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Thank you for waiting, guests, and welcome to the Accent Group Limited Investor Half 1 FY '21 Results Call. I would like to introduce your host for today, Daniel Agostinelli, Accent Group's CEO; and Matt Durbin, CFO. Thank you, gentlemen. Please go ahead.
Good morning, everyone, and thank you for taking the time to attend the call today. I'm joined on the call today by our Group CFO, Matthew Durbin. We will now take you through the results for the half year and the 27th of December 2020, an update on our growth plan and a trading update for the first 8 weeks of this year. There will be an opportunity to ask questions at the end. If I can now refer you to Page 4 of our investor presentation, which was released to the ASX yesterday evening. Accent Group has delivered another record half of profit with comparable EBITDA up 44% to $97.5 million and net profit after-tax up 57.3% to $52.8 million. First and foremost, I would like to acknowledge the performance and contribution of the entire Accent team. The group's strong focus on VIP, Vertical and Virtual along with our integrated digital and store operating model has delivered another record trading-led profit. Turning to Page 5. Some of the key operating highlights for the half include: digital growth of 110%, continuing the strong momentum for Q4 last year; opening of 50 new stores, including new formats; growth of 800,000 new contactable customers, customer database is now sitting at 7.6 million contactable customers; a record performance in our Athlete's Foot business and Skechers, with all other banners performing ahead of expectations; strong performance in The Trybe business with double-digit comp growth. Growth in our Stylerunner business in digital and the opening of our first store in Armadale, Victoria, which is outperforming our expectations; 50% growth in our vertical products to $10 million; 6 stores now trading in our PIVOT business, including the launch of our online store during the half. I will now hand you over to Matthew Durbin to talk about the details of the results.
Thanks, Daniel. One of the major highlights of the year was the continued growth in digital, on Slide 7, with sales up nearly 110% for the year that represented 22.3% of sales. The company experienced record online trade through November and December driven by significant investment in engineered product, which allowed us to provide strong customer offers and maintain margin. Our digital infrastructure worked seamlessly through this period, and our average customer delivery time through our normal channel is less than 2 days, less than 20 hours through our same-day channel. 1-hour click-and-collect was also enabled. This integrated fulfillment model enables customers to order online for Christmas delivery up until the 22nd of January. We continue to see growth in site traffic, conversion rates and average order value.Turning to Virtual and VIP on Slide 8. Our contactable customer base grew by 800,000 customers to 7.6 million customers. This continues to be the result of a strong drive to invite customers to join in-store and in The Athlete's Foot, the strength of our market rewards program. We are on track to achieve our objective of 10 million contactable customers, which will be further supported by the launch of our Skechers loyalty program in the second half of FY '21 and subsequent programs planned for all major banners. From a standing start in April last year, Virtual sales delivered through calls, chat and the Hero video sales app have grown significantly with year-to-date sales of $4.3 million. We're in progress to building a dedicated virtual sales hub to drive the future growth of this channel. Turning to Vertical on Slide 9. The company's Vertical program continues to gain momentum with sales approaching $10 million, up nearly 50% on the prior year. This run rate strengthened through January with strong results from new TAF programs through back-to-school and the launch of new vertical ranges in Stylerunner. The company is on track to achieve over $20 million of sales in FY '21 from a standing start in FY '19. We previously discussed that Vertical products achieved gross margins 15% to 20% better than third-party brands. We're targeting a 10% sales mix from Vertical products over time. Turning to retail and wholesale on Slide 10. Owned retail sales were up 7.7% to $486 million, with strong growth from digital and new stores. Inclusive of the TAF franchise stores, the group now operates 569 stores, an increase of 45 stores during the half. In the retail banners, Hype DC, TAF, Platypus, Skechers and Subtype continued to be standout performers, all ahead of expectations. The other banner is all traded in line with plan. Sales in The Athlete's Foot continued their strong momentum from last year. The TAF corporate stores and, in particular, the TAF New Zealand business, which we own entirely, traded very well. The gross margin percentage in TAF corporate stores continues to grow in line with our strategy of introducing a greater mix of distributed brands in the TAF vertical product program. During the year, we opened 50 new stores across all formats and closed 5 stores where sustainable renewal terms could not be agreed. The chart on the right-hand side of that slide demonstrates the continued growth in our store network with a full breakdown provided later in the pack. Wholesale sales in the first half were ahead of expectations with record forward demand from presell into quarter 4 of this year and the first half of FY 2022.Turning now to our growth plan on Page 12. Our growth plan is well on track, delivering another half of record growth. Digital continues to grow strongly with ongoing investment in our integrated omnichannel capability and customer engagement initiatives. Digital sales for half 1 represented more than 22% of sales, giving us confidence that we are on track to achieve 30% of sales in Digital over time. Significant investment is underway with our online stores. All of our major banners are planned to have their online stores rebuilt on the latest Magento Tier 2 headless platforms over the next 12 months. This will further benefits in site speed and capacity and drive improved conversion rates. Significant work and focus is also underway on loyalty programs and the introduction of new analytics and customer business intelligence capabilities. Our new virtual sales hub will be complete in early March, providing the infrastructure for a virtual video shopping experience for customers across all our major banners.VIP and loyalty. With contactable customers of 7.6 million, we are well progressed towards our target of 10 million customers over time. Significant investment and focus is underway, implementing loyalty programs and the introduction of new analytics and customer business intelligence capability. The pipeline of new stores remained strong with 90 new stores expected to open in FY '21 across all banners. This is an increase of at least 10 stores from the update provided at our AGM in November and reflects the continued quality of the deals available, and our rollout plans of