operations. We have completed our 1st successful trial of our replacement point of sale system with further pilots to be rolled out before Christmas. The months leading into Christmas and beyond are well and truly fronts and foremost for the team. Moving to Page 22. Space reductions have been and are continuing to contribute to optimizing profitability as part of our multichannel strategy. We continue to reduce space across our store network. In total, we have exited 83,000 square meters of space since first half twenty eighteen, including 42,000 square meters to execute or agreed to exit in FY 2021 alone, which includes the closure of Knoxville. We have a further 70,000 square meters of space in the pipeline. And as announced in early 'twenty two, we will be moving to a more appropriately downsized store support office at 1000 Latrobe Street in Docklands, ensuring the best office environment for our team members whilst reducing costs for the business. Importantly, when we've made these changes to stores, we are seeing vastly improved productivity with stores like Cairns, Belconnen and Morley, all significantly outperforming state averages, as you will see in the snapshot below. Our approach still remains to have the appropriate balance between physical stores and space and online to serve our customers better. Slide 24, Christmas. We are focused on the season ahead. Myra is Australia's home of Christmas gifting, and we will have a larger Giftorium offer with an improved online and in store shopping experience for our customers. We are well stocked and prepared for Christmas. Our new Christmas campaign is strong and distinctive and a great follow-up to last year's highly successful bigger than Christmas campaign, which was well received by the community. In addition, we have developed a strong promotional plan and will leverage a more engaged customer base through Maya One over this period. We are making exciting plans for Maya Melbourne to once again showcase our Christmas windows and have a new giftorium within the iconic mural hall once lockdowns begin to ease. We are currently seeing that Christmas is a leading search term already on our website. We have a compelling offer, and the team are excited and ready to meet the needs of our customers in the safest possible shopping environment. So in conclusion, we will deliver on Page 25. We will continue to deliver against our strategy, our customer first plan, which we believe is clearly getting traction despite the extraordinary market conditions. Importantly, it is resonating with our customers. We have a more engaged Mile One base. We have record installed customer satisfaction, record online NPS, as we said earlier, 7th in the Royal Board and most trusted brands. Today's results show the strength of our online business, which we have scaled over the last 3 years to a formidable size with enhanced fulfillment capability, outsizing competitors and pure plays. We have a strong balance sheet with significantly improved merchandise offer, better inventory management and disciplined management of costs. And we relaid stores, moved over 83,000 square meters in space and optimized our network, as we said we would, with more to come. Results today demonstrate we're on the right track. We achieved a lot over the past 3 years, but we know there is more to be done, and this is the right plan with more initiatives in place to continue to drive the business forward. The growth in online and Mile One continues to underpin the value of this business, providing us relative market scale in online and a growing competitive advantage in MYO-one. The inherent value in both these components alone see significant upside for shareholders to come. Current trade remains subdued given half the country remains in lockdown. However, we are seeing significantly strong sales performance of our online channel and outperformance of our non lockdown affected regions, which provides optimism as we ease out to the national lockdown strategy. Finally, I want to thank our team members, brand partners and suppliers, but above all, our customers. We remain focused for the all important Christmas period ahead and look forward to seeing you in store or online soon. Thank you. We'll now open up for questions and apologies for the breakdown earlier on. Thank Your first question comes from Ben Gilbert with Jarden. Please go ahead. Hi, good morning guys. Just first question for me, just around the inventory. You've obviously given some metrics there, which suggests it's pretty healthy. I'm just wondering how you're thinking about inventory and particularly planning into Christmas, just in the context of it feels like the market's is probably sitting a little bit heavy, but at the same time, there's obviously a lot of challenges around freight and distribution. Do you feel you've got enough inventory at the moment? What are your plans around stock coming in? And then how are you seeing the backdrop out there at the moment? Yes. I mean, clearly, there's a few elements