Ladies and gentlemen, welcome to Shaver Shop's Results Presentation and Investor Conference Call for the 2023 financial year. Please note that today's call is being recorded. There will be a presentation, followed by a short question and answer session. Presenting today will be Cameron Fox, Shaver Shop's CEO and Managing Director, and Larry Hamson, Shaver Shop's CFO and Company Secretary. If you wish to follow along with the slides, Shaver Shop's presentation has been lodged with the ASX and is also available from Shaver Shop's Investor Centre website. I will now hand you over to Mr. Cameron Fox. Please go ahead.
Good morning, ladies and gentlemen. Thanks for joining us today as we present our financial results for 2023. In terms of the agenda, I'll provide a high-level summary of the financial and operating highlights from the last year, as well as talk to some of the key drivers of the results. I'll hand you over to Larry, who will go through the financial results in more detail. We'll touch upon our priorities for the coming year and provide a quick update on our trading results for the first six to seven weeks of 2024. Let's jump straight into the highlights on slide four.
First off, we set another new sales record for the business, generating AUD 224.5 million, up 0.8% on last year's results, with strong performances from our core men's grooming categories, like men's shavers and our quick and trim business. Importantly, our sales results for 2023 were more than 34% above the pre-COVID-19 result of 2019. The strength in our gross profit margins that we highlighted in our half-yearly results continued throughout the H2, leading to record gross profit margins of 44.5%, which is up 60 basis points. Now, this is clearly one of the standouts in our announcement today.
We kept our costs well controlled throughout the year, managing to drive savings in certain expense categories to at least partially offset the impact of our stores being fully operational for all of 2023 financial year, as well as partially mitigate the inflationary impacts to retail award wages. All of these factors led to net profit being up 0.8% to AUD 16.8 million, and earnings per share coming in at AUD 0.131. A really pleasing result, given the softer trading environment we experienced, particularly in the H2 of the year. Operating cash flow increased 14% to AUD 32.3 million, with stock levels also very well controlled. Finally, on this slide, our board remains very focused on shareholder returns, declaring a final dividend of AUD 0.055, fully franked, consistent with the final dividend from last year.
This brings total 2023 dividends to AUD 0.102, fully franked, an increase of 2.0% on last year's AUD 0.100 per share payout. Really pleasing set of financial results to back up similar results in FY21 and FY22. Let's move on to some of the operational highlights on slide five. While Shaver Shop is a niche retailer, our products are relevant to the mass market across almost all age groups and demographics. As a result, we processed more than 2.5 million orders last year, with around 378,000 of those orders being generated online. This online metric is well down on pandemic-impacted results over the last two years, with customers increasingly returning to our stores to shop.
As I've said many times in the past, our stores are the heart and soul of Shaver Shop, driven by our passionate and knowledgeable team members that strive for customer service excellence each and every day. This is reflected in our Net Promoter Score, or NPS, once again, being at a world-class level of 88.6 out of a maximum score of 100. We opened two new stores last year, and we refitted seven other stores. We also closed our Melbourne Spencer Street store shortly after year-end, given foot traffic levels and shopping frequency just isn't the same as it used to be across Melbourne's CBD. Pleasingly, Click & Collect orders increased to 13.4% of total online sales. Click & Collect has a three-pronged benefit to our business.
Firstly, it brings customers back into our stores, where we can create an ongoing and more personal connection. Secondly, it shortens the timeframe for customers to receive their items and reduces call volumes through our customer service lines. Thirdly, it reduces postage and freight costs, driving increased profit contribution. Despite the obvious inflationary pressures, we were able to keep our costs of doing business relatively flat at 26.2% of sales through actively managing and adapting our cost base. We also maintained our focus on inventory terms, with average stock per store coming at AUD 180,000, or around AUD 22 million in total inventory across the network. Overall, some really pleasing operational and financial metrics for the business.
Let's now move to the next slide and review our top-line sales performance across 2023 and discuss some of the trends and changes we saw over the course of the last 12 months. As I briefly mentioned earlier, shoppers have returned to stores, with around 77% of all revenues being generated in our physical outlets. In-store revenues were up 18% to around AUD 173.5 million. Importantly, while foot traffic across the year is up versus the last few years, it remains well below pre-COVID-19 levels, consumer propensity to spend remained elevated. This was reflected in sales conversion being 43.9% for the year, up 170 basis points on last year, and an all-new all record for Shaver Shop.
