Ladies and gentlemen, welcome to Super Retail Group's FY 'twenty one Full Year Results Presentation. There will be an opportunity to ask questions at the end of the presentation. Today's call is for investors only. Media wishing to speak to management should contact Kate Carini, whose contact details appear at the bottom of today's ASX announcement. I would now like to hand over to Mr.
Heredy to begin today's presentation.
Thank you very much. Well, good morning and welcome everyone to SUGAR Retail Group's full year results presentation. In terms of structure, I'll begin by speaking to some of the financial, operational operating and ESG highlights for the period, And then I'll provide a brief overview of our corporate strategy with particular focus on 3 of our strategic pillars. Will also discuss our divisional performance before asking our Chief Financial Officer, David Burns, who's joining us on the call from lockdown in Sydney. Good morning, David.
Good morning, Anthony.
And he will provide more detail on the full year financial results. And finally, I'll provide you with some color is on the FY 2021 4th Quarter Trading together with a trading update for the 1st 7 weeks of FY 2022. Presentation is open. All right, let's get to it. So I'm pleased to report that the group has delivered a record full year result underpinned by strong top line growth, high gross margins and disciplined cost management.
Presentation is a very warm thank you to the broader Super Retail team from our team members in stores to the DCs, management and leadership team. Presentation has been a team effort and one that's generated a very pleasing result. Now clearly, our result was clearly driven by elevated customer demand in all of our categories. However, it was really the group's omni retail business model that was critical in enabling the group to successfully capture demand presentation is expected to be a strong performance in our digital channel where group sales presentation were achieved of over $400,000,000 for the digital channel. As a result of this strong performance, the Board has declared a final and fully franked dividend of $0.55 As we enter an issue rich FY 2022, the group has a conservative balance sheet with no bank debt.
Further with global manufacturing and supply chains that are clearly understressed, we have proactively responded by fortifying our inventory position. Presentation will be recorded. We will talk about that in more detail later in the call. In short, we are well prepared for what is to come. As previously flagged, our operating expenses have increased in the second half, especially as presentation is now open.
And also as we reinvested in the core business, specifically the acceleration of our closeness to customer strategy. As we go to Slide 5, it really provides a high level summary of the top line sales performance of the business in F21 presentation is a record sales result of strong double digit growth in each of the four for the Q4. As we go to financial highlights on Page 6, you can see that group sales increased by 22% to GBP 3,450,000,000. Presentation is a very strong quarter for the quarter. This top line growth delivered an 80% increase in EBIT to $477,000,000 Our statutory NPAT increased by 173%, While our underlying NPAT increased by 107%, reflecting a reduction in below the line adjustments.
Online sales grew by 43% to over $416,000,000 and represented 12% of group sales. Notably, despite the impact of F 2019 on presentation is now open. Good morning, everyone. Good morning, everyone. Good morning, everyone.
Good morning, everyone. Good morning, everyone. Presentation is on page 7, we go to some operating highlights. And this year underscores how we've successfully executed our omni retail strategy. A sharp focus on inventory management and supply chain have been key in managing unprecedented volumes of demand in both our store, in store and online channels.
The group completed over 1,500,000 home delivery orders this year, Which contributed to a 34% increase in home delivery sales to $224,000,000 Click and Collect sales grew by 56% to 192. Our supply chain successfully absorbed a 54% uplift in shipping container volumes and we delivered over 400,000 pallets from our distribution centers presentation is now open to our store network. Pleasingly, following our recent investment in order management technology, the number of deliveries to our online customers decreased by 24%. It's a good result. We've also grown our number of active club members during the period by 22% presentation is expected to be approximately $8,000,000 These club members represent almost 2 thirds of group sales and I'll talk later today on how we think we can build an even stronger relationship with these customers presentation is on slide 8.
Super Retail Group is is committed to social, ethical and environmental initiatives that benefit our team, investors, customers, trade partners and the wider community in which we operate. During the period, we continue to make good progress towards our objective of adopting a sustainable and ethical approach to our business operations, presentation and some of these key achievements are set out on slide 7. Further details of our ESG performance are set out in the appendix presentation and in our sustainability report. There's always more work to do here, but our company is well on its way. For those who have followed Super Retail Group during my tenure as CEO, Slide 1011 should be quite familiar to you.
