Ladies and gentlemen, welcome to Super Retail Group FY 2024 full year results call. Today's presentation will be made by Mr. Anthony Heraghty, CEO of Super Retail Group, and Mr. David Burns, Chief Financial Officer, Super Retail Group. Today's presentation is for investors and analysts only. Media seeking access to management should contact Kate Carini, whose contact details appear at the bottom of today's ASX announcements. I would now like to hand over to Mr. Heraghty to begin the presentation.
Thank you, operator, and welcome everybody to Super Retail Group's F '24 full year results presentation. In terms of the structure of today's presentation, I'll begin by speaking to some of our financial and operating measures for the period before discussing the performance of each of our brands. Our Chief Financial Officer, David Burns, who joins me this morning. Good morning, David.
Morning, Anthony. Good morning, everyone.
He'll provide you some more detail on the full year financial results. I'll then provide you an update on how we're executing against our corporate strategy, talk briefly the progress we're making towards our ESG goals, and outline our approach to capital management. Finally, I'll provide a trading update for the new financial year. As always, there'll be an opportunity for investors to ask questions at the end of the call. All right, let's get started. The group delivered record sales of AUD 3.9 billion, achieving sales growth of 2%. Pleasingly, in a competitive environment, we were able to increase gross margin by ten basis points to 46.3%. This revenue and gross margin expansion was offset by cost inflation, with segment PBT down 12% to AUD 343 million, representing segment PBT margin of 8.8%.
This translated into a statutory NPAT of 240 million and a normalized NPAT of 242 million. The board has determined to pay a fully franked final dividend of AUD 0.37 per share and a fully franked special dividend of AUD 0.50 per share. Together with the interim dividend of AUD 0.32 per share, this represents an aggregate annual dividend to shareholders of AUD 1.19 per share. The group is entering FY '24 in a strong position, with no undrawn bank debt and AUD 218 million cash balance. Move over to slide four. I won't speak to detail, but obviously call out the record sales result of AUD 3.9 billion. Sales growth of 2% was driven by new store openings and, pleasingly, a reignition of growth in our online sales.
Flat like-for-like sales reflected the impact of higher interest rates and an increased cost of living expenses, which obviously dampened consumer sentiment and spending. As a group, total transaction volumes increased. So despite a more cautious consumer, we were able to maintain a connection with this customer, and particularly with our 1.5 million active loyalty club members. We still have a large number of customers visiting our stores, our websites, and should retail conditions improve such that customers gain confidence and start spending a little more, we are well positioned to benefit from that. Turning over to slide 5, which shows trends for gross margin, cost of doing business, and profit before tax since 2019, which is our pre-COVID year benchmark. Chart here shows that group gross margin and PBT margin have now settled above those pre-COVID levels.
A 10 basis point improvement in gross margin to 46.3% is a pleasing outcome for the group, given that we've absorbed the impact of the new loyalty program, Rebel, and returned to the cut and thrust of a normal promotional environment. Cost of doing business as a percentage of sales increased by 120 basis points, as the impact of inflation on rent, electricity, and wages was only partially mitigated by the group's cost control initiatives. While inflation appears to be gradually easing, we do expect continued upward pressure on our cost base as we move into FY2025, and of course, the net impact of these gross margin and CODB outcomes has been the inevitable compression of our PBT margin to 8.8% for the period. Let's go to slide 6, customer highlights.
11.5 million active club members, and remember, to be an active club member, you need to have shopped with us at least once in the last 12 months. This 11.5 million active club members now represent 77% of our sales. Pleasingly, club member spend as a percentage of sales has continued to increase across all of our core four brands. In particular, I would absolutely like to highlight once again BCF, where club members now account for 90% of their sales. Across the group, our measure of customer satisfaction, Club Member NPS, has improved from 67- 69, and again, this reflected in improvements across each of the brands. Over the page to slide 7, gives you a snapshot of the continuous improvement we've achieved in our club member metrics over the last 5 years.
I'm proud to say that this is the fourth consecutive year where we have added over a million active club members to the program. In fact, the company has already achieved its FY2025 or 2025 mission statement some years ahead of schedule in achieving our 11.5 million active club members. Achieving this scale and the 77% coverage that our membership of our membership program has been hard-fought. The prize is compelling. Simply put, Super Retail Group can directly influence 77% of our revenue base. We are growing confidence in our ability to defend our high customers, retrieve lapsed customers, stimulate disengaged customers, and moderate investment in low-yield, high-churn segments. On to slide eight, store network.
In terms of the store network, in the period, we opened 28 new stores and plan to open a further 25 in this current year, including two more BCF superstores. And if we go across from slide 9- 12, it provides you a bit of a whistle-stop tour, in terms of investment we've made in the network in 2024, and what we plan to achieve in FY2025. So for instance, in Supercheap Auto, we opened 11 stores and upgraded 28. We're focused on completing over 200 next-generation stores by the end of financial year 2026. Now, the key features of these stores include dedicated increased floor space for high-growth categories like tools, four-wheel drive, better signage, and designated store service zones for the Do It For Me fitment services.
In FY2025, we'll add a further ten stores and undertake a further twenty-eight store refurbishments. In Rebel, we've added five RCX stores in the year, including our flagship store at Melbourne's Emporium, which is featured on slide ten. It's worth a visit, and in FY2025, we plan to open four new Rebel stores and upgrade a further three stores to the RCX format. In BCF, we opened seven stores this year, including our third BCF superstore in Mackay. Mackay people would be very upset with me. Our in-store Tackle Store, which offers an extended fishing range tailored to individual store location, has proven a big hit with consumers. As a result, we plan to open a further ten Tackle Stores in FY2025, as well as five new BCF stores.