As we progressed throughout the year, we observed shoppers being more value-conscious and discerning when making their purchase decisions. In terms of the quarterly trends, we had a very strong start to the year, with Q1 sales increasing 17.5% on FY22. We are cycling these strong sales growth numbers now. Top-line results started to soften early in Q2, but key promotional periods like Black Friday, Boxing Day remained resilient. Total sales declined 4.1% in Q2, which, despite still driving strong profitability for our business, was disappointing compared to our internal expectations. The sales softness in Q2 flows into the next two quarters, with Q3 being down 2.3% and Q4 being down 4.0%.
Interestingly, our end of financial year sale in June was very well received by customers, with Shaver Shop reporting sales growth for the month. This leads us to believe that our customers are well-educated about our products and are willing to purchase when there is a highly compelling value being offered. While sales were down three of the four quarters compared to last year, compared to pre-COVID-19 or FY19, total sales remained very elevated, up 34.1% across the year. So far, indicating there has been no material pull forward in sales through the pandemic. That leads me to discuss one of the major highlights from our results in more detail on slide 7.
Gross profit margins were a record 44.5% in FY23, up 60 basis points on last year, as we continued to balance the desire to drive sales volumes and top-line revenues with gross profit contribution back to the business. This clearly worked very well, with gross profits increasing to almost AUD 100 million last year. In relation to trade-wide models in our core men's and women's hair removal categories, we continue to be fiercely price competitive to retain and grow our market share. However, in adjacent categories where retaining market share is not as high a priority, we deliberately chose not to match in-market pricing when we felt it didn't make commercial sense for us to do so. From a category perspective, trimmers and men's shavers performed very well last year. We had a hypothesis that shavers would rebound when workers returned to office environments.
This ultimately proved correct, with strong growth being realized. Trimmer sales also remained resilient. On the other end of the scale, as expected, Homedics massage products, which grew immensely over the pandemic, were less in demand over 2023. We'll continue to adapt and monitor our pricing strategies, taking into account competitor activity and consumer sentiment, with a goal of maximizing gross profit dollars to Shaver Shop. Pleasingly, there has been a step change in our gross profit margins over the last 3 years, increasing from around 42% pre-pandemic to around 44%-45% today. While supplier and category mix will always have an impact on gross margin percentages, there are also other controllable factors that have influenced our strong margin result, which takes me to slide eight and the contribution from exclusive products.
As a leading specialty retailer of men's and women's personal care and grooming appliances across Australia and New Zealand, we pride ourselves on offering customers the broadest range at all price points across all categories. Equally important is offering customers a truly unique shopping experience. This comes from our store teams being trained to be product matter experts. It also comes from our buying team's ability to identify and source lines from global suppliers on an exclusive basis. Generally speaking, these products are the latest in innovation from these global suppliers that are sold at a higher price point and generate higher margins for Shaver Shop, as well as the suppliers themselves. Now, consistent with last year, almost 50% of our sales and 57.2% of our Gross Profit came from these exclusive product lines.
These results are not only driven by sourcing the right products on an exclusive basis, we also spend considerable time educating our store teams about which products to prioritize at various price points through each category. It is an integrated approach, and over time, it has become a core component of our business model and value proposition to the customer. Looking forward, we have a range of initiatives that are designed to maintain or increase exclusive product contributions to sales and profits in the future. I'll now hand you over to Larry to discuss the financial results for 2023 in more detail.
Thanks, Cameron. We're now on slide 10. Total sales were up 0.8% to AUD 224.5 million, a new record for the business. It was entirely driven by in-store sales growing AUD 26.5 million to AUD 173.5 million, again, setting a new benchmark for Shaver Shop. Offsetting this was the decline of online sales of 32.6%, or AUD 24.7 million to AUD 51 million, I should say. Online sales represented around 23% of total sales in 2023, and have been consistently around that level for most of the year. Moving on to gross profit.