Our corporate strategy, which we first released at our investor date, November 2019, has served us well over the last couple of years, which have included a bushfire, presentation is a global pandemic and I think from last check and mouse plague, but we're making good progress against our targets. Our focus remains on growing our core four brands, presentation is on the call to the operator, connecting our omni retail supply chain, simplifying the business and most importantly, excelling in omni retail. Slide 11 contains further detail on some of our execution progress to date. But with limited time today, I won't talk presentation is on this slide, but what I want to do is focus on 3 of these strategic pillars in a little bit more detail. So as we've spoken, 43% increase in sales to 416,000,000 all brands representing double digit like for like sales growth on slide 13, very credible result.
Online sales representing 12% of total sales and we expect that penetration to continue presentation is in the medium term out to 20%, 25% penetration levels that we do see in more mature offshore markets. That's our planning assumption. Whilst COVID-nineteen resulted in an acceleration of this online activity, Chart 14 shows you there's a long term trend here across all of our brands is now open to online purchasing. And as we turn to slide 15, what becomes clear is the operational leverage that our presentation is a strong quarter for the company as we execute our omni strategy. Put simply, as the pie chart, presentation.
Our pie graph on the left hand side of slide 15 shows you 94% of everything we sell requires a customer visiting one of our stores. And while the metrics differ across our brands, the chart on the right hand side table on the right hand side shows you a group level that half presentation of our online sales of Yclick and Collect. That tells you that many of our customers value the convenience and certainty of being able to order products online and conveniently pick them up from their local stores. Further, 100% of our online deliveries are fulfilled from the existing store and DC network. Presentation is a very important part of our delivery profile combined with our investment in order management tech has ensured that our network can scale to meet what has become very dynamic demand presentation is associated with online delivery.
So in short, stores are our linchpin to our omni retail strategy. Presentation is a very important part of our strategy. We will now go to presentation is on Slide 17 and start talking about closeness to customer. So again, 17 is a familiar chart for those of you who presentation has been in previous presentations. Book in short shows over the past 4 years, we've been able to grow our active club members presentation is 4 times faster than store numbers.
This is important because as we organically scale our business by growing our customer base Independent of opening stores and the capital acquired, the company can create sustainable operating leverage. Slide 18 provides more detail on a brand by brand basis about our growth in customer numbers, members who have purchased from us in the last 12 months by more than 20% to over to 8,000,000 club members. Now we're determined to hold on to those customers. Our aspiration over time is to grow this club member base to over 10,000,000 club members. Currently, across the group, Active Club members represent more than 63% of total sales, and we think the stickiness of these loyal customers provides an additional level of resilience for the company.
Perhaps just as pleasingly were the strong NPS scores, which our brands delivered during the period, Despite the logistical challenges and general shenanigans associated with COVID-nineteen, so in short, more customers and more satisfied customers, presentation is a good place to start for F 2022. When I last updated the market, as we turn to slide 19 at half year presentation, I indicated that we're really accelerating our investment and our ambition is for our customer loyalty programs. Now with an additional 1.4 club members in our system, There's a worthy price to pay for or even more worthy price to pay for. Now upon completing detailed customer research, has gone through new segmentation, analytical modeling, we are now proceeding to further invest in the company's customer capability. This investment will enable the company to offer structured loyalty benefits that will award high value customer profiles presentation will be able to utilize that rich data through data analytics to hyper personalized offers to 1 customer at a time, presentation is a testament to the 2019 guidance.
This program has already commenced in the 2021 year and obviously requires upfront investment. In due course, our brands will be in a position to reduce churn, increase visitation and ultimately improve annual customer value. With over 8,000,000 customers in our system, it's an ambitious program and we look forward to updating you on our progress as we move through the execution phase. Turning to Page 2021. As I've indicated earlier in the presentation, our near term focus continues to be is focused on organic opportunities to grow our 4 core brands.
Over the last 18 months, each of our brands have been shaping their network strategies, is to commence the rollout of our renewed 5 year store network plan. Combined with our customer and omni digital strategy, presentation is a key opportunity to deliver value for our shareholders. In turn, the group now expects to spend $70,000,000 of CapEx on the network in FY 2022. Slide 22 talks to the key network opportunities for each of our brands. Presentation is in Supercheap, we're looking to add a substantial refurbishment across the fleet to upgrade our old format presentation is the next generation stores and continue the rollout of dedicated service areas to provide more fitment options for the do it for me customers.