Finally, Macpac, having opened nine stores this year, plans to open another six stores next year. We're on track to celebrate our hundredth store opening. Off to slide 13, and I'm pleased to report that our online sales grew by 9% to AUD 485 million. When we first launched our corporate strategy in 2019, our focus was on excelling in omni-retail execution. It was based on the premise that we needed to be agnostic as to which channels our customers chose to shop in, and instead focused on our efforts on ensuring we provide customers with a seamless and positive experience, regardless of the channel they shop. With the group online sales fast approaching AUD 500 million, this approach appears to be well and truly vindicated.
Nevertheless, it's worth pointing out that 93% of all transactions are still dependent on an in-store, highlighting the ongoing value of our national store network and our omni-retail approach. Slide 15 and 16 are self-explanatory, so what I propose to do is let's go to the brands and start with Supercheap Auto. Once again, Supercheap Auto has delivered a resilient performance this year, confirming the reliability of the auto category and the strength of the Supercheap brand. Benjamin Ward and his team have done a great job delivering a full year sales result and EBIT result, a record customer NPS score, and a record number of fitments for the in-store service program.
Supercheap Auto has continued to excel in customer acquisition, having added more than five hundred thousand active club members to their Club Plus membership program in the last twelve months, to exceed four million active club members. Supercheap Auto also announced the launch of its dedicated trade website, which is now live. The website provides an enhanced digital experience for our trade customers by giving them access to over a million products online, with accurate and transparent pricing. A summary of the financial performance of Supercheap Auto is set out on slide eighteen, but I want to call out the following: Total sales grew by 3% to AUD 1.5 billion. Like-for-like sales grew by 2%, driven by growth in transaction volumes and higher average transaction value.
PBT margin fell by 60 basis points to 13.5%, and PBT decreased by 1% to AUD 203 million. Off to Rebel. So Rebel performance during the year fell short of expectations. Weaker consumer demand, which in turn led to increased discounting from competitors in the footwear and apparel categories, contributed to a sales result that was below previous year. On a more positive note, there were still some highlights for Gary Williams and the team, including the successful launch of the Rebel Loyalty Program, which I'll talk to later in the presentation, the execution of the highly successful Women's World Cup licensed football campaign, and an online sales result, which was 12% higher than the previous year.
A summary of Rebel's financial performance is set out in Slide 20, and when considering the financial performance, I would remind you that this, the results include, for this period, the one-off impact of the revenue deferral of AUD 7 million, which relates to its new points-based member loyalty program. Total sales fell by 1% to AUD 1.29 billion. Like-for-like sales fell by 2%, with transaction volumes and average transaction value, decreasing. PBT margin fell to 7.9%, which translated to a full-year PBT result of AUD 102 million. While these results were disappointing, we have taken a number of steps to improve performance in Rebel. And for the FY25 year to date, we've seen some encouraging results in the key category of footwear and apparel, which are both seeing positive sales momentum. BCF.
Paul Bradshaw and the team, BCF team have had an outstanding year, delivering record sales and 10% EBIT growth. Successful rollout of our in-store tackle format has helped deliver BCF's biggest ever year of fishing sales. BCF has delivered strong growth in other key categories, including four-wheel drive, caravan, and touring. Our Townsville superstore delivered more than AUD 20 million in sales in its first year of opening, and the further success of that superstore in Kawana and Mackay, I've lost my nerve now, has strengthened our conviction that we can roll out this format more widely. Watch this space. A summary of financial performance of BCF is set out in slide 22. In particular, I'd like to call out the following: Total sales grew by 5% to AUD 879 million.
Like-for-like sales fell by 1%, as higher transaction volumes were offset by a modest decline in average transaction value. Segment PBT margin increased by ten basis points to 6.2%. As a result, segment PBT increased by 6% to AUD 54 million. Turning now to Macpac. Following a very soft half due to a mild winter, we did experience improved sales momentum in the second half, helped Macpac deliver a credible full-year result. This year, Australia achieved another full-year record sales result, as well as a record NPS scores in both Australia and New Zealand. It's a testament to the teamwork and collaboration across our brands, that more than 10% of Macpac's Australian sales were actually made in BCF and Rebel stores.
I'm pleased to say that Macpac has also made significant steps, increasing the recycling content across our range, including the introduction of Pertex Quantum NetPlus, which uses fabrics from recycled fishing nets. A summary of the financial performance is set out in Slide 24. I'd like to call out the following: Total sales grew by 3% to AUD 222 million. Like-for-like sales was flat, with 8% like-for-like growth in New Zealand, offset by lower like-for-like sales in Australia, due to that milder Australian winter. Segment PBT margin of 8.5% translated into a PBT result of approximately AUD 19 million. With that, I'd like to hand over to David Burns to talk through more detail to the financials.
Thank you, Anthony. I'll move to slide 25. Group and unallocated includes our corporate costs that we do not allocate to the brands. It also holds development costs, which are early-phase project costs that the brands are not yet benefiting from those projects. This year, by way of example, the loyalty project, OpEx, was held here. And I wish to confirm that these costs are pre-launch costs only. Once the project moves into an operational phase, such as Rebel Loyalty, the brand, Rebel, bears all the full costs of that loyalty program once live. As outlined on page twenty-five, the group unallocated segment was lower than last year. A key driver was interest revenue that was from both a improved cash balance and higher underlying interest rates, noting that we had no drawn debt through the entire period. Moving to slide twenty-six, the group balance sheet.
Our total inventory has increased by AUD 58 million, driven by the opening of a net 23 new stores into the network. Some increases in the size of these stores, in particular, the BCF super stores and the Rebel RCX format, have contributed to a higher stock weight. Inventory cost inflation has also passed through, and a slightly higher stock weight that targeting Rebel, where we felt compared to last year, we were slightly underweight. Overall, stock health was robust. Average inventory per store was in line with our target, and we are confident that we will be executing a stronger in-stock position this year. Net inventory investment was lower due to the higher trade creditors at close position, and pleasingly, our net cash position increased to AUD 218 million. Moving to Slide 27, Group Cash Flow.
