Thank you, Operator, and good morning to everyone. Welcome to Super Retail Group's FY 2025 Full Year Results Presentation. As always, I'll begin by speaking to some of our financial and operating highlights for the period before discussing the performance of each of the brands. Our Chief Financial Officer, David Burns, is joining me here this morning. Good morning, David.
Good morning everyone.
We'll provide you with some more detail on the full year financial results, provide the all-important trading update, then there'll be opportunity for you to ask questions at the end of the call. Let's get started. The group faces a pretty challenging retail environment in FY 202 5. Consumers continue to be cautious with their spending, most notably and frustratingly, frankly, in New Zealand, with elevated competitive and promotional intensity across pockets of our business. There is ongoing inflationary pressure on key lines of cost of doing business. A challenging backdrop, I think, with this context we were pleased to be able to continue to grow our revenue from last year's record base with contributions importantly from both like-for-like sales and network expansion, featuring continued strength in online growth.
It was pleasing to see growth accelerate in the second half of the year across all four brands, with Supercheap Auto and Macpac in particular experiencing stronger momentum in the final quarter. Our continued investment in the store network saw 31 new stores open in FY 20 25, with several more undergoing upgrades in either format or refurbishments in the period. From a loyalty perspective, our Rebel Active loyalty program enjoyed its first full year in operation, tracking well against its targeted KPIs. We announced changes to the Supercheap Auto program, including the launch of the new Spend and Get loyalty scheme, which commenced on 1 July 2025. The investments in our network and loyalty program are yielding positive results from our customers during the year. We saw continued growth in our active club membership, customer Net Promoter Scores, and customer member percentages of total sales across all four brands.
These results also reflect their ongoing strong team member engagement scores, which exceed global benchmarks, and we were particularly pleased with the progress during the period of our team member safety scores, with targeted initiatives and a real focus delivering improvement in the total recordable injury frequency rate from 15.5 last year to 12.1, so a 17% improvement. If we go to the page, slide 4, the group delivered another record year of sales. We've surpassed the $4 billion mark for the first time. Revenue grew 4.5%, driven by 2.6% like-for-like growth and supported by continued network expansion. Gross margin declined 50 basis points over the full year to 45.6%, with an improved performance in the second half. Normalised PBT declined by 3.9% to $329 million, representing a PBT margin of 8.1%, down 70 basis points from the prior year. Normalised NPAT was $232 million.
The board has determined to pay a fully franked final dividend of $0.34 per share and a fully franked special dividend of $0.30 per share. Together with the interim dividend of $0.32 per share, this represents aggregate annual dividends to shareholders of $0.96 per share. The group is entering FY 20 26 in a strong financial position. No drawn bank debt and $63 million cash balance. All right, let's go to Slide 5. I'll obviously make further comments on each of the brands, but just take a total look of sales here. I want to note a couple of things. As I say, delivered full record full year results in terms of sales, total growth 4.5%, 2.6% like-for-like growth, and 1.9% for new store openings all year. Like-for-like sales were mixed within the portfolio.
Strong performance from BCF, more to say about that later, and a solid result from Rebel, contrasting with outcomes from Supercheap Auto and Macpac, which were frankly below our expectations. Pleasingly, growth accelerated across the portfolio in the second half with all four brands seeing improvement in trading momentum. Now while sales are good, we also recognize that PBT margin declined by 70 basis points. On page six, we just wanted to sort of set out the drivers of that 70 basis point decline you see in the shaded boxes on the left-hand side. That's margin evolution expressed in the P&L categories of gross margin and CADB, with the overall decline being attributable to gross margin. By contrast, or not by contrast, but just to provide a different perspective, on the waterfall chart on the right, we presented these margin drivers in terms of strategic outcomes.
These are decisions that we've made for long-term gain versus operational outcomes, which is something that's more in the direct control of management or arguably not direct control of management within the performance period. If you start with those strategic outcomes, you can see they contributed a net 40 basis point decline to the PBT margin and that first and foremost is this investment in the store network. We'll talk a little bit about this later in the presentation. This encompasses the new stores as well as refurbishments and that's at a negative 40 basis points on PBT margin during the period. Now that's because you've got the setup costs associated with that activity as well as the near full run rate of the operating costs of the stores offset or matched against a revenue base that's not yet mature.
In many respects it's a future investment that we should yield in the latter years. The second item in that waterfall chart refers to loyalty, which is mainly the Rebel Active loyalty program which resulted in a 20 basis point impact at group level. That loyalty program however was matched against a planned marketing spend reduction where you see a saving of 20 basis points. We've actually achieved broadly what we wanted to within loyalty and Rebel, which is a net zero PBT impact when you take the gross margin impact and offset against the CODB cost reduction in marketing. On the operational side, the most significant individual driver of gross margin and group EBT was a rise in stock loss. We'll talk about that later in the presentation.
It was elevated in all brands, but notably in Rebel and that was a real disappointment operationally within the period and one that the management team are very focused on. Outside of that stock loss, some gross margin improvement at Supercheap Auto and Macpac along with some CODB saving offset rising finance lease costs. In short, when we have a look at that 70 basis point decline, there are two big drivers. It's that deliberate investment in stores. We always said we invest through the cycle. We've done that and executed, we believe, to a high standard as well as this stock loss issue which is particularly fraught in Rebel over the period. Okay, let's go to slide seven and talk about some customer highlights.
So.
Slide seven shows that we now have 12.5 million club members. Remember, to be an active club member, you have to shop with us. It's not just the mailing list. These are live heartbeats that come into our stores or go online and buy something from us in the last 12 months. This group, this 12.5 represents almost 80% of sales and, pleasingly, club membership or club member spend as a percentage of sales continues to increase across each of the four brands. It's worth noting that BCF is a standout where club members now account for 91% of sales across the group. Our club member NPS score has improved from 69 to 71 and, again, this is reflected in improvements across each of the brands. As I keep saying, the simple equation more customers, happier customers, generally speaking, is a lead indicator of business that should grow.