In Revel, our stores have been well, they've been a spectacular success and we intend to prioritize that rollout, presentation is a very important part of the rollout of that format across our 25 doors or top 25 doors. This will include the opening of our Rundle Street flagship store in Adelaide in the first half of FY twenty twenty two and we also intend to introduce our specialized in store world op format presentation is in must win categories of basketball, football, running, kids and training more broadly across our network. In BCF, having successfully trialed our small format regional stores at Echuca and Victor Harbor, we will be targeting a rollout across smaller catchment regional areas. This compact 600 square meter format is delivering sales intensity 30% above the fleet average. And given the less demanding regional rents and a modest CapEx requirement, we are achieving quite a bang for our buck.
And finally, in Macpac, we'll continue to roll out stores in our Colder Climate States, so Far North Queensland will miss out for now, in Australia to grow our market penetration. The introduction of Macpac sales in Rebel and BCF this winter has significantly boosted brand awareness and supported increased sales in Macpac stores. When combined with our fleet rollout strategy, we think there's a neat recipe for helping Mackpack achieve improved brand recognition presentation and critical scale benefits. 23 or Slide 23 provides a little bit more detail around these store network targets is a very exciting story around the scale and breadth of the opportunity across our 4 core brands. Okay.
So let's move to the brand by brand details starting on page 27 for Supercheap Auto. For the Supercheap Board to deliver such strong growth in COVID-nineteen disrupted year is a pretty clear demonstration of just how strongly this brand resonates with its customer base. And thanks to a concerted focus from Benjamin Ward and his team on driving club membership, the customer base now includes 2,300,000 club members, a remarkable 37 presentation is a strong quarter for the last 12 months. Like for like sales growth was achieved in all categories with auto accessories and car care detailing being strongest is subject to the financial results. Segment normalized PBT margin improved 3 20 bps to 14.7 percent due to improved gross margins And cost leverage, a great result.
Revel's performance this year as we get to page 28 was underpinned by a very strong online sales performance from Gary Williams and the Revel leadership team and an increasingly strategic and accretive promotional program. Whilst promotion activity will of course normalize as we get into post COVID environments, we continue to believe that through improved sourcing, Leveraging the capability of our group pricing strategic team, Revel can rebase its gross margin above pre COVID levels. Like for like sales growth of 17.5 percent was driven by higher ATV due to increased items per transaction and higher average item value. Like for like sales growth was achieved in all categories with Performance Sports delivering the strongest growth. The difference between total sales growth and like for like sales growth reflects closures during the period as we continue to address the duplication of A Mart and Rebel Stores and the closure of Infinite Retail, which of course we indicated presentation was recorded last year.
Online sales grew by 36 percent to $193,000,000 represents 16% of sales. Gross margins increased due to lower promotional activity, sales mix to higher margin products and the favorable net recovery of supplier cost Inflation segment normalized PBT margin improved by 4 70 bps to 13.9%. BCF was clearly the standout performer across the 4 core brands this year. And whilst clearly, BCF was beneficiary of COVID-nineteen tailwinds, There's been a number of initiatives which Paul Bradshaw and his team have undertaken in BCF this year, which really holds the business in good stead for a post presentation is the successful introduction of Macpac Winter Range in Bcf Stores to start to mitigate seasonality and the just general broadening of the apparel and footwear offer. So again, when trading conditions eventually normalize, we're optimistic about BCF to rebase revenue and earnings above those pre COVID-nineteen levels.
In the meantime, if domestic lockdowns and travel restriction these there is potential for a strong summer. So total sales increased by 49.1 percent to $797,700,000 due to a 48% increase in like for like sales growth. Online sales grew 90% to $86,000,000 representing 11% of sales. Boating, camping and fishing categories all grew strongly, presentation is a very strong quarter for the quarter reflecting elevated levels of domestic tourism and leisure activities. Gross margins increased due to lower promotional sales, again reduced promotional clearance debt and a favorable net recovery of is subject to higher cost inflation.
Segment normalized PBT margin improved by 9 30 bps to 12.1% driven by significant cost leverage. Presentation and to Macpac, Slide 30. Now clearly, Macpac has had an interesting ride, a bumpy ride, we've described since we acquired the business in April presentation is 2018 for AUST135 $1,000,000 but nevertheless, we're really pleased with the trajectory of Macpac over the last 12 months. I think it's fair to say Macpac has exceeded our expectations. And to put that comment into context, Macpac was the most impacted by COVID-nineteen this year presentation is a very credible performance from the Macpac team and they'll be to be congratulated on their execution.