Our operating cash flow was solid at AUD 635 million, noting the larger tax payment in FY 2024, a difference of AUD 64 million year-on-year. Adjusting for this item, cash conversion was robust. Capital expenditure of AUD 135 million was slightly lower than what we had outlined this time last year, as progress payments related to the National Distribution Center in Victoria moved into FY2025. This has now elevated the FY2025 capital expenditure from AUD 150 million, previously advised, to AUD 165 million. I'll now move to slide 28, Returns and Capital Ratios. The ordinary dividends determined for the year have lowered to AUD 0.69 in line with earnings.
At the same time, the board has determined a AUD 0.50 special dividend, increasing our total dividend for the year to AUD 1.19, as noted earlier by Anthony. All metrics remain robust, reflecting a strong balance sheet and quality of our underlying earnings. I'll now hand back to Anthony to take us through group strategy and the trading update.
Yeah. Thank you, David. All right, so Slide 30, familiar slide to most, I would imagine, provides an overview of the key pillars of our corporate strategy, which we first released at our first Investor Day in 2019 and reconfirmed at our most recent Investor Day of May of 2023. Our focus remains on growing our core four brands, leveraging closeness to our customer, connecting our omni-retail supply chain, simplifying the business, and excelling in omni-retail. Slide 31 contains further detail on some of our progress to date in executing this strategy, but given time is limited today, I won't talk to detail on this slide, other than to say that the construction of our new automated DC is on track to timetable, with transition from the existing DC facilities to commence in FY 2026.
Now, we still see significant value to be extracted from delivering on our existing organic strategy. The group's made significant progress to achieve many of these strategic goals we originally set for ourselves way back in 2019, and we remain focused on completing that journey over the medium term. Nevertheless, we've begun to turn our minds to what a refreshed 2030 strategy might look like as we transition to our next phase of growth. We look forward to updating the market on our thinking, most likely at the end of next calendar year. All right, over to slide 32, loyalty. So for those of you who attended the Macquarie conference earlier this year, this slide should be familiar to you. There's a couple of updates.
We launched the Rebel Active Loyalty program in October of last year, and this slide provides a further update on how the program is performing against some of the key metrics we use to measure success. I'm pleased to say the program is delivering to our expectations. Most importantly, it is driving increased visitation and higher average basket size from our club members. We continue to focus on increasing the average annual customer value, one customer at a time, millions of times. To date, three point three million club members have earned points under the program, and one-third of members have redeemed those points. Those customers who are redeeming those points are spending more than a twelve times multiple of the value of those points on their redemption transaction. It's a very healthy multiplier.
I would remind you that the points earned of the program have a six-month expiry date. This use it or lose it approach naturally provides an incentive to members to spend their points before they expire, at that twelve times multiple, but it also means there is no risk of a ballooning liability on the group's balance sheet for unused points. Thirty-three confirmed that our program investment in customer loyalty and personalization continues to proceed to timetable, have successfully launched the Rebel loyalty program in October. Our focus has shifted to BCF and Supercheap Auto, where we can expect to launch new loyalty platforms during the course of FY twenty-five. At this point, obviously mindful of commercial sensitivity, I don't intend to provide details of the proposed changes to these loyalty programs, but I do look forward to providing an update later in the year. On to 35.
So I think it's appropriate to spend just a little bit more time than normal talking about the culture and engagement of our team, how our team members are feeling about Super Retail Group when they turn up to work each day. This slide is intended to provide you with a transparent insight of the process we use to measure team engagement and the responses that we received. Twice a year, the group conducts a team member survey in order to gauge what we're doing well as an organization and what areas we need to improve on. The survey is voluntary, it's anonymous, and it's designed to elicit direct, honest, and actionable feedback, and it sure does that. Our most recent survey was undertaken during the period of eighteenth of April to the 5th of May 2024. More than 12,400 team members responded to the survey.
That represents a participation rate of 78%. Remember, it's voluntary. The results of that survey told us a few things, that our overall team member engagement score of 81 was two points higher than the global benchmark. Critically, our top leadership team's engagement score is 86. That's seven points above the global benchmark. Survey results relating to work-life balance were five points above the global benchmark, indicating that our teams feel they're able to balance their personal and professional life. Retail is a team sport. We take development and the well-being of our team seriously. Our team are proud of these results, and they bloody well should be. Off to sustainability, page 36 and 37. This is an outline of how the group is performing on key metrics relating to our sustainability strategy.
There are some highlights, and there are some areas for improvement that I'd like to specifically call out, the first being health and safety. Despite our commitment to health and safety, in FY 2024, we observed a 32% increase to our total recordable injury frequency rate, or TRIFR, to 14.5. Manual handling tasks accounted for 58% of this increase. These instances primarily involved sprains, strains, and cuts sustained by team members while handling products. In response, we've initiated a number of steps to address this increase, including a rollout of a refreshed manual handling improvement program and the introduction of Sonder, which is a program to enhance our early intervention and medical care programming.
On a more positive note, this year, over four thousand team members participated in the I Am Here program, which provides practical tools to enable our team to support fellow team members when they need it. Secondly, diversity and leadership. At Super Retail Group, our aim is to cultivate a workplace which reflects the diversity found within our communities, and to foster an environment where team members feel a sense of inclusion and belonging. For the reporting period, female representation on our board was 50%, and 37% for women in senior leadership. We continue to invest in targeted leadership development for future leaders, having grown the alumni of that program to over seven hundred and fifty leaders. We've retained our citation as a Workplace Gender Equality Agency's Employer of Choice.
The group's 2024 median pay gap was 4.7%, which compares very favorably to the national average of 18.7%. And finally, on community, I'm proud to say we published our first Reconciliation Action Plan, or RAP, setting out the actions we'll take to advance reconciliation. Our RAP was developed in consultation with our team members, in fact, driven by our team members and communities, and will build on some of our important partnerships, including the Clontarf Foundation, the Stars Foundation, and Racing Together. Given time today, I won't talk to the rest of our sustainability highlights, but for those who are interested in further detail, I'd refer you to our sustainability report, which was lodged with the ASX today and available on the group's website. Dividends and capital management.