I would note the largest increase in club membership and club NPS was at Rebel, which we attribute to the Rebel loyalty program gaining traction with our customer base and we'll talk about that shortly. Slide 8 just gives you a snapshot of this continuous improvement over the last five years. I'm proud to say this is the fifth consecutive year in which we've added a million or more active club members to the program. You can see we continue to grow active club memberships. Those club members represent a growing percentage of group sales and their shopping experience with us is increasingly positive. These are shoppers that know and love our brands and, frankly, our team members who visit us regularly and for whom we can communicate directly through our programs.
As I've said a couple of times previously, that means unlike many of our peers, we are not relying on casual blow-ins walking past the four doors. These are relationships that are built over time that we can capitalize on. Slide 9, we talk about store network highlights. We continue to deliver on a strong pipeline of store openings. Thirty-one stores have opened in FY 2025 and we plan to open around 23 in FY 2026. In addition to these new store openings, we converted a further two BCF stores to the superstore format. More on that later. Increasing our BCF superstore fleet continued with the refurbishment of the Supercheap Auto and Rebel fleets. Rebel to that RCX format.
Slide 10, I want to pause here for a second because one of the things this chart, slide 10, really highlights is the importance of this renewed network expansion, especially in that post-COVID period. You recall over the COVID period we had that elevated level of sales. You can see that in the annual group revenue chart on the right-hand side of this particular page. The question that management had is how do we maintain that sales intensity. We sought to look for more effective store formats and start a process of executing a store network expansion program. Today our store network is now 10% higher than it was pre-COVID. More importantly, the increased store network count has been complemented by growth in sales per square meter across all four brands. Effectively, this has enabled us to sustain this elevated revenue trajectory.
On the chart on the right-hand side, one of management's concerns at the time was that we would revert to the pre-COVID trend line that's represented in that dotted line. Whilst we have taken a PBT impact from this investment in network, we're confident that we've been able to maintain the revenue base of the organization, therefore the underlying margin structure, but do so without losing store-based or sales density productivity. All in all, a sound result. Slide 11. Go to Digital Anomaly Highlights. Full year online sales grew by 8% to $524 million and now represent 13% of sales. Click and Collect, which is our most profitable channel, accounted for almost half of online sales, meaning that 93% of all sales are completed in the store.
Our new distribution center in Victoria, which we anticipate will be fully operational in calendar 2026, will further enhance our capacity to meet growing customer expectations for fast and reliable service. Slides 13 and 14 are self-explanatory, so let's go to the brands. I'll start with Supercheap Auto. It was a challenging year for Supercheap Auto with ongoing market softness in New Zealand and elevated competitive activity in Australia resulting in a full year like-for-like sales growth outcome that was just below our expectations. That said, the team made a number of tactical adjustments in the second half resulting in improved like-for-like sales growth and gross margin performance and a restoration of PBT growth for the half. A sound recovery. Supercheap Auto added 600,000 members in the 12-month period and generated a record customer net promoter score. The team completed a million fitments.
This is where customers come in and get their wipers changed, their bulbs changed. It's a good program and in the weather in Sydney today I recommend you pop into a store. We did a million fitments across the network in FY 20 25. That's an 18% increase on the prior corresponding period and we'll talk more about this over the coming months. I'd call out this as a key point of differentiation not only amongst our auto peers, but particularly in generalists trying to enter the auto market. Summary of the financial performance of Supercheap Auto is set out in slide 16. In particular, I would make the following call outs. Total sales grew by 2% to $1.5 billion, like-for-like sales growth of 0.7% in Australia contrasted with a like-for-like decline of 2.7% in New Zealand, with both regions reporting improved sales momentum in the second half.
Despite the elevated competitive intensity, the gross margin improved by 30 basis points as the group maintained promotional discipline, prioritizing profitability and focusing on growing gross profit dollars. Full year PBT margin fell by 60 basis points to 12.9%. PBT decreased by 3% to $197 million in the full year, noting PBT growth was positive in the second half. Over the page, Supercheap Auto team announced changes to its club membership program which involved replacing the previous Best Price credit program with a new Spend and Get loyalty scheme, with changes effective from 1 July 2025. This new Spend and Get scheme is the most generous and straightforward loyalty program in the category. It needs to be because they are straightforward customers.
It's expected to be more efficient at rewarding a broader base of customers as well as stimulating additional visitation and/or spend per visit relative to the previous Best Price credit program. The implementation of the new scheme is expected to be gross margin neutral, with the cost of the scheme offset by the removal of the existing Best Price credit program. Let's go to Rebel. Rebel produced a solid revenue outcome during the year with 3% or 3.5% like-for-like growth generated amidst a period of inconsistent consumer demand. Quite choppy actually, as evidenced by challenging results at the footwear and apparel peers. Following our very well executed peak season over Christmas, the business saw like-for-like sales continue to improve in the second half, supported by strong performance in footwear, licensed apparel, and fitness tech.
Rebel reported a 6% increase in active club membership to 4.1 million members and generated record net promoter scores across all channels as we talked. Disappointingly, we did experience a significant step up in stock loss activity during the period, which negatively impacted gross margins and offset top line performance at the profit before tax level. We're no longer dealing with the teenager stealing a pair of tracksuit pants in the change room. Rather, this is a much more sustained and systemic problem and encourage those involved in it to find alternative employment. The team have implemented a number of measures to address this activity during the second half in an effort to limit the impact on the profitability of business in FY 20 26. A summary of Rebel's financial performance is set out in 19. Total sales grew by 4.8% to $1.4 billion.
Like-for-like sales grew by 3.5% with growth in both number of transactions and average transaction value. The gross margin declined by 110 basis points, primarily driven by this stock loss as well as the full year impact of establishing the loyalty program. CODB was very well managed, declining by 60 basis points to percentage of sales. Full year PBT declined by 1.6% to $101 million. Again, noting the positive PBT growth in the second half, Slide 20 sets out some pointers for the Rebel Active loyalty program and look, it's resonating well with customers. It's performing in line with our expectations as it continues to mature. This slide revisits some of the key performance metrics of the program and how it's resonated with the customers. Since October 2023, we've talked very strong membership sign up. That's accelerated. We're at 4.1 million now, accounting for 81% of sales.