Sales increased by 16.3% was $153,400,000 as a result of a 14.2% increase in like for like sales. Online sales grew by 38% to $30,000,000 representing a 21% presentation of total sales and Macpac Store benefited from an increased brand awareness associated with the successful launch of Macpac product in Revel and BCF presentation is a great initiative it worked to treat. This activity delivered Macpac's second half like for like sales of 31.8%. Gross margins recovered to FY 2019 levels due to increased average selling price, improvement in product sourcing costs and favorable foreign exchange movements. Segment normalized PBT margin increased by 6 60 bps to 11%, all in all a good result.
So with the segments or the brand updates complete, I'd now like to pass over to David Burns to talk through the financials in more detail. David?
Thank you, Anthony. I'll turn to Page 31. This segment includes our corporate costs and costs not allocated in segments. This year, it also holds an additional $5,400,000 of intangible write offs and amortization associated with the new guidance update from Ifrick is on the treatment of software as a service expenditure for our IT platforms. You'll note this issue across most corporates this reporting season.
The change in this guidance has the potential to impact future project costs being treated as OpEx rather than CapEx. The increase in corporate cost is linked to investment in corporate compliance areas and higher cost for insurance and also performance rights expenses. On Page 32, I'll take you to the group balance sheet. Inventory increased $194,000,000 This was associated with which represents a 39% increase on the June 2020 figure, though this should be compared to The June 19 year of $560,000,000 and representing just an increase presentation is really due to purchase lead times increasing, supply chain cost uncertainty requiring higher levels of stock reserves, Elevated levels of demand and increased land and cost of products due to the elevated shipping costs. Net inventory investment has increased to $247,000,000 So this is still lower than compared to June 2019, balance date of 285.
The elevated stock turn is at the moment is supporting an improvement in the net inventory position. And I would note that all temporary extended payment terms that occurred presentation was normalized by December. Net cash at $242,000,000 is $185,000,000 improvement on the prior year. Turning to Page 33. Normalized EPS of $136 has increased 81%, which has moderated slightly compared to underlying profits due to the presentation.
Our fixed charge cover ratio of 3.1 times will moderate Committed debt, undrawn debt facilities, total in excess of $600,000,000 And combined with our net cash position, the group has a conservative balance sheet to support a more uncertain trading environment. Turning to Page 34, cash flow. Operating cash flow of $600,000,000 was comparable year on year is a lower cash conversion. We noted last year that the increase in net inventory sorry, I noted earlier that the increase in net inventory of $80,000,000 year on year presentation is contributing to the low operating cash flow, and this is a consequence of the extended payment terms that we experienced in June 2020 unwinding during the financial year. Capital expenditure of $85,000,000 has benefited in a cash flow context from some occurred in early July and all outstanding debt was repaid in early July of 2020.
I now will hand back to Anthony will take us through the 4th quarter sales and the performance of our FY 2022 trading.
Yes. Thank you, David. All right. So let's turn to slide 36, which just provides just a little bit more detail on our 4th quarter trading. And given the significant COVID-nineteen trading disruptions, which impacted our stores from really late June, This slide is important because it shows a strong trading momentum in the business as we exited the 4th quarter.
4th quarter sales were 15% higher than the prior Consistent with the full year life for number of 23%. So then as we turn to the trading update on slide 37, I think probably the first thing I should note before we get into the detail is that these like for like sales numbers on 37 provide is in other forums. The second point I'd like to make is that the July August trading has obviously been significantly disrupted presentation is expected to be recorded by lockdowns and straw trading restrictions. It's worth noting that today is only in WA, Queensland and South Australia that our customers can shop without restriction and I'm sure it will be different tomorrow. Finally, it is worth noting the group is cycling a 32% like for like in the prior corresponding period.
All right. So with all that said, for the 1st 7 weeks of FY 2021 2022, group like for like sales were 14% below the comparative period In FY 2021, but arguably and more relevantly, they were 12% above the comparative period in FY 2020, About half that FY 2021 run rate, which frankly we're pleased by. The lockdown impacted seeing In stores the decline in store sales being partially offset by a significantly uplift in digital channels, which resulted in record levels is online sales in July August. Indeed, in FY 2022 year to date, online sales have grown 62% with Click and Collect sales is growing by 137%, often an inflated base in the prior corresponding period. As a result, the total group sales in the 1st 7 weeks of We're quietly pleased with that.
Look, we've got a stretch global manufacturing and supply chain is creating delays. There are longer lead times, higher freight costs and shipping delays. This is nothing new and it's certainly not improving, But the group has fortified its inventory position. We're well positioned for the coming peak. And indeed, slide, the group is very well positioned to maximize post lockdown sales opportunities.