Clearly, the gross margin expansion that was achieved is a highlight and proof that our decision to strategically manage pricing to optimize gross profit dollars was a good one. Operating expenses, or what we call cost of doing business, came in at AUD 58.9 million, up 2.6%, or AUD 1.5 million on last year. I believe this is another very strong result for Shaver Shop, having regard to our stores being open for all of 2023, as well as being able to offset some of the inflationary pressures that have been impacting all retailers. I'll speak more on this later. Depreciation and amortization increased significantly as the number of store leases entering holdover increased during the year, and we continue to reduce the average lease tenor of the portfolio.
You'll see there is a partial offset to this in interest expense, where lease interest is lowered. We have also been focused on investing surplus funds to the extent practicable, now that interest rates on deposits are returning an acceptable amount. All of these factors led to our net profit after tax to be AUD 16.8 million, up AUD 0.1 million, or 0.8% on last year's result. With a slight increase in the weighted average number of shares outstanding during 2023, our EPS declined slightly to AUD 0.131, and our cash EPS came in at AUD 0.139.
For those of you that are relatively new to Shaver Shop, we report cash EPS because we receive a relatively significant tax deduction each year through to 2025, related to the value of the franchise right termination assigned to each of the buybacks that we've completed. It effectively results in cash taxes payable for each of the five years following the buyback to be lower than the tax expense shown in our P&L. If you'd like more detail on this, it can be found in the directors' report in the financial statements, as well as an appendix to this presentation. Slide 11 provides a bit more detail on the relative contributions to sales from our online and bricks-and-mortar channels over the last six years.
A few key takeaways from the top right-hand graph: firstly, you can see that other than the lockdown impacted periods in 2021 and 2022, in-store sales, represented by the gray bars, are growing with the highest ever in-store revenue result for Shaver Shop being generated in FY23. We think this is reflective of the nature of the categories we sell and customers' preference to have a personal face-to-face interaction to understand which product best suits their needs before they make a purchase decision. That's part of the reason why our in-store teams and their product knowledge is so, so important to our business model. The second key takeaway is that while online sales have retracted considerably, they are still almost double the contribution they were back in 2019.
Importantly, you can see in the bottom right-hand graph, online sales as a percentage of total sales has normalized and been very consistent at around 20%-25% of total sales across each quarter. We think this is the new baseline, and we are intent on growing our web sales business again from here forward. The last point on this slide is around fulfillment. Pleasingly, we have seen a broader spread of fulfillment options, being chosen by our customers, with an increase in the proportion of Click & Collect orders coming in at 13.4% of all online fulfillments. We've also seen an increased allocation to express shipping.
We are continuing to seek to optimize the pricing structures for our delivery options to offer online customers value for money that is competitive in the market, while at the same time minimizing the net postage expense to Shaver Shop. Let's move on to slide 12 and discuss the trends in our cost of doing business. Clearly, 2021 and 2022, and to a lesser extent, fiscal year 2020, are not truly indicative of our underlying cost structure due to the impact of COVID-19 across a number of our expense lines. We've highlighted these before, but to bring them back to mind, so you're considering them when we speak to our FY23 results. During the government-mandated lockdowns, we were forced to stand down store team members, thereby reducing our employment costs.
We also secured rent abatements from landlords for the period, the periods when our stores were closed. Lastly, postage is a variable cost driven primarily by online orders and is a key reason why operational expenses rose to 5.0% of sales in FY22. FY23 is considered a more normal year, and recognizing that we are going to have cost pressures coming through our P&L, we actioned various initiatives designed to offset them, including closely managing our rosters to ensure it appropriately matched foot traffic within our stores. We also took a more strategic approach to our digital marketing spend, which drove increased return on investments at a lower overall expenditure. This led to marketing spend as a percentage of sales, dropping 60 basis points to 3.2%.
These are just two of the examples of these initiatives, at the end of the day, the overall increase in cost of doing business as a percentage of sales of 40 basis points to 26.2%, is considered an exceptional outcome for the business. Given these cost pressures are still apparent, looking forward into FY24, we'll continue to seek to offset them as much as possible through actively managing and adapting our business processes and approach. Brings me to slide 13 and our net profit and EPS results. We achieved our second-highest NPAT result on record, coming in at AUD 16.8 million, an increase of 0.8% on last year's result. This means that our NPAT margin was also consistent with last year at 7.5%.