More importantly, that's interesting, but this is fascinating. Average basket value for club members is higher than non-members, while redemption transactions are higher again, growing faster. Members who redeem loyalty points are spending more than 12 x the amount of their loyalty credit. These factors are combining to deliver growth in average annual spend per member, which you'll see on the chart on the left, has steadily increased since the introduction of the program in October 2023. That very subtle growth of that annual club member spend is a key driver in the underlying organic performance of the business. Longitudinally, these factors are combined to deliver growth in average annual club member spend. As you'll see, I've spoken about that.
We're pleased with the progress to date and remain confident that the program is on track to achieve our aim of incentivizing our Rebel active club members to visit us more frequently and to increase their annual average sales spend. All right, let's talk about BCF. The BCF team frankly just shot the lights out. They've had an outstanding year. Record sales, 12% PBT growth driven by strong performance in key outdoor categories of camping, boating, fishing, four wheel drive, caravanning, you name it. There was, however, and we've got to call this out, a very favorable weather pattern in the key trading period. It all came together. However, retail execution was strong from the team, including delivery of store format initiatives such as the in-store tackle store format and the continued rollout of this superstore phenomenon.
A strategic investment in stock availability during peak summer trading was a smart move and the ongoing focus on premium, global and domestic brand partnerships continued to resonate well with our customers. Club members now represent 91% of sales. Net promoter scores are on the improved to record levels. We summarize the financial performances on 22. Total sales grew by 7.9% to $951 million, so closing on that billion dollar mark. Like-for-like sales increased by 5.4% driven by growth in transaction volume. Segment PBT margin increased by 20 basis points to 6.4% as investments in gross margin were offset by a reduction in cost of doing business. Segment PBT increased by 12.3% to $61 million. Key part of the growth strategy is the ongoing rollout of this superstore. If we look on slide 23, you can sort of see that these stores are typically 3,500 m² or greater.
Inside, they offer a bonanza of extended product range across the key outdoor categories of fishing, boating, four wheel drive, camping and caravanning. They feature interactive experiencing zones allowing customers to explore products hands on, and they understand how they enhance their boating, camping and fishing adventures. On average, customers spend 1.5 times more at a superstore, with higher visitation, more items per basket and higher average item values, resulting in superstores contributing disproportionately to BCF's overall growth. There's five superstores in operation. I think we'll see some scope for more, somewhere between 15 to 20 locations in the near term. All right, let's turn to Macpac. Macpac's had a mixed 25. Highlights include a record Boxing Day sales, continued expansion of the network, and ongoing market share gains in Australia.
However, it's been contrasted by weak underlying market growth, most notably in New Zealand, and elevated costs of doing business which impacted profits. Weather conditions on balance were unfavorable, remaining mild for much of the period. Although it was pleasing to observe Macpac deliver strong performance late in the period when the cold weather finally arrived in Australia. It's important to highlight that the growth in cost of doing business has both an underlying inflationary component as well as its network expansion component, with the latter taking on a near full rate of store costs ahead of the seasonally important winter trading periods, noting a Macpac store usually requires two or more winters for it to reach revenue maturity.
Macpac opened 10 stores in the period, which is a lot for them, including the launch of its new premium store fit out in its 100th store in Christchurch and saw solid growth in active memberships. A summary of the financial performance in FY25: total sales grew by 3.8% to $231 million. Like-for-like sales grew 2% with 3.7% growth in Australia, offset by a decline of 0.9% in New Zealand. Both regions improved in the second half, including New Zealand returning to positive growth. Gross margins improved by 30 basis points despite elevated competitive activity and softer market conditions. PBT margin declined to 4.5%, with the gross margin improvement offset by higher costs of doing business. Including this network investment segment, PBT was $10.3 million in the full year FY 2025.
Pause and note the gains made by Macpac in Australia over the past five years as well as the potential for further progress in the medium term. Macpac network in Australia has expanded from 24 stores in FY 2018 to now 64 and has executed its strategy of improving penetration in the Australian market and achieving market share guidance. Its brand awareness has improved from a very low base, but there continues to be substantial upside relative to the levels of brand awareness it enjoys in its home market in New Zealand. Market share in Australia has steadily improved but it remains an opportunity over the medium term as brand awareness continues to climb. The network strategy aims to support a profitable conversion of future share gains. With that said, I might hand over to David to talk more details to the financials.
Thanks Anthony. Grid on allocated costs increased by $4 million in the period. Corporate, customer, and loyalty related costs were lower as projects completed, triggering run costs. To be absorbed by the brand, offset.
By a $9.5 million worth of costs associated with our new Victorian distribution centre which we'd previously signaled to the Net interest expense was higher reflecting the higher cash dividends paid during the period as we lost that opportunity for interest revenue. Moving to slide 28 group balance sheet total inventory increased by $41 million or circa 5% reflecting firstly a 3% increase in the store network and secondly a 1.8% increase in inventory per store. Inventory per store was higher due in part to inflation of cost of goods as well as a strategic investment to improve stock availability at Rebel and BCF which Anthony called out earlier supporting a positive revenue outcome for both brands. Inventory quality remains high with aged inventory. Levels below our target.
Moving to slide 29, group cash flow operating cash flow of $577 million was $58 million below the prior year, reflecting three things: a $39 million outflow of working capital compared to a $33 million inflow in the prior period, and a $72 million differential is attributable to one less payment cycle taking place in the prior year. The operating cash flow conversion of 95% in FY 2025 remains strong. Capital expenditure of $165 million was $30 million higher than FY 2024 and was attributable to the elevated work network investment activity in stores as well as project costs related to the new Victorian distribution centre. Dividend and interest remained high due to the payment of a $0.50 special dividend from FY 2024, which occurred in the FY 2025 financial year.