Entering F 'twenty two, the group has had a cash balance of $240,000,000 no bank debt, dollars 600,000,000 of undrawn committed debt facility. So we're ready. We're targeting CapEx presentation is in F 2020 2 of circa $125,000,000 to fund the expanded store development program and continue our investment in our omni retail transformation. So in summary, it's been a strong result driven by unprecedented customer demand, but more importantly, the continued successful execution of the group's omni retail strategy. Looking forward, while COVID-nineteen lockdowns and global supply chain issues are creating some unique challenging for us, presentation is a conservative capital structure and more importantly a fortified inventory position.
The strength of our brands, our large active customer base means the group is well positioned for the future. I'd now like to hand back to the operator for questions.
Thank As a reminder, today's call is for investors only. Your first question comes from Kegan Boysen with Jarden Group. Please go ahead.
Good morning, team. First one for me, I'm just interested in any color you guys can give me on the state based performance. So just comparing New South Wales Victoria to WA in Queensland. Trying to get a bit of understanding on how much weakness is coming from the lockdowns and I guess how margins are tracking in the 1st 7 weeks as well given There might be a bit of greater clearing activity with seasonal lines due
to lockdowns. Yes. Thanks for the question. Look, we've always been very cautious around is 7 weeks worth of data. It is microscopic as a point of comparison.
And so to then start to further carve it up, we're always reticent to do it. The other comment I'd make is, I don't think there is really a clean co order stores that hasn't had some sort of lockdown effect presentation is over the period. So when you start dividing up by state, then trying to make sense of a non COVID impact, You get to a very, very minor small sample amount. So look, my strong encouragement is that 7 weeks of data, it's clean, Nearly everything has been impacted at some point by a lockdown or some restriction of trade. It's very difficult to sort of draw A true underlying number over a small segment of data.
As we get closer to the AGM and we Further update, we might be able to get a stronger sense of trends. I think the last one I'd sort of say is that's why that run rate out of the Q4 chart we put in there just to give you a sense of What was happening just prior to lockdown?
No, sure. I mean, is there anything else you could probably add just in terms Of the lockdown states compared to I appreciate what you're saying with all states being impacted, but just if New South Wales and Victoria are Meaningful drag or if the trading conditions are relatively similar given the online uplift?
You can't compare. It's The nature of a lockdown is also different because you've got some stores that are in lockdown, some are in lockout and the time period is different. Queensland lockdown over school holidays that will have a very different impact to what's happening in Victoria. I just I hear where you're going. I'm just Not sure I can give you the answer that you're looking for because it is a very incomplete data set over 7 weeks and Everything is impacted at some point.
Sure. Thanks. Maybe second one
for me as well. Just on the competitive backdrop into the Q4 and the Q1 as well, Are you seeing any change in sort of promotional activity or competitive dynamics? Yes.
We have noted that across a couple of categories, there's presentation is either a continuation of promotional activity, which has been sustained through the year or an acceleration of clearance activity, Which is probably a bit more pronounced than we would normally imagine, which is Curious considering some of the supply chain constraints inbound. So I think as lockdowns impact Different retailers in different ways. There's obviously management of inbound inventory and the like. So I would characterize in some segments there's been an uptick late is in the Q4 and certainly in the 1st 7 weeks, although in the situation we're in now, it's very difficult to tell what it's what. But broadly speaking, it's I would say there's been an increase in promotional activity within
Thank you. Your next question comes from Ayanne Narozi with Sharon Joey. Please go ahead.
Hi, guys. Hope you're all. First off, I'm going to just an accounting one. Just in terms of the depreciation rights, I think the rights you're assuming 1st half of 'twenty one and then that's continued into the second half. So how do we think about that moving cautiously?
Yes. Look, on a sort of a pre AA, if you exclude the leases, which you can look through and you can see those, our D and A is going to be in that sort of circle $100,000,000 sort of level D and A and amortization. So before you apply the leasing standard D and A in there as well. So hopefully that's helpful.
So the second 100, is that right? 100? Second 100 for the year. Yes.
Yes.
And just high level, I mean, if you there's a lot of moving parts over the last sort of 12 to 18 months and it will be moving forward.
If you just take
a step back and look at your business in a normal Can you just give us an idea around some of the key buckets on the cost and gross margin lines and which ones do you think are sustainably Better post COVID and or needs more reinvestment. Just maybe talk through the things. I think you touched on a few in the call around Revill gross margins, but Just a few areas where you think you're sustainably better post COVID and maybe you need more reinvestment as well.