I'm pleased to confirm that having considered the group's strong balance sheet position, in addition to the payment of the final dividend of AUD 0.37, the board has decided to make a return of capital to shareholders by way of a 50-cent special dividend. Together with the interim dividend of AUD 0.32 per share, this represents an aggregate annual dividend to shareholders of AUD 1.19 per share. The group continues to target a long-term net debt to EBITDA position, pre-AASB 16, of between zero and 0.5 times. While we are not making any comments at this stage, this gearing target would imply the group has capacity for further capital management activity in FY2025. Over to the important trading update on slide 41.
I'm pleased to report the group has made a strong start to FY2025, delivering 3% like-for-like growth and 5% total sales growth in the first seven weeks. We note that Supercheap Auto executed our best performing oil promotion, which brought forward in the calendar compared to the prior corresponding period. Footwear and apparel sales pleasingly have driven higher sales and revenue in Rebel, which is cycling the elevated sales of licensed product in the prior corresponding period relating to the FIFA Women's World Cup. BCF has continued to grow in fishing, caravan, and four-wheel drive. BCF Superstores at Townsville, Kawana, and Mackay are trading well. Macpac has delivered a strong finish to the peak winter sales period. Sales momentum has accelerated in the FY twenty-five year to date, with insulation and rainwear sales benefiting from the cold and wet weather.
The group is targeting CapEx in FY2025 of AUD 165 million to fund its store development program, a new distribution center in Victoria, enhancements to its customer loyalty programs, and cyber, omni, and digital capability. As previously flagged, the group expects duplicated operating costs associated with commencing the transition from its existing distribution center to the group's new distribution center in Truganina, and that will result in a one-off increase to the group's unallocated costs in FY2025 of AUD 8 million. Total group and unallocated costs in FY2025, including this AUD 8 million, are expected to be AUD 40 million, compared to AUD 36 million in FY 2024. While inflation appears to be gradually easing, the group does expect continued upward pressure on its cost base in FY2025.
In relation to wages, I note the group's 2024 retail and CCC enterprise agreement became operative from the fourteenth of July, 2024. The FY2025 increase to retail team members' base rates represents a step up in retail team member expenses from FY 2024- 2025 of approximately 3%. The EA also includes an increase in penalty rates. Targeted benefits from our workforce planning capability, along with other improvements to the EA terms, are expected to more than offset the impact of these penalty rate increases. The outlook for the consumer remains uncertain, given the ongoing cost of living pressure on household budgets.
The group's customer loyalty proposition, the strength of the group's brand, and the size of its loyalty club membership base, means Super Retail Group remains well positioned to perform in the retail market conditions, where customers are carefully managing their spending and prioritizing value for money purchases. Now, before I invite the operator to ask questions, please be advised that based on the group's legal advice, I or David will not be in a position to provide you with any commentary on the pending litigation, other than to refer you to the group's ASX announcements, dated the 26th of April and the 30th of July, twenty twenty-four. With that said, I now hand back to the operator for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up your handset to ask a question. The first question comes from the line of Peter Marks with Barrenjoey. Please go ahead.
... good morning, Anthony and David.
Good morning, Peter.
Yeah, good morning. So just a question on the gross margin outlook into FY2025. Just wondering if you're able to talk through some of the drivers there. I guess, particularly interested in what you're seeing on shipping costs, if you're getting any relief on product costs out of China, and I guess any expectations on the promotional environment.
Yeah.
FY2025.
Yeah, Peter, we know there's some commentary about shipping costs. I think we've all got a little bit spooked by the COVID rates. I think, look, whilst there's some movement, they're within our tolerances, so we wouldn't call that out as a specific risk. We've been talking about gross margin drivers for a while, and our observation is the underlying pattern probably isn't changing a lot. Certainly, we continue to see good terms coming out of the manufacturing base, conscious of currency there in terms of the net impact of that. Promotion looks to be back to normal and stable, so, you know, we're not calling out any specific upward or downward movement to gross margin position driven by any material factor.
Yeah, that's great. And then just a quick one on M&A. Obviously, the balance sheet is still in very good shape. You've got strong momentum in your existing businesses. Feels like there's a little bit of distress out there in retail land. Is now the right time to be adding, I guess, another brand to the group, where you can further leverage some of those investments you've made?
Look, not for now. We've been very clear that the strategy is core four. We've still got work to do as a sort of, as I mentioned in the comments. There is certainly more value to yield, and the distraction of that kind of activity when we've got a strategy that's working effectively, more work to do, feels unattractive at this stage. We have always said, and we still are of the mindset, that if there was an asset out there that delivers against our core four strategy or enhances one of the brands, we'd have our mind open to that, but no change in mode at this time.
That's great. Thank you, guys.
Thank you. Next question comes from the line of Michael Simotas with Jefferies. Please go ahead.
Good morning, everyone, and well done on the result. First one from me, just another one on the gross margin. Historically, and I know there's a lot of noise around COVID and coming out of COVID, but historically, your gross margin seasonally used to be a little bit stronger in the second half than the first half. This year it was the other way around. Is there anything that's significantly changed in the business why that seasonality is different, or is that just sort of the run rate of the changing environment rolling through?
Michael, thank you for the question. There, you are correct. Historically, that was the case. There has been quite a change to our approach to some of the promotional activity. We've eliminated quite a number of promotions, and COVID was an opportunity to reset, and we've been able to maintain the new environment. I would say that the new profile is appropriate at the moment, and I don't see it likely to change. Well, just picking up on the gross margins, there will be some, what you've seen in Rebel, the gross margin performance there has softened.
There's an aspect in there that relates to the loyalty program, and so that's actually played through in Rebel, but other than that, no, we would say that the profile is as it is, as you're currently seeing it.
So more consistent across the halves relative to what it used to be?
Yes. Yes, correct.