Moving to slide 30, dividends and capital management, the Board is determined to pay a fully franked dividend of $0.34 per share, taking the full year ordinary dividends to $0.66 and representing a payout ratio at the top end of the group's 55% - 65% payout range. The Board is determined to pay a fully franked special dividend of $0.30 per share. Group has now generated $1.2 billion in operating cash flows over the past four. Years which has been used to fund.
Its capital expenditures programs as well as ordering dividends to our shareholders. Over the same time frame, the Group has distributed a further $170 million of special dividends to return surplus cash on the. Balance sheet and make progress to achieve.
Our targeted gearing ratio of 0 : 0.5 times pre AASB 16 EBITDA. Note that we have now reached. That target range with this final special dividend payment.
The returns and capital ratios on page 31, the group has delivered normalised EPS of $1.029 per share in FY2025, down 4% from the prior year. Post tax return on capital was 17.7% in 2025, below the prior year but comfortably above our weighted average cost of capital. The average net cash position was below the prior year following the payments of the special dividends noted earlier. I'll now hand back to Anthony to take us through the corporate strategy and trading update.
Thanks, David. All right, Slide 33 should be very familiar to you all. It's an overview of key pillars of our corporate strategy which we announced in 2019. We continue to focus on growing our four core brands, leveraging Codeless to customer, connecting our Omni Retail supply chain, simplifying the business, and excelling in OMNI Retail. Now, Slide 34 contains examples of our progress in FY 2025 of executing the strategy, but with limited time today, I won't talk to the detail on the slide other than to say that we are at the end of this strategic cycle and it's probably the last time you'll see this chart in this format. We're pleased, however, with our progress towards our objectives and remain focused on sticking the landing before we move forward with a new strategic agenda, which we look forward to share with you later this calendar year.
Slide 35, a bit of an update on our new Victorian distribution centre, which is now open and operational, serving Rebel stores only at this stage in phase one with little or no disruption to the fulfillment activity to date. The internal fit out is ongoing, including the automation capabilities which are due to come online in the second half of F26. That will be phase two. We are progressing through a phased opening schedule to minimize risk to the operations. We're very conscious of the risks associated with this type of activity, and in particular, we're focused around mitigating that as we approach peak trading period at the end of the first half.
Once this facility is fully operational, the new distribution centre will provide a step change in our online and home delivery capabilities while allowing us to optimize our national DC footprint and deliver operating efficiencies, greater scalability, and working capital savings over time. Slide 35 highlights the evolution of various projects within our capital envelope over the past three years. Investing in new stores and refurbishment is a constant element and will continue underpinning the capital envelope or CapEx envelope, I should say, in the short to medium term. CapEx loyalty peaked in 24, now it's effectively complete following the rollout of the Rebel Active program. F25 represented the peak period investment in supply chain with the new DC in Victoria now commencing its operational run, and that spend is expected to moderate in FY 2026.
Investments in systems and technology commenced in FY 2025, and we anticipate to grow within the capital envelope in the coming years. On to 38. We're making solid progress on our sustainability agenda, focus on supporting our people and managing the impact of our operations and products on the environment. We've provided detail on our progress in our new Responsible Business report, which we published alongside our financial releases this morning. On slide 38, we highlight some of the key advances and achievements during FY 2025 with regards to our ESG focus areas. In particular, I'd once again note improvement in the safety outcome for the year with a 17% improvement in the total recordable injury frequency rate, and we continue to make good progress with our Senior Leaders gender diversity profile, with female representation amongst our senior leaders up 4 percentage points to 41% during the period.
Our 16,000 team members remain highly engaged within the business. It's our secret sauce. Our most recent engagement score of 81 is above the global Achievers benchmark for team members and continues to be supported by high participation rates in the survey. We're pleased that our overall efforts are once again being recognized by a top quintile performance in the S&P Global Corporate Sustainability Assessment, and we continue to achieve a AA ESG rating from MSCI. Before proceeding to the trading update, I think it's appropriate to highlight the management transition for Macpac, which has also been announced today. I'd like to thank Cathy Seeholm for her contribution to the group. Under her leadership, Macpac achieved record sales, expanded its market share in a very highly competitive segment.
On behalf of everyone at Super Retail Group, I wish Cathy and her family all the best for her retirement and her slated return to Australia. We're pleased to achieve the smooth leadership transition with the appointment of Reuben Casey, a former CEO of Kathmandu. Look forward to working closely with Reuben to drive the next phase of growth for Macpac. Onto the trading update, we're pleased to report a positive start to F26 with like-for-like growth of 3.1%, total growth 5% for the first seven weeks. Supercheap Auto continued some improved momentum from its final quarter of FY 2025, delivering a 3.3% like-for-like growth for that first seven weeks, cycling 4% in the prior corresponding period. Rebel generated a 2.7% like-for-like growth. It's sort of reflecting this varying demand patterns observed in the category calendar to date. It continues to be a bit choppy.
Positive contributions from footwear, license and equipment were offset by some softness in apparel, so we'll keep an eye on that. BCF continued positive momentum, albeit we're on the, you know, that seasonally low period of the year. That's apart from caravanning, which is everyone seems to be doing caravanning. Growth was broad based across boating, camping and fishing categories. Macpac delivered like-for-like growth of 1.9% cycling 9% in the prior corresponding period. July trading was influenced by the timing of promotional activity, with a lower level of in-market promotions relative to the prior corresponding period. In Australia, like-for-like sales grew by 3.7%, partially offset by a 1.8% decline in New Zealand. That said, I'd like to hand back to the operator to open for Q and A.
Thank you. If you wish to ask a question, please press star and 1 on your telephone and wait for a name to be announced. If you wish to cancel your request, please press star and 2. If you're on a speakerphone, please pick up your headset to ask a question. First question comes from Anthony Lemmy with Citi. Please go ahead.
Good morning Anthony and David, and well done on the second half turnaround. The first question I had was in order. We saw the better gross margin in the second half. Can I just understand, was that being driven mostly by the Move to multi buy product promoters.