to that, Ben. I mean, firstly, it's winter stock. So we've got a plan for moving that. We bought a little bit lighter, so just in case. So therefore, we don't have a stock problem as such. And as Nigel said in the slides, 18% is 6 months or older, so the rest is all newer. So we have a plan around that. So the key thing for us is to get the stores open quickly in New South Wales and Victoria. With regard to Christmas, we plan to bring it in earlier and we plan to ring fence Q2. So apart from a few weeks, 1 or 2 weeks here or there, we'll be on schedule to launch round about the time the Christmas windows launching in October. So we're actually enter into Christmas windows in my environment in November. So we're fine with it. We think the plan has been is robust, been well planned. And particularly, we're pleased with the way the market calendar and promotional calendar is going to look this year compared to last year. And for us, we're well set for that really important Q2 period. If you don't if we just look in the context of the other companies that have reported, they've had much more material inventory builds, just given the fact that there's pretty optimistic view on reopening. I appreciate what you said, but do you feel you could be sitting a little bit light? Or it feels like you've got shipments coming in that you're pretty confident of hitting the time for Christmas? Is that how we should interpret it? Yes. Yes, exactly. And we've got more regular shipments of newer merchandise. If I think back to when I first joined this business 3 years over 3 years ago now, where we had clearance floors and clearance doors and stock up for gunwales that was years years old. What this has allowed us to do is be cleaner, it's better margins, less markdown. But more importantly, we have the right the appropriate levels of stock. We always felt the stock was we had too much stock. We carried too much stock, and that's one of the reasons why the stock turns improve. We want to turn it even faster than we currently are at just under 4%. And we believe there's an opportunity there. So we're not I'm not too worried about the absolute level of stock year on year because I think we have the right stock, which is more important and we've got plenty of it coming in. And just take one from me. I noticed you haven't given a trading update and appreciate it's pretty tough at the moment given everything that's happening. But could you just give us a couple of comments on how you're seeing the competitive backdrop and how you feel the consumers positioned and how you're planning for the consumer to respond as we hopefully get lockdown dosing pretty soon? Yes. I mean, look, we've seen fantastic online sales, obviously, as I'm sure everyone else is. And the stores that are open, as we said, are trading very well. Clearly, Victoria and New South Wales are significant parts of our business. But we're partially mitigating this lockdown there with online and those stores that are open. So the one thing we do know is as soon as we open, they start flying. So that's what we're planning for now. So hopefully, as things start to open up over the next month, we know we'll be ready. We've got a lot of experience of closing and reopening pools, unfortunately, over the last year. So we're well set. So we think we're going to be fine. As soon as we can reopen, that will be great. And final one from me. One of the buzzwords or new ones now coming out of all the corporate is ecosystems. What are you guys you've obviously got a strong brand. You've talked to this how big your online offer is. What's the view around creating a marketplace type offer? Or how do you think about this whole ecosystem approach? Because you obviously sold off your credit card a number of years ago. What are you thinking around the opportunity to leverage brand? Because my view is, to your point, BrandTrust has gone through the roof through this period, and it's really an opportunity to leverage it and look at right to play category stretching the brand. Have you got any plans in place around that? How are you thinking about that? Yes. Well, I alluded to it sort of in the final wrap up that MyaOne and Mya.com are completely undervalued. Mya.com was a separate company. It would be valued at somewhere between $1,000,000,000 $1,500,000,000 probably. So we think there's inherent value in our online business. And also mya.com sorry, mya.1, we haven't truly monetized it yet. So if you look at what Virgin did, what Affinity did with Virgin's Velocity program for us to sell it back to them, they doubled the membership base from 5 to 10. We're at those sort of numbers. So I think we see there's been opportunity. And to us, we are a marketplace. That's why we talk about being a data led and digital driven business because we're driving we will finesse and data mine what our customers want and make sure that we can give them what they want, when they want it and create value over the lifetime of that customer. And that will be through MyOne, it will