Compared to pre-COVID, being FY19, NPAT has increased 128% compared to the normalized NPAT result achieved that year of AUD 7.4 million. The results are similar when we look at EPS. Basic EPS was AUD 0.131 per share, down marginally on last year due, as I mentioned before, to an increase in the weighted average number of shares outstanding. Similarly, cash EPS was down 0.3%, but these are still very strong results, all things considered. Our balance sheet is strong and continues to get stronger, as shown on slide 14. Net cash ended the year at AUD 13.5 million, up AUD 4.1 million. We have no debt and an undrawn loan facility amounting to AUD 29.5 million.
The cash balance was slightly elevated versus our internal expectations, given the end of financial year sale was stronger than expected, which Cameron mentioned. This, in turn, led to lower stock levels coming in at AUD 22 million or thereabouts, and higher cash. Our current net cash position has been achieved through hard work and changes to our business practices. Unlike some other retailers, Shaver Shop did not do a capital raise at the start of the pandemic. We instead immediately changed our procurement practices to generate as much cash flow as possible. One of the really pleasing outcomes over the last four years has been our ability to keep stock levels much lower than what they were pre-COVID. This has allowed us to release at least AUD 6 million-AUD 7 million in working capital back into the business and significantly improve our stock turns and liquidity.
Our stock position continues to be very clean, something we also plan to maintain going forward. Our right-of-use asset and lease liability balances continue to reduce as we've negotiated shorter lease terms for the last few years now. We also have around a fifth of our leases in holdover as we renegotiate terms with landlords. This is also the reason why you'll see our lease depreciation increasing and our lease interest expense decreasing through the P&L. To be clear, our landlord relationships continue to be very positive, and we expect all of these leases to be renewed on acceptable terms in the coming year. Where it doesn't make commercial sense to keep stores operating, we'll make the decision to close, as evidenced by the recent closure of our Melbourne Spencer Street store in very early July.
Also, to be clear, Melbourne Spencer Street was a profitable store for us. We just chose to optimize the profitability across all the stores in Melbourne, by closing the Spencer Street outlet. Finally, for more context, we are generally renewing leases for two to three-year terms. It means that we now have 30- 40 leases renewing annually, so having 20 or so in holdover is not going to be an unusual situation for us for the foreseeable future. Moving on to our cash flow statement on slide 15. Operating cash flow was up AUD 4 million, or 14.1% to AUD 32.3 million, in part driven by the lower than optimal closing stock position I referenced earlier. This will reverse in 2024, as we've already returned stock back to targeted levels.
Even after adjusting for this, our cash conversion remains extremely strong, as it has always been for our business. Net CapEx, after adjusting for the contributions from new and relocated stores, was AUD 1.4 million. This will increase in 2024 as we continue our store refit program and upgrade some components of our IT infrastructure. Finally, we returned AUD 12.8 million to shareholders, an increase of AUD 1 million on 2022, which takes me to the next slide. With today's announcement of a AUD 0.055 fully franked final dividend for 2023, total dividends for the year come to AUD 0.102, up 2% on last year's AUD 0.10 payout. It also means we are distributing close to 80% of our 2023 net profit after tax.
We have now raised dividend payouts in each year since we listed on the stock exchange back in 2016, a fact our board is very proud of and reflects their continued focus on maximizing returns for shareholders. At the moment, we are replenishing franking credits at the same rate that we are using them for dividends, effectively, we're in balance. As the franchise buyback tax benefit unwinds over the next two years, our tax payments should increase, all else being equal, leading to more franking credits being available. In terms of return on capital employed, we remain above 30%, coming in at 31.6% for FY23. A very pleasing result. The board has and will continue to consider all capital management alternatives for the business.
However, at present, having regard to the relatively uncertain retail environment we're currently in, we've chosen to preserve our strong balance sheet that we've fought so hard to achieve and also pay an attractive, fully franked dividend to our shareholders. Maintaining our balance sheet strength also allows us to consider value accretive acquisitions and other investment opportunities, should they present themselves. That concludes my section of the presentation. I'll now hand you back to Cameron.
Thank you, Larry. That brings us to our FY24 priorities, as reflected on slide 18. While it may seem a tad trivial to some, our top priority remains running a very tight ship and maximizing our controllable operating metrics to the best of our ability. That means providing exceptional customer service every day, maximizing every sales opportunity that we have to drive up sales conversion and average basket sizes, and ensuring our sales focus remains on the products that maximize our penny profit at each price point through every category. We have systems that measure these operating metrics in almost real time, so that our management team can quickly react to any trends we are seeing. Our social media presence remains a huge priority.