Avoided triggering that Best Price credit on your loyalty program? Was it more about less discounting activity in the market that we heard about from that call where they pulled back on the storewide discounting and Autobarn? I'm just trying to get a feel. For the run rate into 26%,
Yeah. I think it really was the former more than the latter. What we were finding as we got to the end of the first half of Supercheap is we were in a trade-off between volume versus yield. I think I sort of said at the half we could either show up with a soft top line or a soft gross margin line. We decided to step out of the depth or the intensity of the promotional activity to preserve gross margin and market structure. By making some adjustments to promotional structure, the interplay with the Best Price credit and ultimately the replacement of Best Price credit with Spend and Get, it's given us just a much more sustainable gross margin platform to engage with the market and we're quietly pleased with that progress. I don't think I would call an end to competitive intensity. I think that's premature.
I think it's a bit of us getting our house in order to be able to execute in that market in a more sustainable way.
That's very helpful, thank you. Can I just ask one more on the store rollout profile, please? I think in May at your last update you were outlining a target of 810 stores for FY 2026. Today if I do my math right, I've got it at 796 factoring in closures as the target for 2026. Can you talk to what the drivers of the longer store target are, please?
Yeah, so it's going to be a little bit of timing. We'll be very thoughtful about executing stores blindly if the commercial conditions are not appropriate for that, i.e., we don't want to rush into a poor leasing outcome. That's one. There has been some of these stores. You will see, say for instance, the new Rebel Broadway, very complicated fit out that one, which sort of creates a movement to the right. I would sort of say the bottom right hand number is right. It's the time series that's out. I'd also call out, you see us moderating some of the Macpac openings now. They've had a big run at new stores, especially within the year. On reflection, what we would like to see is the Macpac team sort of knuckle down and secure the gain of those new stores before we hit it again with another rollout.
It's just a matter of moderating some of the executional risk associated with the speed of that rollout. We think the opportunity is still around that number. It's just a little bit of movement to the right, as well as some moderation of the Macpac rollout.
That makes sense. Thanks, Anthony.
No problem.
The next question comes from Sean Cousins with UBS. Please go ahead.
Thanks. Good morning, Anthony. David, just a question further to Adrian. On gross margin, it was down 50. Basis points for the year, but I think in May you indicated you were. Down some 70 basis points, which based. On my maths in the last sort. Of seven weeks implies a reasonable expansion there. You touched on the competitive intensity sort. Of issues in Supercheap Auto. Can you talk a bit about some of the broader trends in Rebel, particularly? Around theft and just more broadly how you're thinking about gross margins in fiscal 2026? I note you were silent on gross margins as an outlook comment, where you've made comments on that before in fiscal 2025. Just what went on in the last seven weeks for gross margins and how you think about the 2026 outlook, please.
Yeah, sure. I think Supercheap Auto, it's a bit of a copy and paste answer to Adrian's question. I think I'd probably just sort of say we were not totally confident that we would be able to achieve a neutral outcome in terms of as we wanted to reapply volume in the auto market, we thought we would have to give away more gross margin than we ultimately did. I think we got a better result than we got the result we deserve, but a better result than we hoped for, if we put it that way. On Rebel, on theft, we haven't looked, we've thrown the kitchen sink at it. In terms of countermeasures, we talk more about that later but haven't yet seen a result come through that we go that feels like an improve.
That stock loss issue feels challenging and I mean because for us what we're trying to trade off was we don't love the stock loss. We still want to make sure the customer experience is sound and frankly as important, if not more important, it's the team member safety. I don't really want team members accosting thieves at the door. That just is quite a tricky thing to navigate and it's just meaning we're not getting the bottom right hand result that we're looking for there. Broadly speaking, outside of those two factors, you read my silence on commentary of gross margin for 2026 as there's neither upward or downward inflection. I think we're relatively steady as she goes with the exception of our stock loss issue and we've not called out any moderation in competitive activity. I think that don't read into an improvement there.
It's the same old same old there.
Fantastic. Thank you. Regarding capital management, just the special dividend history has been. A little bit more uneven in terms. Of $0.25 in August 2023, $0.50. This time last year $0.30 this year. Now that you're in the capital management framework of that sort of gearing metric, should we see an end to special dividends and then hence only get regular dividends there? I'm just curious around the path of. Capital management now that you've added an appropriate level in reducing your net cash position once the payment of this special dividend would occur, please.
I think, Sean, considering the goal here has been all about getting to our guided gearing position. That was the goal and the special dividend was a mechanism which the board sought to deploy to achieve that goal. If we're there and we're declaring we're there, it would be logical to assume that a special dividend would not be something that one would expect going forward unless things materially change relative to our liquidity.
Fantastic.
Thank you.
Thanks, Anthony. Thanks, David.
The next question comes from Michael Simotas at Jefferies. Please go ahead.
Good morning, Anthony and David, and well done on the result. First one from me on the auto business. Just interested in how you would assess your balance right now between gross margin and sales. Just extending from the comments you've already made. Looking at the disclosure from your two major competitors, one of them continues to grow sales at a pretty rapid clip, the other one's under pressure. How do you see your trends in your key categories? Do you think you're maintaining market share given you've got slightly different customer and slightly different category exposures to your two major competitors?
Yeah, thanks, Michael. Look, I think we would say it's an improvement to where we were in the first half. By stepping out of the fray, we gave some share up there, we certainly gave up some volume and we didn't enjoy that. We weren't prepared to deploy significant gross margin in the short term to defend it. We just felt that that wasn't the right call. I think history, we'll see how history judges that decision. I still think we're on the right side of history there. I think we are better, we're improved. I would say we're not where we want to be and we will be very thoughtful about that. I don't think we would declare we're there.