Yes. I want to start thematically and take it perhaps on anything that I missed thereafter. Look, I think probably The greatest driver or one of the biggest benefits has been our gross margin improvement. Now that's been obviously partially driven by a reduction in promotional frequency as demand gross margin because at the same time we've made significant investment in our pricing promotional analytical capability. So we think there's a good bit of leverage there.
Now in terms of the operating Leverage delivered by the enhanced revenue that obviously is going to unwind over time. But as we've been able to grow our online sales, Specifically, Click and Collect Driving Harder Than Delivery. That also provides us is a fair bit of or continued operating leverage where I think the previous assumption was store sales would decline, online sales would increase, variable costs would increase, you'd end up with Margin compression, that doesn't look like that's holding. It looks like we're getting good online growth, strong click and collect growth, Which of course is it has negligible impact or negative impact on operating leverage. So that provides, I think, some good confidence.
And then just from a pure revenue perspective, walk out of the COVID period with 8,000,000 active club members presentation that you don't have to reacquire that you're therefore able to use data and insights to mine and to appropriately target presentation really does give you a big base to work from in terms of almost a rebasing of revenue brought on By that significant increase of just active customers that are in your system. So I think those three drivers I think gives you A bit of insight. And then probably the additional was if you look at the three things we called out being omni retail, we talked about closeness to customer We also talked about the step up in our in store investment that also provides some operational leverage as well.
That's That's perfect. And those 8,000,000 club members, there's a lot of retailers that sort of quite maybe Customers or metrics, for example, have a transaction value for a member versus non member. Do you guys have you guys provided that data before? And how does that look?
No, I don't think we have. No, no. And I think one of the things with members with the way we measure it, which is important is It's not everyone that's in the base. That number is far bigger than $8,000,000 This is the number that's actually shot with us in the last 12 months. So in order for it to grow, there is Acquisition of a customer, but more importantly, there's a retention and activation of that customer to drive purchase.
So it's actually a it's a harder measure, and that's why
Thank you. Your next question comes from Mark Waid with CLSA. Please go ahead.
Good morning, gents. Thanks for taking my question.
Look, I'm just trying
to understand on the sustainability of these sales, I mean, it's been a cracking past 12 months for the business. I mean, even compared with pre COVID, your sales are well ahead. So what's in there to lead us to believe? And I think there is, right? What's in there so that we can think that if sustainably Can be held up there, those sales.
I mean, is it the number of unique customers you've got in the business now that's different? Is it Chopper behavior, I mean, people are more participating in those outdoor activities that you guys play into. What is there about the business that means you can actually hold these sales
Yes. Look, I think in the
short term, if we declare the obvious, I think the fact that The customer base is effectively ensconced in Australia for the and New Zealand for the foreseeable future in terms of international travel. So That leisure dollar, that discretionary dollar is concentrated here. So whilst I think that is in play, We feel quite confident around that underlying run rate continuing all things being equal and clearly they're not, but just all things being equal. So I think it's important To make it clear that there is that COVID macro factor that's driving, right? So that's 1st and foremost.
But you're quite right. Beyond that, we've always said that health and well-being is a driver. It's a macro trend. And if anything, COVID has accelerated people's commitment to health and well-being. We're seeing that in terms of the transformation of the Rebel business from sure, apparel, footwear, Structured sports is important, but personal fitness is really strong.
So we're sort of seeing good solid trends there that gives us some Confidence. We've always said within the leisure category that reconnecting with nature, getting outside was key With frankly half the population seemingly in lockdown at any one time, the notion of getting out and getting back to nature, it's only going to become more attractive. So we've got good tailwinds there. And then we I mean, this is the reason why we're really pushing hard on this investment in our Customer capability. With your 8,000,000 active club members, a movement in ATV, a movement in visitation, A minor movement just the sheer weight of numbers provides enormous leverage.
And I think that's how we feel confident around sustaining business, Which is why we've increased our CapEx and why we continue to push hard on stores. So I think it's a combination of all, but certainly in the short term Those closed borders will continue to be a strong tailwind for the business. And in the meantime, we'll maximize that opportunity, invest in the business to build out those other I think it's a crucial point.
I mean, there's a view from some of it, is it? We're going back to FY 2019, lower sales and profitability. But as you rightly point out, That's not going to happen. It's going to stay up here stronger for longer, so to speak. And just maybe I'll go on then.
No, no, you go ahead.
I was going to change my second question, but is there any other remarks you want to add to that first point?
No, no, I think you're on the right track.