While it's improved considerably over the last 6 to 12 months, there is still so much more that we can do as a business to be relevant and relatable to the younger male and female demographic. It's important we establish this today, given they will become a Shaver Shop's loyal customers of the future. We will continue to drive the contribution from exclusive Shaver Shop products. Not only does this differentiate our business in the market, but as was discussed throughout today, it gives us greater control over margins as well. Speaking of gross profit margins, we will continue our strategic approach to adjust prices to remain competitive, offer value for money to the customer, as well as, of course, maximizing gross profit dollars.
We are in the process of upgrading certain components of our tech stack so that they are fit for purpose for the next five to 10 years. These are highly complex projects that don't get undertaken regularly, but are crucial to our future success. As we've discussed, our flagship Chadstone store was relocated to a temporary location within the centre, as our section of the centre has undergone a major upgrade. Our flagship location is scheduled to reopen in November with the latest store design. Our new store will be bigger, around 120 square meters, in fact, and reflect our latest brand standards and store design, as I just mentioned. If the new store design resonates with customers as well as we expect it will, this will then set the benchmark for what all future Shaver Shop stores will look in the future.
Finally, while we're interested in looking at accretive acquisition opportunities, as Larry mentioned, we will retain our prudent approach that we've shown in the past and only proceed if we are very confident that will benefit shareholders. That takes me to our trading update and our outlook. Moving to slide 20. As mentioned at the start of the presentation, we are currently cycling the very strong sales results from Q1 last year, where sales were up 17.5% in the Q1. Now, with that context, year to date, our total sales have declined around 5.1% compared to the prior corresponding period. When you compare against the pre-COVID-19 levels of FY20, total sales remain very elevated, up 27.0% at a total sales level. Like-for-like sales year to date are down in the order of 4%.
Center customer foot traffic is down slightly on last year, and shoppers' propensity to spend also looks lower, likely due to cost of living pressures and interest rate increases. Whilst there are some visible headwinds, Shaver Shop remains exceptionally well positioned as a business. We are a specialist retailer that is a recognized leader in our core men's grooming market. Personal care and beauty remains a priority for many consumers, and we offer budget-conscious DIY alternatives to going to the barber or the beauty salon. We've adapted well in the past to the rapidly changing retail environment, and we will do so in the future by providing our customers with compelling, value-oriented offers relevant to their specific grooming needs and, of course, their price point.
Looking forward to the rest of FY24 and consistent with prior years, having regard to the importance of the Black Friday, the Christmas, and Boxing Day sales period, our full financial year results, it is not appropriate to provide sales or profit guidance at this point in time. That concludes the formal part of the presentation today. We'd now like to open up for any questions.
At this time, I would like to remind everyone, in order to ask a question, please press star followed by one on your telephone keypad. To withdraw your question, again, press star one. Your first question comes from Andrew Johnston with MST Access. Your line is open.
Thanks. Congratulations, Cameron and Larry, for the great results.
Thanks, Andrew.
I'll just zero in on a couple of issues. The, the advertising and marketing spend, was down 3.2% of sales. When do you, when do you expect to see that, to see that shift going forward? Obviously, you didn't have, you know, you, you still produced a pretty solid result even though that spend was down. How do you think about that, going forward?
I think on a total dollar basis, Andrew, I think we'll probably see it pretty flat going forward. The adjustments we made, were particularly in our digital advertising spend, where over the course of the pandemic, you know, we really invested in that channel, particularly through some of the affiliate marketing, Google AdWords and some of the other advertising channels that, that we use, digitally. Overall, I think may increase slightly from a total dollar value, but not significantly versus where we ended up for FY23. We see that more as a, as a permanent change.
Okay. You mentioned that one of your priorities for 2024 is to increase the sales of your exclusive products. Are you planning on sort of expanding into other product ranges to get exclusive products and expanding the relationships with suppliers, perhaps to move into women's products? Is that something, maybe it's not, not something you want to talk about, but, yeah, I'm just interested at how you plan to, how you plan to expand that. I think if I'm right, that's about the same as last year, the percentage of gross profit from exclusive products.