I think in terms of your observation around the peers' performance, you clearly got a player that's underperforming in retail and in trade versus a player that's more trade than retail. I would suspect that some of that growth, or certainly on our numbers, has to be coming out of that trade business, which we don't participate in. I'm not going to sit here and say we are loving what we're doing in the retail space. We still think we've got work to do and we've still got some, you know, we're appropriately plotting and scheming to be able to achieve a better result. I would point out the deployment of Spend and Get is a big play here. The storyline there is effectively it's the same gross margin dollar investment against a broader customer base with better returns.
We think that's going to be a factor, but we can make further improvements and we will.
Okay, I appreciate that answer. Thank you. The second one relating to inventory cash flow and just tying it back to capital management. Your inventory's increased year on year as a percentage of sales with puts and takes across the businesses that actually got a little bit lower in the second half. How should we think about that inventory position going forward? Is this the right level? Just tying it back to Sean's question around capital management. I take your point on adjusting for the special, that it'll put you at a slight net debt position, but you guys generate $400 million of free cash flow a year. It's not hard to see you getting back to a positive cash position in the absence of a big inventory investment or something along those lines. I'm just sort of struggling to reconcile the comment around assuming no more special dividends from here.
I might just clarify. I think if we, the goal here is to get to the targeted liquidity position, which with the gearing ratio, which we've done, if we're there, there's not, we would see no need for a special. I think that's just a truism. Your question is will we be there? That's, I think, another question entirely. In terms of our commitment to the gearing, that's not changed. The mechanism which we get there, you know, that will be a decision we'll make in due course. You know, all things being equal, I think that the chances of longitudinal specials are low, in the medium to long term. I'll let David talk to your inventory question.
We've gone and invested in inventory deliberately in BCF and in Rebel because we saw availability was lower than what is optimal, and we've yielded certainly the benefits of that in BCF. Noting we've also got some, the superstore format stores do take a lot more inventory investment, and in those planned store openings, we've got more superstores this year. In the next calendar year, we've. Certainly got a number. We would say that that inventory investment is more intense in BCF and Rebel compared to Supercheap Auto by way of example. Certainly, we see an opportunity to. Grow. Earnings through that. Invest organic investment of capital into stores and into that inventory profile. There's still a profile of stocks in BCF that we're trying to eliminate, which will actually support their top line growth.
That's clear. Thank you.
The next question comes from Josephine Ford with Bank of America. Please go ahead.
Good morning Anthony and team. Congratulations on the result. My first question is just on the Rebel cost of doing business growth. It looks like in the second half it was about less than 2%. Are you able to comment on this better than expected cost growth? You've pulled back investment in advertising. I would have expected more cost to come through from addressing the stock loss issues, or is that likely to just be minimal?
Yeah, the reduction in marketing is quite deliberate. I think when we talked about loyalty over the last couple of years, we sort of said that one of the benefits of loyalty is that your cost associated with acquiring or reacquiring the same customer should go down. If you've got 4.1 million members that represents 80% of your sales, you shouldn't have to spend external marketing at the same rate in order to transact. If we go to that PBT margin bridge earlier in the pack, it's more or less an offset. Whilst you've got a gross margin hit from loyalty at the top, you've got the offset of the marketing line. I would think about it through that lens from a CADB, just line it up against the gross margin negative.
Okay. Going into the first half, are you going to need to put more cost in to address stock loss?
It's one of the interesting things about the stock loss. It has a pretty aggressive Pareto. You're not seeing across the whole group. We're not seeing the same rate of stock loss acceleration. That's the first issue. It is more of a Rebel issue. Then we dive in, double click into Rebel. It is more of a Victorian issue. When we dive into Victoria, there is a number of stores. What we're finding is that in terms of what we're deploying at countermeasures, it is in labor. In terms of just having visibility of team members, that's one. Second is some capital costs associated with physical barriers and the like, body cameras and the like. These are not material impacts. These countermeasures are not material impacts on OpEx nor CapEx for that matter because it is a relatively narrow Pareto of stores that are problematic. It's not across the board, you know, burgle assessed.
Okay, thanks very much guys, and congratulations again.
The next question comes from Sean with CLSA. Please go ahead. Morning, J.
Thank you for taking my question. My first question is related to the, you have now recycled the cycle the first three years of Rebel Active and going to launch Spend and Get using two virtue model. I'm just interested to know if you can please provide some more specific metrics on customer behavior change. You have seen any uplifting average basket value or the visible frequency?
Thank you. Look, on page 20 we sort of provide some disclosure there of the Rebel loyalty program. Obviously, not for a whole bunch of reasons disclosing some specific numbers, but probably the thing that I would call out, and for those that have been listening for some time, if you look at that average annual member spend at a group level, we sort of indicatively said it was around that $270, and the goal of loyalty was to get that arguable $30 to get to $300. What that index chart shows on the right is that for that customer base, which is now 80% of sales, we've been able to—the loyalty program has impacted their behavior. Either those customers have grown in visitation or average basket, which has meant the spend they're making with Rebel annually is growing quite robustly. We're very pleased with that.
What's most interesting is the factor that's impacting that spend is more visitation than average basket, which is frankly what we hoped for, that you get the credit and you make a return. The good news is when you return with a credit in your pocket, you're spending 12 times the value of that credit. The driver metrics here are working pretty much to expectation. It's been a long time coming, but we are certainly seeing some good results there in terms of spend and get for Supercheap Auto. It started in July, where, you know, two months into it, of course I'm going to say it's going well, and it is, but it's way too early, and we'll talk about that as we get to the half.
The good news is with the percentage of revenue that is impacted by these initiatives, it does push through into organic growth, and we would sort of point to Rebel like-for-like performance versus its peers to sort of say, in quite a difficult apparel market, Rebel is an outperformer, and from our analysis is taking share in the category, and we can sort of trace that through to that increase in visitation of the core engine of the business, which is that club membership.
Perfect, thank you. Maybe just a follow up. Galen Scotch Direct's entry into Australia. Considering the global scale and supply chain capability, it's very interesting to know your view of the competition landscape. Sports Direct. Thank you.