Yeah. Okay. No, no, that's really helpful. Thank you. And then the second one for me is on the cost outlook. Thanks for that color on the wage cost. I just wanna make sure I'm understanding it correctly. So I think the point around offsetting penalty rates with more efficient use of labor is clear. On the underlying wage cost increase for team members being 3%, that's below the base rate increase in your enterprise agreement. Is that because you're then cycling provisioning for the one-off payment that was taken in the FY 2024 year?
That's correct. We accrued that throughout FY 2024, and so that's an embedded cost in the 2024 result, and therefore, on a year-on-year basis, the underlying base rate increase is about two and a half, and then you've got the 0.5% related to super. So that's your 2.3.
Yep.
And then note, as we've noted, there were other things that were agreed in the EA, which have been efficiencies that are offsetting those penalty rates, along with our workforce planning system, which we presented on our strategy day.
Yeah, and sorry, Michael, there was provision then paid in FY 2024, that one-off.
Yeah.
Yep, so if you can maintain like-for-like sales at this sort of rate, would it be too optimistic for us to think that you should be able to manage your CODB to sales at a pretty consistent level? And, you know, we've seen all the de-leveraging we'll see, and it should be sort of flat or even improving from here.
Yeah, I think the only hinge in that will be what underlying CPI does and its impact through to the lease book. So we're kind of mon-
Yep.
We've monitored that pretty closely. So look, the arithmetic, you're not a million miles wrong, or more right than wrong, but there is a hinge in there in terms of what CPI does, so that has a factor. So yeah, quite right.
... Yep, that's really helpful. Thank you.
Thank you. Next question comes from the line of David Errington, Bank of America. Please go ahead.
Morning, Anthony.
Morning, David. Anthony, the question. There's two questions I've got. The first one's a very general one. One thing that you said that really interested me, is that you said that your visitations this period was very strong. Obviously, your customer acquisition has been particularly strong, and you mentioned, I think, your shopping basket sizes were down. Now, you highlighted that that highlights that you're very well positioned, you're very well leveraged for a pickup. Can you bring that to life, please? Is that, is that when the economy picks up, that you expect customers to trade up a little bit more? Or do you expect them to expand your basket size? And can you bring to life how you're gonna realize?
Because clearly, the customer acquisition has been outstanding with your clubs. You know, your active club members increasing by 1.2 million. You're saying that your visitations are very high, so you're ready to go when we get pickups. So how can you bring to life, for us, so that we can actually, you know, predict what it looks like going forward? What does that mean? Does it mean that, you know, in Rebel, you go from footwear to buying now more apparel? Does it mean that you go from buying spark plugs to buying more oil? What does that mean? And how do you facilitate that expansion? And then my second question, clearly, is probably not as optimistic, but it's Rebel. Obviously, are very concerned about Rebel, that drop-off.
You know, following on Michael's question, you know, like, you're doing 1% in that trading, which is a nice pickup, but can you go into a little bit more colour for us, a bit more detail as to what you can do to turn this around? Because it looks to me that unless something changes pretty dramatically in the next six months, you're probably gonna have another year where earnings are gonna go backwards again. So can you go into a little bit there in detail with Rebel as to what we can expect? Because, you know, Rebel is the one business that does concern me from an immediate earnings outlook. So if you could do those two questions, Anthony, that'd be fabulous.
David, happy to. All right, we'll take them one, take the first one first.
So I think what we're saying in terms of customer acquisition and visitation is, we don't need to promote to get them in the store, so it's not like they've left us. So you don't have to cold start that customer. They're coming in, they're visiting. That provides the company with an advantage should the macro turn, customer confidence returns, and we start to see some accretion in terms of the nature of the products they're buying. And so, it would be the reversal of the trend we've just gone through, where I think now for the last eighteen months, two years, we've been talking about this movement from wants to needs. And the-
Mm.
example of that is BCF out of the fridge, into the tackle. Supercheap, you're right, it's out of customer car care into car maintenance. Rebel is out of basketball systems into basketball. That's sort of the narrative that we would sort of talk to in terms of that average basket value deflation. As customers become more confident, you should see some retracing of that. And categories like kidswear, which, when you know athletic, so say Nike, Adidas kidswear is a pretty good canary in the coal mine. When things are going well, suddenly Johnny's in a pair of Nike tracksuit pants. When it's not so great, they go to our friends at Kmart, and more power to them.
Mm.
It will just be product mix. And I suppose the benefit for us and how we influence that is, where we've got the customer data, the ability with point accelerators, for Rebel, I'm talking specifically, we're able to better target those customers that are more likely to start marching up that cycle. We're watching basket value very closely, pleased with visitation, but basket value, I think, is the number that we're looking at hitting. There's a macro driver there, like, there's no magic pudding.
Do you think you're still going backwards? Do you think you're still going backwards in that? Do you got a bit more to play out, or do you think we've hit a point where we might start thinking it could turn around?
It's too early to tell. Like, it's slowing. It, it's less worse. I wouldn't declare victory, but, there's some early signs in some of the segments that we're seeing some reversal, but like, slowing being slightly better, as opposed to rocketing, if you know what I mean. So I'd say-
Yeah
... we're well positioned for an improvement, but I'd be gilding the lily to say it's improving now. That would be overstating-
Mm
... the position.
Mm.
Rebel, I hear you. So on Rebel, the things that we've executed in terms of footwear and the introduction of those new brands have performed very well. We're pleased with the way footwear is going. The other thing I would point to is that some of our trade partners globally have had a tough time in terms of the way that they've managed their innovation, and we're not unique there. If we look at what's been played out in the U.S., we are seeing some softness, especially within Nike and Adidas to a lesser extent. From what we can see from the pipeline that's coming through, looks very strong.
Mm.
So I'm optimistic about the new brands coming through. I'm optimistic about some, a retracing of performance from the key global brands. And then when I look at the seven weeks trading data, if I mentally back out, the Women's World Cup actually have quite a credible like-for-like sales result. So I'm feeling more optimistic.