Okay, cool. Maybe one for David. I'm just kind of confused on these comments On the intention to increase the net debt ratio to earnings, reduce the fixed cover charge, Is this just a normalization of earnings here that that will reflect? Or is it some kind of crazy step up in CapEx in outer years? Or Given that really we're running on an organic growth strategy for the business, like why should debt blow out and fixed cover charge Come down in the future.
It's just the elevated level of earnings that we're calling out as we as you've all got in your consensus An assumption of our earnings reducing off the top of this great result this year, there will be Obviously, applying through the EBITDA in the fixed charge and in the net calculation, we'll just see those numbers moderate, but they're still going to be at very conservative levels. There's no intention to increase. Yes, we'll likely move back to a small cash or net debt position that you might see through the year, but it's our intention is not to be in a presentation.
Yes, sure. That's clear. And just to be sure, I mean, we're not going to wake up tomorrow and You've made some acquisition of barbecue floor or something like that. This is a purely an organic growth strategy that we're pursuing at this point in time.
We've been quite clear our strategy is focusing on the core 4. And I think Anthony has even said that our focus is To grow the business organically, so that's been quite well communicated in the business strategy.
I think that's clear. Look, thanks so much, guys. Yes. Spectacular results. All the best.
Thank you.
Thank you.
Your next question comes from Lachlan Costello with Jefferies. Please go ahead.
Good morning, Anthony and David. Well done on the results. A couple of questions from me, if I may. Firstly, just on inventory, given you're stocked
up there, I was wondering what level
of demand are you planning for, leading into Christmas? And just following on from that, are you concerned between which your balance can mix in the COVID lockdowns and slowdown in sales?
Yes. Good morning, welcome. Thanks for the question. Look, when we with inventory planning, especially with supply chain disruption, So we've set out a peak similar to that of last year. So we look the view And still are of the view that with international borders effectively closed that underlying domestic demand should be similar And have appropriately purchased inventory accordingly.
Now my observation around supply chain is that There does seem to be only 2 settings, which you either have inventory or you don't, because the ability to moderate presentation is very impaired. So you're either in it or you're out of it. And of course, our view is it's better to be in it. So of course, as lockdowns continue and if lockdowns were to presentation will take place over the summer peak. I think it would be a reasonable statement for retail in general that that would be problematic On frankly every part of the P and L and balance sheet, retail is entirely seasonal.
We're no different. So if we found ourselves in a heavy lockdown over the Christmas period, I think we wouldn't be alone in having to deal with some challenges. That said, if you wanted to buy inventory for peak now, you just simply will not get it onshore. Presentation is just not physically possible. So it's either here now or it's not here at all.
And I think the conservative and appropriate position is presentation is available to you for the demand that comes. And the second thing I would observe is that our inventory profile is not seasonal or fashion based. So it's not perishable. So if we found ourselves in a position where We had exposure to more inventory than we would otherwise want in a non COVID year. The way we think about that is we would just simply Appropriately just plan over a longer horizon with a higher working capital.
Now given the volatility in the market that just seems a sensible approach Because it's a relatively low risk, but quite a significant reward if you're able to capitalize the demand Over the peak in a closed border, open, less lockdown environment. That's how we concluded our thinking.
That's very clear. Thanks, Anthony. And just second one for me, if I may. Given the challenging global supply chain environment you mentioned, I was wondering if you could provide me further color to what extent you're able to pass on increases in manufacturing and freight costs. Yeah.
If you look at
just the movement of the AUD over the last 5 years and sort of pegging at our sort of underlying gross margin, we've Good form of being able to appropriately manage COGS increases and gross margin, and that's either through Headline price increases, optimization of promotions, focus on mix, all those tools are available to us in the future. And I think you've got a you have got a rising tide here of cost inflation, which is across all segments and all sectors. And so I think it would be fair to say that should this continue, You would expect to see underlying prices increase across the economy as we as Some of these supply chain issues continue to bite. And our view is there's just no sign of them abating. I think if anything, it's you could say it's getting more challenging Because you're now starting to sort of see some of the manufacturing hubs impacted by lockdowns and the like.
So I think the safest place for retailers' inventory at the moment is onshore and in store and that's what we've got. It's in the shed ready to go And that means we've got some flexibility of how we think about future inventory planning and we can afford pause and pull inventory in as we need it and where it's most affected from a cost perspective as opposed to In a panic trying to get things onshore. So we feel like we've bought ourselves some breathing room, but it is a very, very challenging game of chess.
That's very clear. Thanks, Anthony, and well done, guys.
Thank you.
Thank As a reminder, today's call is for investors only. Your next question comes from Sophie Caron with Goldman Sachs. Please go ahead.