Yeah, correct. Yeah, I mean, the, the short answer, Andrew, is it's really just continuing on with the strategy I think we've implemented successfully for many years. We know that we have significant market share and scale across men's grooming in particular. Certainly, I still feel that there's some low-hanging fruit opportunities with respect to men's grooming as a priority in terms of where we can leverage more exclusives within those, you know, various categories, including, for example, men's body grooming.
Okay. Finally, just around the leases. You were looking to reduce the tenure of the leasing, I think if I heard you correctly? From this point, your average lease tenure is gonna be remain unchanged. Just interested in the strategy for that, the reasons for you doing that. For the leases that you've renewed in the past 12 months, what was the result a reduction in total, in total expense? I suppose that's, that's gonna be the combination of right-of-use assets and the finance costs associated with lease liabilities.
Yeah. There, there's a couple of questions there. The first one in, in terms of average lease tenure, really at just before the start of the pandemic, we started to look at our portfolio, and when the pandemic hit, we deliberately chose to renegotiate leases on a two-year, two or three-year term, was basically the maximum, because we really weren't sure what tenancy mix and what was gonna happen, in a lot of the centers. That was a deliberate approach. The average lease tenure is probably in the order of three to four years now, probably in the upper end of that range.
It may still come down a little bit from where it is, currently, but it probably won't come down that much more because there's certainly some centers, the A-grade centers, where we know, we have good relationships with the landlords, we're in a good position, and we'll renew those, you know, potentially on a five- or six-year lease. For some of the other ones, middle of the portfolio, we may choose to still go with two or three-year terms for the time being, until, you know, the retail environment, normalizes a bit. In terms of the lease expense coming through, I think there's sort of two parts to your question. The first one is, I think, are we actually getting reductions on some of the lease renewals that we're doing? The answer is yes.
On average, we are getting reductions versus the last amount that we were paying on the previous lease. I won't go into the details of, you know, percentages reduced, but on average, we're getting reduction. The second part is, is in lease expense, which you referred to at the end of your question. There are a couple of impacts. Lease expense overall increased. Like, if you look at our occupancy expenses line on the P&L, that should stay relatively flat year-on-year. Because we still had around AUD 300,000 in rent abatements related to COVID-19 coming through in 2023, that was lower than. It increased year-on-year, but it's still probably lower than a normalized result because we had those AUD 300,000 in rent abatements. That's highlighted in one of the slides.
Then going forward, depending on the length of the lease term that you end up negotiating with the, with the landlord, that'll impact, you know, the value of right-of-use assets and lease liabilities you set up on the balance sheet. That in turn impacts the level of depreciation and interest expense. If you have a longer lease term, it's more interest expense at the start of the term, and it reduces over time. I hope that's helped answer your question around the leases, lease interests, and provide a bit more context around why you're seeing the movements coming through on some of those lines on the P&L.
Yeah, no, that's great, Larry. Thanks. Thanks for that. Well, thanks very much.
Thanks, Andrew.
If you would like to ask a question, please press star one on your telephone keypad. Seeing no further questions, I will now turn the call back over to Cameron Fox.
Thank you, Brianna. Just to close today, just to provide a broad summary of how the business is performing and the key fundamentals underpinning the strength of the Shaver Shop business. We are a segment leader, both online and offline. We are in a large and growing market, driven by changing consumer preferences and, of course, new product innovation. Product range is applicable to almost all consumer demographics. COVID-19 has accelerated DIY personal care adoption and introduced new customers to Shaver Shop. Shaver Shop is a differentiated and resilient specialty retail business model. We thrive on service excellence, unparalleled product knowledge, product exclusivity. We are a competitive value-based pricing model as well. We have significant potential to further increase market share, very strong brand awareness in Australia, albeit in New Zealand, it is quite low and growing, proven and highly profitable omni-retail model.
We have a clean balance sheet, no debt, strong cash conversion. We have an experienced management and board of directors, we have a very strong focus on investing for growth and improving total shareholder returns. Of course, we've experienced since listing, very strong dividend payout and the intent to increase the dividend payout year-on-year. Thank you for everyone's support today, and that concludes today's presentation.
Thank you for joining us today. You may now disconnect.