be through buy.com, and it will be through the right size stores. And that will be our plan. And we are a marketplace. I mean that's it, department stores. We're always marketplaces to begin with, if you think about the basis of the definition of marketplace. So for us, the whole of our company is a marketplace, and that's what we're aiming at and we'll be investing in. That's great. Thanks, John. Cheers. Thank you. Thanks. Thank you. Your next question comes from Mark Waid with CLSA. Please go ahead. John, thanks for that. The comments in around MYO-one and the online business, I mean, is there any proof in some of that market chatter about those parts of the business being spun off? We haven't discussed it as a Board. Okay. And in turning it to I mean over the last couple of years, I mean you've had this wonderful increase in online sales. I mean, stores have been a bit weak. You've added new MyerOne customers. But overall, what's really happened to the total customer counts over the period aside from any kind of championships or MyerOne sign ups? You've been able to actually attract new customers? Or is it still an issue, been able to get new blood in the doors? No, no. We definitely we saw that during lockdown last year, where a lot of new customers come in. And interestingly enough, it was both ends of the spectrum, if you like. We had older customers who were totally used to shopping in stores, suddenly discovered online. Isn't that difficult? And our total active customers have increased overall, particularly in the last 18 months despite the lockdown. So we have absolutely attracted new customers. And I think one of the things is when you go in and search Ralph Lauren or you search whatever brand, we have most of those brands that people want. So and particularly in Beauty, where we've had us for a very strong period with the Beauty brand. Okay. Okay. And lastly, the online business, I mean, I know it's cycling a really big comp in the second half of last year, but it looks like growth stalled in the second half of FY 'twenty one. Is it just a cycling of and stores reopening? I mean, what do you put that down to? Yes. It's a mix of that. I mean, as I said in one of the earlier slides, what we've seen is that the 2 businesses complement each other. So as soon as stores are shut, online takes off, particularly when we get a lockdown that's over a week. And we've seen that through the period, and we're seeing it right now. And then as soon as stores open, people are desperate to get out of the house as I'm sure everyone is right now, whether you're in Victoria or whether you're in New South Wales. So it's a flex between the So we're also an advisory we are anniversaryizing from a store perspective, lockdown. So we've got significant growth from last year. But the problem is that if you're you're trying to compare things, as Nigel said earlier, trying to break things down, but trying to nail a jelly to a wall. I mean, we can do it get through and get to the normalize. And that's what I was not doing the question. The business flips and flops in terms into online or into stores depending on whether we're in lockdown or out of lockdown. And I think until we get out of lockdown and we can get a pandemic strategy that isn't a one trick pony, which is lock everybody down all the time, then I think we've got more we'll have more opportunity to see how things are normal normalized. But the thing for us is we're multichannel. So we follow our customer and deliver to our customer on their terms. So the great thing is for us is that we're able to flex between the 2. So if you're online only and don't have stores or if you have stores and not online only, then you will be missing out. And I think an example of that in the UK is Primark coming out with the numbers the other week. So I think Google is stores only. So for us, Knox channel, we're there for our customer. They can shop however we want. And then the other thing as well is when you think that 70% of our sales go through Mile One, that's it there. It provides the sort of stickiness, if you like, in terms of they stick with us and shop with us. Look, overall, I think there's been some really interesting questions made and good improvements in the business over the last couple of years. So well done and keep it going. Thank you. Very much, Stephen. Thanks. Thank you. Your next question comes from Shaun Cousins with UBS. Please go ahead. Hi. Thanks. Good morning, John and Nigel. Just a further question regarding online. Can you just talk a little bit about I guess it goes to that sort of commentary around the possibility of spinning out online? And I think we've seen that happen in Canada and the like there. Maybe just how important are the stores for your online business, particularly maybe to what proportion sales click and collect versus sort of delivery? And is it a different customer that is shopping with you online on stores? Or do you have a significant overlap, please? Yes. Good morning, Sean. Yes, I think, look, COVID