Yes, I know Sports Direct, we know well and we anticipate their arrival in later this calendar year into Fountain Gate, and there'll be a nice fresh Rebel store, fully refurbed, waiting for their arrival. We have very strong relationships with the global brands. I would observe that there is the forbearance both for Nike, Adidas, Under Armour. There is not an existence of global agreements. You know, even retailers, global retailers don't have global deals. Given the scale of the business, we're confident that we will not be at a disadvantage versus the new entrants in terms of ranging product availability or wholesale list price equally. We wouldn't call out that we would be at an advantage either. It will be an appropriate battle between who can appeal to a customer with the best offer and the best location with the best team. Of course, we look forward to testing our arm.
Got it. That's a good answer. Thank you.
The next question comes from Peter Everingham with Baron Joy. Please go ahead.
Oh, good morning guys. Just hoping to understand the Supercheap Auto trading update a little better. Looks like it's bounced from trading there from May and June and accelerated even further despite the comps getting a bit harder. I'm just wondering, is there anything to think about in terms of timing of promotions or if you've given up a little bit more gross margin, or are you lapping the worst in New Zealand now? Has the loyalty program had an impact there? I think you launched that at the first of July. there anything you can give us on this? That update would be helpful.
Yeah, I think. Look, New Zealand is less worse, so we've seen an improvement there. We wish we would see it in Macpac as well, but we've certainly seen an improvement there. So macro seems slightly better for Supercheap. Your comps coming into Q1, Q2 of the first half, they were challenged by our decision to step out of the market as well. There's some purposeful decisions we've made back then to preserve gross margin. As we talked about at the half, you probably need to factor that in. Loyalty won't really show itself in terms of Spend and Get realistically, probably for a period. I think I answered Adrian's question at the beginning of the call around some of the impact of the Best Price credit that was creating an impediment to us driving volumes profitably. We've obviously removed that, so there'll be a plus there.
In terms of that, you know, that loyalty mechanic and points spend spinning up, what we know from Rebel is it takes a little while for a customer to kind of get the hang of it and then it starts to, you get a bit of a flywheel. I wouldn't imagine we'll be jumping up and down about that at the half just yet. Early days is fine, but early days is just that, very early days.
Okay, that's helpful. Just coming back to the Rebel gross margins in the second half, looks like they're down about 70 basis points. Is that all theft or is there. Is there any loyalty still coming through or anything on the mix front? It sounds like as we go into FY2026, you've got the transition to the new Truckanini DT. Should that benefit things into FY2026?
Yeah. A couple of things. No loyalty for Rebel. That's just theft. You can see why it's a focus for us and obviously is causing us some consternation and frustration. Truganina? Not yet. The way to sort of think about Truganina as we commence, it's a manual DC at the moment, a brand new manual DC. We're building the automation that will go live for regional distribution in February, March. There'll be some benefit there. We anticipate when we execute these facilities, they're complicated, we've got multiple redundancies in terms of risk management. You plan for the best but expect the worst. I'm going to call out that that's not going to shoot the lights out of stuff because it takes a while to get that initiated and we'll have that fully operational at the end of calendar 2026. Got a bit to go on Truganina.
It's a big program and I think everyone knows when they go wrong, they go horribly wrong. We are being very, very thoughtful how we execute that. We're through phase one unscathed. We're dealing with phase two now and I think we start to see the results come through calendar 2027. Very helpful, thanks.
The next question comes from Brian Raymond with JP Morgan. Please go ahead.
Morning Anthony and team, just on back on the auto loyalty side. Just wanted to clarify. I'm just surprised this isn't a net gross margin benefit, to be honest, given the expiry profile of the points at 28 days. I just wanted to understand how that compares to average frequency and putting that in the context of Rebel with a six month expiry, and I thought that was broadly similar to where frequency is. I just feel like breakage rate will be pretty high in that program, and obviously you're taking out some of the other elements of the old program, which were quite costly. Can you just help us understand those. Assumptions, particularly around breakage and frequency banks.
Yeah, look, I'm happy to. It's 28-day breakage on Spend and Get, and it was 28-day breakage. On Best Price credits, what we. If you look at the mechanism itself, you've got to have spent $100 to be able to gain your first credit on Spend and Get, and so average transaction values are about $50. You're really looking at your stepping visit that you get the trigger of the credit, which then allows us to communicate that to you both. If you've got.
Through EDM, through text, or when people come in at the counter, and also through the website. When you search on the website, you'll see your credits, so those triggers will come forward. The average visitations are in Supercheap Auto of about four times a year versus two times a year at an average level for club members. That's the driver of those frequencies. Revel. The objective was to ensure that there was a, it expired and it wasn't something that sat there for too long. It was about to expire on the basis of your frequency. Whereas Supercheap Auto, again because you've got to get two visits, we've brought forward or maintained the 28 days there. We also know that the Supercheap Auto customer will come in for $5. If they're keen to use them when they pop up, they'll come in and it triggers a visit. If we can get the same sort of, we won't get a 12 times veggie because of the lower dollar value in terms of average transaction value, but we know that it's a much higher multiple than what we were getting on Best Price credits.
Brian, I think you're probably right. Let's see though. I mean, you've got a—this thing's just kicked off. If we take the gross margin investment of the two programs, they're the same, but we obviously have hit go on this because we think there is—it is a better mechanic with a better return over a broader base. You would expect a better result. Right. Okay. Okay.
I'll have to wait and see.
There and then just on Rebel theft. I know we've talked about this. lot, but a comment you made in your prepared remarks, Anthony, around it sounded like it was staff. That was the blindness. You said it's no longer teenagers. Is that, did I misunderstand? Yeah, not staff. It is, it's organized theft. Instead of someone just picking up a pair of tracksuit pants, it's actually someone coming in and taking thousands of dollars in one move and usually assaulting the team members on the way out. You always have a component of internal. Every organization has it. I'm sure we're no different. The jump up here is not that. The jump up here is a significant antisocial structural theft that's impacting a number of stores. Quite frankly, we're not alone. The ARA have had numerous symposiums on this. There's engagement with government, the whole nine yards. It is not the kid shoving a T-shirt in the bag. It's someone grabbing a rack of tennis rackets and then selling them on a marketplace. Yeah, this is different. This is a different thing.