... about Rebel's performance coming into 2025, driven by the reversal of fortune in footwear and apparel. The other thing, which is yet to kick, is what loyalty does once the team actually dial in, and we start getting some incremental benefit from there. So the story will be told in Q2. I think when we're talking again in February, we'll flip the card over, and we'll know the answer of whether those countermeasures that we've deployed have been effective or not.
So you're confident it's probably getting towards stabilization in the earnings, maybe? I don't. I mean, I don't. You don't want to get into guidance, I know that, but.
But sales being the hinge, I sort of, I feel much more confident about sales, because the engine room of that business is footwear and apparel, and the underlying performance within those categories, as we called out, has improved markedly, driven by the look, that footwear change we pulled off last half, was the most significant change in ranging in probably a decade.
That was HOKA and On, yeah.
Yeah.
Yeah.
Yeah, yeah. And frankly, New Balance.
Yep.
So, you know, that's the team. Look, as I think I might have made the remark to you, we caught it late, but we caught it. We've executed it. We like what we see. See what happens in Q2, but we're feeling. I'm feeling much more confident about footwear and apparel in that business.
Okay. Thanks, Anthony. Enjoyed your answers. Thank you.
Thank you.
Thank you. Next question comes from the line of Shaun Cousins with UBS. Please go ahead.
Great. Thanks, and good morning, Anthony and David. Just a question further on Rebel. Can you just talk a little bit about the EBIT margin outlook? I guess, sort of, we're looking at EBIT margins in the second half, down to 7.6%, conscious that that includes some negative impact from loyalty, but I think it's only AUD 2.5 million that was in the first half, I believe. But is that the base that we should be looking at?
And maybe if you could touch on where you're seeing some of the building blocks there around, you know, mix and promotions in GM, and then the rent wages, in terms of how the higher wages play out, but also the higher rents play out, conscious that this is the business with the most service in your staff network, and then also the most shopping center SKU across your business. So just curious around how we think about EBIT margins and some of the building blocks there, please.
Yeah, thanks for that, Sean. I'll take that question. We've got, obviously, the impact that's a one-off of the building of the provision for points, and so that's about a 50 points impact on their margins, 'cause that's just a straight off the top line revenue number and passes through to margins. That's done. It won't be repeated, and, you know, if we grow it slightly, the base slightly, it'll be slightly negative, but it, we wouldn't call that out again. The second component is that, yes, it's the highest exposure in terms of labor cost, Rebel, in the group, and so the impact that we just went through, and called out on the inflation in 2024 that we had from the EA and the one-off payment, was most significantly impacting Rebel.
And so that with getting back to a cleaner year-on-year position for labor will, in terms of rate, will be a factor that will improve and support margins. The secondary item is, yes, Rebel has a much larger exposure to CPI-linked leases, whereas the rest of the large format tends to be a fixed escalation arrangement, whereas Rebel tends to be more susceptible to those sorts of changes through CPI.
Finally, there is, there's no question, as we've gone through that period, we've had the impact of the loyalty redemptions passing through into margins, and so overall, Rebel's margins are at these levels and will be slightly above the 8%, once adjusting for the fifty basis points I mentioned, going forward, because we are providing the customer with an outcome in terms of a loyalty position, which we're expecting to see the benefit in a stronger top-line position. So as Anthony called out, we'll see a stronger top-line growth coming through from loyalty and the impact of those margins, the impact of that loyalty redemption on margins will still have to play through the first half result.
Great. Okay, that's sort of helpful. So just to clarify there, so you'd expect the first half of 2025, or really we should see that the second half of 2024 is really the low, and then we should start to see an improvement from here, but it just sort of depends on how you trade it?
Correct.
Yep. Okay, fantastic. And then my second question is just on net interest. If we think about, it was a bit higher in the second half and, at AUD 30.8 million, should we look at net interest in fiscal 2025 as, sort of doubling that number, conscious that you've also got the special dividend and a step up in CapEx sort of there as well? I'm just sort of curious. It just looks as though that might have been an area where, the result came in a little bit higher, and I think we as a collective are having a rough time forecasting net interest, particularly when it relates to the lease component of net interest, please.
Yeah, so there's a couple of factors in there. The first one is: we've got a underlying interest expense relating to our bank facilities that has been pretty stable, and you can see that in the group and allocated number. There's then the benefits we get from the cash that we have on our balance sheet, which will reduce once we've paid over those dividends. And so you'll see that moderate. We would expect the overall cash impact of interest benefits on the cash to be about the same as the interest costs of those facilities, and so we don't see any net gain in that, which we saw last year.
... In terms of the, how leases are accounted for in, under lease accounting, yes, you're gonna see a slightly higher discount rate, and therefore a slightly higher interest figure passing through related to lease accounting, but obviously offset by, a slightly lower D&A. But, if you're just looking at-- 'cause you, you raised underlying cash issues there, plus the leases. If you just look at the underlying cash position, yes, we'll see probably a neutral, cost of the facilities offset by, interest income on those facilities for the year ahead.
But the lease costs will step up in terms of what we saw in the second half. We'll see that annualize in fiscal 2025?
A- absolutely.
Yep.
and that's a consequence of a higher-
Understood
... interest rate environment passing through lease renewals as they go through.
Fantastic. That's great. Thank you, David.
Thank you. Next question comes from the line of Ben Gilbert with Jarden. Please go ahead.
Morning, team.
Morning.
Just in Supercheap, you've obviously just pushed into tools. I must admit, with your oils campaign, I thought you're about to go into radio-controlled cars with the teasers. But what do you think in terms of your opportunities there around adjacencies? And I'm thinking about Bunnings and what they've been able to do in cleaning and pet, and the phenomenal success they've had there. Could you give us any indication on how you see a yearly take-up of that expanded range you've put across in tools, and how you're thinking around scope to move into more adjacencies? Does it make sense to put a marketplace above the top of it? It's obviously in a great spot.