doesn't help because it distorts the behavior between stores and online. So that's just the caveat, I'd say, around this because we're not we haven't been in normal trading conditions for at least 1.5 years now. But we have the best customers we have or the most valuable customers we have are those that shop in store and online. We know that 70% of our store purchases start with a visit to our website. We know that from stores that we drive customers from stores to online, and we can see that through stores in sales in stores and iPads. Clean and Collect is a smaller part of the business at the moment, but it fluctuates depending on the time of the year and what's going on. So when the Oz Post turns off deliveries, then Click and Collect goes through the roof. So I think for us, it's about having the flexibility to serve the customer whichever way they want. And I think in terms of going forward, we're more valuable having both. And it's interesting, you talked about accounts and Hudson Day, but it's all part of the same family, Saks. And I know them very, very well. And they sort of talk me through that they need both need each other. It's a symbiotic relationship between the 2. So that's why they spun it out the saks.com from the stores, but they still need the stores. But the thing is the saks.com business, for example, wouldn't be able to sell Oscar de la Renta dresses because it doesn't have a retail presence. So therefore, they wouldn't get those that range of product. So having that too allows you to really maximize what you can do with your business and also with your brand partners. But I think the underlying issue that we have at the moment is we don't know what the normal looks like. That's very fair. And maybe sort of the I guess a continuation of that question around what normal looks like. CBD has been an area of weakness in aggregate for retail. You've got CBD expiries, I believe, coming up in Brisbane and then Sydney. How are you thinking about the space, particularly, I think, Sydney, you've got quite a lot of space and you're probably over rather than under spaced in Sydney. How are you thinking about spaced ambitions in that area? And what could that mean for the business in terms of do you get access to potentially lower rents? Or would it be a broader deal with in that Instant Center group that has Sydney as well as many other of your stores. I'm just curious around how you're thinking about your CBD space going forward. Yes. I mean, we're in negotiations at the moment, so confidential. But I think if you take our fundamental belief around space, it will be smaller. So we believe we can do more with less. We've proven that in the numbers on Belconnen and Cairns and the other stores that we've downsized, and there's a lot more to come through. So we do believe that we will we downsized Perth. We downsized Adelaide. Melbourne, we gave back the 2,000 square meters in the Emporium. So you can expect more of the same with Brisbane and Sydney. Fantastic. And just finally, just in terms of if we think about your business, you've got access to tremendous brands in the beauty categories. You probably would like to emulate that in the apparel sort of space there. How is the improved performance helping you get access to the brands, particularly the ability to offer sort of an onlineoffline solution for and a way to get a really good reach throughout Australia to sort of key brand partners? If you think about the success you've had with Polo, does that make it easier for you to go after and get access to other brands that particularly on an exclusive basis that probably come with higher rather than lower margins? Yes. That does it does help. I mean, the fact that the brands know we are brand builders, not brand takers. There's a difference between the 2. So we want the brands to build with us. We want the brands to partner with us. We will partner with them. And we want their stores, their shop in shops within our stores to look like a standalone store of their own down the road if they had one. And that's a really important key point. But the other thing as well is our beauty business, we know, which is incredibly strong. We've attracted Maison Dior, which is the first one in Southern Hemisphere in Melbourne. They put that in about 6 months ago. So we can attract the best brands. Now for us, there's a threshold from a price point perspective. So we don't, as I said always, the times we talk and don't tour visits, while sweet spot is in that sort of mid upper price point, not the luxury or the prestige. That's not for us. Okay. Thanks so much, Phil. Thank you. Thank you. There are no further questions at this time. I'll now hand back to Mr. King for closing remarks. Thanks everybody for listening in. Apologies for the radio silence, but had a bit of a problem here. But anyway, please feel free to just call us and any questions you have, we'll be more than happy to follow-up. Thanks very much. Have a great day. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.