Yep. Okay, that's good.
All right, thanks.
The next question comes from Craig Wolford with MST Marquis. Please go ahead.
Morning, Anthony and David. Just a question here. I had good cost control in the second half. Can you just break that down a bit further? Obviously there's a comment down Rebel, but it also looks like it was quite. Strong cost control in auto. Maybe just thinking through some of. The line items of your costs. Where that benefit has come from. What we might expect going forward.
Yeah, as we've called out previously, leveraging our solution for workforce planning and looking at the. Sort of the service. Standards that we've got in stores and the efficiencies that we can gain in particular areas. There's a team that spent a lot of time analyzing that and identifying opportunities to trim hours. That is certainly a key opportunity that has been leveraged in the half. There's obviously the advertising that we've spoken to, and then as you get this greater sales intensity as we move. From flat sales, like-for-like sales.
Growth that we had in Supercheap and we start to gain like growth again. We then have the benefit of cost leverage that's passing through when previously it's just been inflation. Finally, inflation has started to moderate across a number of the cost lines as well. We had some carry, carrying into the 2025 year, some things which inflated late 2024 which had the full year. Impact. Passing in the first half.
Okay. The workforce planning system benefits, there should still be some flowing through in FY2026 on every ongoing thing. Is there a step change that. We should see in FY2026 as well?
I think it's as steady as she goes. Something like workforce planning. It's a continuing improvement of the capability. I mean, effectively what we're trying to do is be better at forecasting demand patterns and placing team members where the demand's required. You generate enormous waste in terms of that misalignment of demand and labor. There is macro quite an opportunity there. It's just slow and steady to get to it. Because you're not only identifying that mismatch, the actual re-rostering of it at an appropriate hourly rate is where the real science kicks in. We're getting better. We're certainly well down the track. I would be careful about saying a 26 step change. It's just a constant gardening the improvement over time.
Yeah, it's our second highest cost after COGS.
On slide six you have the waterfall of the PBT margin movement. The first item called out was that network investment of 40 basis point drag. There is still quite a lot of. Network investment you're flagging for FY26 with store openings and larger format stores, etc. Should we expect a similar 40 basis point drag from network investment in FY26?
We've got those stores going to be improving their performance as they go through and mature. We do have less store openings in 2026 to what we then had in. In 25. There is. We've moderated that as we've called out. On slide nine. You can see we're moving 31 down to 23. Given that it's in the base, you would say that it won't be something you'd call out as an increase, further deterioration, or further deterioration. If anything, you've got a slight moderation.
Okay, thank you, operator. If it's okay, we might just have one more question for time.
Oh yes. The next question is from the line of Benjamin Joseph de Jardin. Please go ahead.
Good morning, guys. Just two. One, two for me. One short term, one long term. If I step back, the timeline since May, obviously May sounds like things were much tougher. Things were much tougher, but they've improved. Quite materially since then. I'm interested in the comments you said probably earlier. It felt like you're sort of tempering expectations around margin. If I think about the benefits you got with Supercheap Auto, you got moderation in cost inflation. David just alluded to the fact that the drag from space would be less. You've got the loyalty programs which immediately take time. It feels to me you've got quite a few tailwinds from a margin standpoint into 2026. I might be misinterpreting, or those comments have. I might pretty much get along.
No, I think you've got it. To just go the other side of the fence. I think we always be pretty cautious around loyalty. We know slow burn. We just got to be thoughtful there. The competitive intensity hasn't moderated. We go back to the half and we were talking a lot about new entrants and we were talking a lot about competitive intensity. I'll let others judge around the effectiveness with new entrants. The competitive intensity across the board hasn't changed. I just think the combination of the two and if I'm honest, the consumer is still fairly volatile. I don't think we're back moving around. That will create. We will naturally have a more conservative posture here because I'm just not seeing that sustained visitation patterns. You really got some. You got some winners and some losers geographically and you've got some inconsistency there.
We of course have deployed those tailwinds as you've set out, Ben, but they are the reason why we've been so keen to get them out and rolling is because we think the macro is still pretty volatile and the competitive intensity is still there. It's balanced. We would say it's more balanced, but you could make the argument that there is more positive. We'll stick with that balanced position.
It's a better way to be. Maybe just a second one for me, this interesting comment. It's probably the last time we're going to see the strategic slide and appreciate you've been nice and consistent since Silver and it's coming now four or five years ago. What does that mean? Are we going to get another iteration? I know you sort of said previously you didn't think that you were in a position to add another pillar previously. It feels like you've got supply chain right. You've got your loyalty humming along. You've got that in place. Appreciate you've got one of BCF. We start thinking when we tie this in with the expectation around the special that you're saving some balance sheet capacity to add another pillar.
What is next in a big picture thanks to the business, because it feels like you've aligned a lot of what you wanted to do and you're ready to step to the next stage.
Yeah. Look, without sort of turning yourself into Donald Trump and say you'll have to wait and see. I don't. Look, we're going to be pretty. I think you should know this management team now, we're pretty sensible. There is some more work to do. We think there is some opportunity for us organically, lots of opportunity for us organically, and we'll talk more about that in November. As we've always said, inorganically, if something worked for our core brands, we go after it. We always have said that. I don't think that posture hasn't changed, won't change. Could it be enhanced? Could we be more ambitious? We'll see. Right. We'll work it through. I don't think we're about to show up and turn into cowboys. It will be pretty considered, pretty considered. That strategy's run its course. It's time for a change or just we won't get ahead.
I would just encourage us not to get ahead of ourselves here, and we'll come and sort of settle that out in November.
Fantastic. Appreciate it. Thanks, guys.
Thanks, Ben. I think that is all the questions. Thank you everyone for joining us on the call. I, of course, look forward, as we always do, to catching up with many, if not all of you in the coming days. If you're in Sydney, hope you stay bright. Good luck with that. Good morning, everyone.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Thank you.