I'm just trying to think about how you continue to grow above market, and you're obviously pushing out a lot of stores again this year as well.
Yeah. Thanks, Ben. Yeah, look, the tools have been good. You know, we, we've been in that category for some time, and we're just looking to improve our offer, make it more compelling and differentiated, and I think the addition of Kincrome in there has been a good step forward. What's interesting is the impact it's had on our private brand in terms of providing that juxtaposition of value, so that's worked quite well. Probably the way Supercheap think about expansion is not necessarily around shipping into other categories, but creating more breadth in its customer base. So we talked before about the fact that it has been quite homogenous in terms of the type of customer that we've got.
It is almost an archetype, and things like the Bissell carpet cleaner, some of the work we've done with brands like Quad Lock, some of the car convenience and the storage solutions that Benjamin and the team have been working through, actually creates a breadth of consumer as opposed to push out in category. And that's where we've seen some pretty interesting changes. So softening the edges in terms of the look and feel of the store, a bit brighter.
A merchandise mix that's got more breadth, but is still relatively auto specific, seems to carve out a very sustainable and differentiated position in a relatively competitive broader market that you're referring to, where we're able to sort of acquire, frankly, the other 50% of the driving population, being a bit more of a gender diversity in the store. So that's where we sort of see growth, underlying growth, and some of those merch decisions are seeking to achieve that.
That's helpful. Thanks. Second one for me, and I don't mean to be critical, and I know we're just looking at a couple of slides on a page and not actually in your business, but when I look at you, how you've talked about the Rebel loyalty program, it, it's hard to see how it's 'cause the expiry started, what? Towards the end of the last quarter. You've talked about AUD 42 million of points, which you just multiply by twelve, and I know this isn't right, but you get AUD 500 million in sales. But it's not all incremental, I suppose, and I wondered, do you feel you're giving away too much for, and how are you actually measuring it as success?
Because I would've thought this is about capturing more share of basket and driving comp, and it's just hard to see any evidence of that in the numbers, and it's, I would've thought we should have in the last few months, at the very least.
Yeah, look, a fair observation. So a couple of things in terms of, you know, are we giving away too much? So the raw economics of a transaction are incredibly attractive. So your average basket value of a club transaction or a club transaction with a redemption, are accretive to non-club. So there's enough ATB increase in the transaction and the twelve times multiple in the points, that actually make the underlying gross margin wash out at a transaction level. The unit economics of it are actually quite attractive. So that phenomenon sort of happened right out of the box and has held, so that's very pleasing. So it doesn't look like we're seeing any kind of gross margin erosion.
In terms of, okay, well, that's all well and good, but what's happening in the bottom right-hand corner, which I think is the spirit of your question, there are two numbers that we are quite fixated on, which is club member visitation, longitudinally, and average basket value for that visit, which then yields into an average annual customer value. And what we are seeing recorded in the Macpac, is that for that membership group, that 70-odd% of revenue, we have seen a step-up in visitation, and we're seeing a reversal of average basket value momentum. So they are the way we would measure it, and if they continue to drive harder than the non-club business, it should be incremental. So the incrementality's got to come from visitation and baskets, you're quite right, comp, and that's the way we, we think about it.
We are now starting to see, what are we now? Getting close to nine months in, so loyalty is not built in a day, in terms of a performance period. We're starting to see, you know, strong positive signs of visitation and reversal of basket value in those numbers. So we maintain we're on track.
So in terms of, sorry, just finally, in terms of when we should all expect to see some sort of tangible benefit, is it, is this sort of a next calendar year story, you think? I don't know what numbers and amounts, but sort of, like, is it that should then a way to drive a couple of points above market or from that side of things. Is this still a calendar year twenty-five story?
Yeah, we think so, 'cause we should roll off. So it's still October, November, we're still going to be dealing with the revenue deferral associated with the points. So once we've got to roll off that, we should start to see that trend line of visitation hold and grow, and then that reversal solidify on average basket value. So you're right, probably as we get through the calendar year, it should start. We should. We would want to see it delivering an incremental result and outpacing non-club.
Fantastic. Appreciate it.
Thank you. Next question comes from the line of Lisa Deng with UBS. Please go ahead.
Hi. Just a question on Rebel as well. In terms of the category, sort of, sales mix, drivers, we've talked to, you know, an improvement in the footwear and apparel. Can we give some color on how some of the other core categories have been performing, and then into the first seven weeks as well? Thanks.
Yeah, so we probably won't pull the first seven weeks apart at that detail. I suppose the other only comment we sort of provide from a category perspective is that basketball continues as a category to be challenging, and that looks to be a global trend, which is disappointing. We like basketball a lot. So, we'll be watching that category closely. But the engine room of the business is really that footwear, apparel, basketball being more challenging, and the rest of the categories are performing okay.
And then, I guess, in terms of dialing up the certain category mixes, are we planning to do anything different there in 2025, as opposed to the organic, you know, improvement of each of those categories? Like, are we mixing any differently?
Probably the move we've made on footwear, which is we have an anniversaried twelve months, that will be the most significant change in terms of mix, and we're also seeing sort of in the consumer electronics, fitness watches and the like, that's an area that we're looking at enhancing as well. But the main game is really that footwear change that I called out early in the call.
Okay, cool. On Supercheap, just wanted to understand the competitive environment. Obviously, you know, we're also very strong into the first seven weeks, and it looks like we're continuing to gain market share. We've talked a little bit about the category evolution as well, but, like, in terms of the competitive dynamics that we're seeing in the market, how, what are we seeing, and is there any sort of signs of any changes into twenty-five?
Nothing material. We've always said it's a competitive category, but relatively orderly. And so we wouldn't call that any material change in tone, depth, or frequency.
You called out EV as a potential, you know, category that you guys are doing more work as well. Can you give us a little bit more color on what you're doing there?