Hi, Anthony and David. Thanks for taking my questions. Just a couple from me. Maybe first on the balance sheet is you've got a pretty strong balance sheet position and I appreciate that there's quite a lot of uncertainty at the moment. Can you just talk about how you're thinking about capital management sort of over the next 12 to 18 months?
Yes, Sure. And reasonable question. I think we will think about it when we're through this volatility. I think every time you get to a horizon, you have a sense that things are stabilizing. We seem
is trying to sort of being impacted at the moment by lockdown, but how do you think about a longer term stable level of online penetration for each of the brands? Yes.
Look, we think broadly speaking, it's in that 20% to 25% over the next presentation is 3 to 5 years. I think you might see a slight slowing of it over the short term as we sort of unwind COVID impact. Customers are well used to this channel. They like the convenience of getting access to the stock. They like the ability to quickly pop down and get a click and collect order.
So I think it's a natural part of the retail mix now and I see no reason why it shouldn't be at those levels before too long.
Great. And just maybe a little bit of color by brand. Do you think that 20% to 25% is sort of the achievable range for each brand or do you think some would be naturally higher or lower?
Look, I think if you look at the penetration levels now, it gives you a bit of an insight as to how each of the brands Literally on the road. Fuses blown. I'm on the road. I'm going to pop in and get a new one. So it's a much more In the moment, instant purchase.
So I think the natural penetration levels for the category will be lower Then say, Rebel, which is obviously a little bit more in line with the broader apparel and footwear trends. So I think it's true that they will absolutely have different pegging. And so I'd say Zip Chips at one end of the spectrum and arguably Rebel and Mac Packer at the other with BCF somewhere in the middle.
Okay. Thanks for that. That was everything I had.
Great. Thank you.
Thank you. Your next question comes from Paige Hennessey with the ACC. Please go ahead.
Hi, guys. Thanks for taking my call. Just one question from me. I noticed in the slide presentation on Slide 32, You've discussed how Metpac's inventory hasn't been built. Can you just talk around why the decision was more impacted because last year's PCP had a buildup of inventory or was it a specific decision not to build inventory?
Look, I think
Macpac is in Look at slightly different position from an inventory perspective where it's obviously highly seasonal And impacted by supply chain influence probably a little bit more directly just from where it's manufactured. So the good news about Mackpack is we're coming out of peak winter season for them. It gives us the opportunity to rebuild that inventory in appropriate amount of time as we enter presentation is going to be in the Q4. And we would probably observe that sales performance outperformed expectations
And look, I'd also add that the PCP figure in 2020 was Macpac was in complete lockdown So that in half of the business in New Zealand, because the New Zealand lockdown ran all the way through into June. So That P2P figure is more elevated than normal.
And you're still confident on the ability to get inventory through
For Matpak? Yes. I think, look, everything will be naturally delayed and presentation will be challenging like everything else, but that will be less of a concern. And of course, noting that the key inventory period for MacPACK
Your next question is a follow-up question from Ayanne Nourize with Barrene
Thanks for taking my follow-up. Just in terms of the CapEx profile as well, so the $125,000,000 includes the network CapEx for this year. Is that sort of how you're thinking about it moving forward as well? Or would that sort of come back down to normalized levels?
No. I think that that level, presentation is a very good opportunity to improve the quality of the network for Super Cheap Auto in terms of its presentation is a new generation of stores, the RCX format being and worlds off being cascaded into Rebel, the smaller format stores For BCF and certainly the backpack expansion in Australia. So that capital envelope we think is sustainable Over the medium term.
Perfect. And the rental cost, the negotiations, I think that's about 15% of your fleet where you renegotiate it. I mean, how How do we think about the rent reduction? Is it the sort of typical 5% to 10% on renewals? Or is it more CapEx contribution that you're receiving?
Yes. Look, it's a more dynamic environment. There's certainly differences that are playing through between stores that are in Sort of large format stores versus shopping centers. And so we're seeing Certainly, a more interest from landlords to support us with the new formats in terms of supporting us with capital Because we're actually driving a stronger traffication into the stores, into the shopping centers particularly. So yes, look, we're getting I think it's a more favorable environment that we've seen over the last 5 to 10 years in terms of landlord Posture and certainly where we're bringing new and effective formats into the Precincts or shopping centers.
Thank you.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Heredy for closing remarks.
Thank you for your questions and thank you for your participation in the call today. I look forward to seeing many of you or some of you over the next coming days, albeit virtually. Thank you for joining us and bid you a good morning.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.