Yes. So I mean, as EV penetration increases, the observation that we would make is that the core categories that we participate in, especially around car care, a little bit of car maintenance, as I say, a Tesla still needs fluffy dice if you're so inclined, those categories we're able to capture. We've also, if you go into a Supercheap store, you can buy a replacement charging cord, and I suppose we're of the view that if you lose the car charging cords, like you lose an iPhone charging cord, there could be some business in that. So we continue to experiment with that EV segment in terms of looking for profit pools there.
But you know, there is a strong opportunity for the group as it relates to EV penetration and it just frankly within our traditional categories.
Is it just more of a defensive move, or you think it's actually a growth, accretive opportunity or a profit accretive opportunity?
Well, we would argue it's neutral at worst.
Okay. Got it. All right, thank you.
No problem.
Thank you. Next question comes from the line of Adrian Lemme with Citi. Please go ahead.
Good morning, Anthony and David. Look, the first question I had, sorry, I know we've talked a lot on Rebel. I was just interested with the gross margin. It looks like the second half gross margin decline was something in the order of, I don't know, 150-200 basis points, and I know there was the loyalty impact. But I was just wondering, was there also a lot of clearance activity on apparel that brought that down, and might that be considered, you know, one-off if we get a more normal winter next year, please?
Look, yes, Adrian, there's certainly a mix in there. There's the underlying loyalty, as you noted, and there is a mix in there related to apparel. We did have a slow start to winter, and there was a weaker-
... apparel comp in the year before, so you're probably not seeing it in the sales line, but you are just seeing it in terms of the mix of working through some of the apparel lines. And so that was certainly a factor that played through, but I wouldn't. The other aspect is with the Rebel did undertake its clearance program in June this year, in alignment with the rest of the market, whereas last year, its clearance program was started in July, or it straddled June, July this year, so there was some aspects of that as well.
That's very helpful. Thank you, David. One last question I had was, we know in July this year, there was one less weekend compared to last year, and I would've thought your business probably skews more weekend sales than most other retailers. I mean, should we think that, yeah, that was an impact on the trading, and the trading update actually would be even better, if you went through that?
Yeah, it has no impact, 'cause we run a 52-week year, finishing on a Saturday. So the key impact of that would be at Christmas time, when we have the movement around Christmas and Boxing Day in particular, which is a major trading event. But it's a fifty-two-week on fifty-two-week year this year, both finishing on Saturday.
Okay, understood. Thank you.
Thank you.
Operator, we might make this the last question, if that's okay?
Sure, not a problem. The last question comes from the line of Bryan Raymond with JP Morgan. Please go ahead.
Lucky last. Fantastic. Just on gross margins, just across the group, they're a hundred and thirty basis points above pre-COVID. You guys are talking to a sort of pretty steady outlook from here, from what I gather from your earlier comments. I'd just be interested in how far above pre-COVID they are in Supercheap Auto and BCF, because it appears that Rebel would be below pre-COVID with loyalty, and then the recent move, which has been pretty severe to the downside.
So, just trying to understand by division, if you sort of hold similar views, that where we are now is a pretty good proxy for where we're going, or if you expect sort of some unwind of some recent activity or other factors which could drive gross margins going forward in a bit of a different way? Thanks.
Yeah, thanks, Bryan. Look, we do have, obviously, a overarching commentary that the loyalty mechanisms are a factor to consider, and we're seeing that play through in Rebel, and we aren't yet in market with any changes, potential changes to Supercheap Auto and BCF, which we have not yet announced, and so we I don't wanna be announcing those sorts of items on this call. What we would say is there's the pre-COVID, there were a series of promotions that were the businesses were executing, which were at times ineffective, and they were primarily historical, and you tended to complement. So the benefit of COVID was eliminating those ineffective promotions, and all brands have benefited from that.
I would say that Rebel was a stronger beneficiary from that, and that's certainly been a factor. There's certainly been a mixed shift in product that passes through the different businesses, in terms of as you get into higher value product, you do have a lower margin percentage, but you're banking more gross margin dollars, and at the end of the day, we bank dollars, not percentages. And so that's a factor also, that's in the businesses. In terms of brand by brand, we don't make those disclosures. We ceased to do those a number of years. We do disclose the year-on-years movements, which you'll see in our notes, but we haven't disclosed the absolute numbers.
but broadly speaking, we would, as we've indicated today, say that the gross margin levels are sustainable, other than where we determine to put a mechanism in the market, which is a deliberate decision to move away from percentages and focus on those gross margin dollar generation.
Okay, great. And just if I could just follow up with one quick one, just on the trading update in Rebel, specifically. So, you called out, I think, footwear as a driver that's been a bit margin dilutive with the promotional backdrop. So keen to understand if that's still a promotional category, and that's been strong in sales, but maybe not so strong in gross margin. But then also, Anthony, earlier you mentioned about the World Cup and cycling, that you said it would be a credible performance after backing that out. I tend to recall last year, you guys saying that was kind of not too big of a factor, so just trying to understand what sort of magnitude that might be impacting your trading update for this period? Thanks.
Well done, Bryan. Yeah, look, so on the World Cup thing, I think it, if a credible result, sort of, you know, 300 basis points up on PCP, you know, it's there or thereabouts when we did the wash up, thereafter on that. So I think we just, we were just back when we normalized that license number, it probably was a bit racier than we thought in the prior corresponding period. So I think that would explain that. In terms of the footwear result, it's probably. I don't think we'd call out a dilution to gross margin there. What we're seeing is, especially ASICS, with their new Kayano, let's say, if you recall last year, the old Kayano was a bit crook. This one is not.
It's actually performing very strongly, so some good full price sales in there. So between the new ranges of existing brands, introduction of new brands, I think that's pretty tidy.
Okay, excellent. Thanks a lot.
All right. Well, I think that might bring the call to an end. I appreciate everyone making the time for listening in, and for those that asked questions. Of course, as is normal, we'll be out and about over the next four days. We look forward to meeting with some of you and speaking with most of you in the coming days. Okay, I'm wishing you a good morning.
Good morning.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.