PIVOT, Trybe and Stylerunner are gaining momentum. Our Vertical product program continues to gain momentum with FY '21 sales now expected to be more than $20 million. This drive in our business is that all multi-brand banners need to increase their Vertical product mix. In Stylerunner, Vertical products already represent a meaningful portion of sales. Significant product development programs are underway to drive continued growth in Vertical towards our goal of 10% Vertical over time. The Athlete's Foot corporate store program is on track with 68 corporate stores owned at the end of the year. The gross margin in the corporate stores continues to grow as we introduce our vertical brands and products. Sales in The Athlete's Foot continued to grow strongly with a record back-to-school trading performance. The Athlete's Foot achieved 20.4% comp growth in January. In New Zealand, TAF, where we own all stores, experienced strong sales and profit growth. We intend to recommence the franchise store buyback program towards the end of half 2 FY '21. The PIVOT store rollout is also on track with up to 15 stores expected to be opened by June. And performance in Trybe was strong through half 1 with double-digit growth through half 1 and the January back-to-school period. The Trybe store rollout will also recommence in half 2 '21 and into the first half of FY '22. Our Stylerunner strategy is on track with our first store in Armadale trading and performing well ahead of expectations. All stores are expected to be trading by June '21 with a further 3 store leases secured for opening in half 1 FY '22 for a total of 7 stores. The Vertical product program in Stylerunner is also performing strongly with accessories in outerwear launched to date. Further technical and stretch apparel programs will drop over the coming 6 months. International delivery to the U.S. and Southeast Asia is planned to launch within the next 6 months. Turning now to our trading update, Page 17. I'd like to discuss the dividends -- sorry, this is on Slide 13, my apologies. The Board had recommended an interim dividend of $0.08 per share fully franked, a 52% increase on the FY '20 interim dividend. In recommending the interim dividend, the Board determined that no residual weighted subsidy funds were acquired or used to calculate or pay the dividend. Regarding trade, we are very pleased with early trade in the second half. Notwithstanding the snap lockdowns in Western Australia, Brisbane, Melbourne and Auckland where stores were closed, LFL sales for the entire store network were up 10.7% for the first 8 weeks. And digital sales continue to be strong, up 65% for the first 8 weeks. Due to the continuation of COVID-19 and the inherent uncertain environment, the company has determined not to provide guidance for the full year. I'll hand back to Daniel to wrap up.
Thanks, Matt. In conclusion, Accent Group continues to demonstrate the value of its integrated digital and store model along with progress against our stated strategic targets. The group has a range of exciting and valuable growth opportunities underway, and the management team remain focused on VVV, being VIP, Virtual and Vertical, and executing on our growth plan. We remain committed to supporting our team through the uncertain conditions over the coming months with all permanent team members maintained in full employment through the current round of snap shutdowns. That concludes our presentation today, and we would be happy to take any questions. Thank you.
[Operator Instructions] We have our first question already, gentlemen, it's from Sebastian Datta.
It's Supratim Datta from Citi. So to start off with, Accent's LFL sales growth has accelerated from 7% over the last 6 weeks of first half '21, to 11% over the first 8 weeks of this half. Can you talk to us about what is driving this acceleration? And how has momentum varied from January to February?
Yes. Thanks, Supratim. The big driver there, as you can see, was that result through back-to-school. We were very, very well planned in The Athlete's Foot for back-to-school and also in Trybe and, indeed, across all our banners. And it's fair to say that January was a very strong month, indeed, off the back of that for the group. That's moderated a little as we've gone into February, and we've come out of that back-to-school period. So hopefully, that gives you some color.
Sure. And the next one is on rollout. So your Skechers and Platypus rollout is running well ahead of your previous target. What has driven this? And do you have an updated store target for the market for these formats?
So the fundamental theme that's going on there, Supratim, is that the quality of the deals that we're seeing are still very strong. And we haven't got an updated target for future periods. We'll have to get through this period and work it out. We felt it was important to advise that we'd be at least 90 stores through to June this year. And so that's what's going on. I might throw it at Daniel to talk about some of the trends he's seeing in terms of stores and opportunities in bridge and all other areas as well.
Thanks, Matt. And Supratim, the -- as Matt mentioned, the quality of the deals have been great for us. We have a model that attracts -- simply attracts use, and our sector is very strong and has been strong for some time. COVID has actually made it stronger. Our shopping center partners love the fact that we execute. We feel we put good-looking stores on the ground and provide great environments for that type of customer. And they're responding. We've had fantastic results from stores in what we will call the outer regions. By that, I mean Shepparton, Traralgon, Greenhills in Sydney and so on, and those deals seem to be getting stronger and gaining momentum, and we have a good offer for the shopping centers to want to see us grow.
Okay. That's great. Lastly, what has driven the strong growth in your wholesale order book? Could you give us some color on that?
Absolutely. It's been an outstanding effort from our team. Forward orders are looking very, very strong. Indeed, we've had a few record sales for the company, primarily in Skechers, Vans and Dr. Martens. We have a very, very capable team. And indeed, we've got simply fantastic product that is on trend. You only need to read the results of those companies I've just mentioned. They're all experiencing very strong growth around the world. And we are a great distributor for them and execute exactly as per their DNA, and we're seeing the results of that. We will continue to put fresh and the best product into the market as we offered it from our [ principles ]. And simply, the market has certainly [ voted ] with forward orders looking very, very strong.
Our next question is from [ Neera Simon ] from [ Evanston Partners ].
Just a couple of questions for me. Firstly, just on PIVOT. So do you still see it as a 100-store opportunity post the rollout of like the 6 stores in the first half?
In the main, we do. The model is obviously still being tested with a small sample. But from what we've seen and the learnings we are getting from current trade, yes, we intend to keep that growing. We've certainly learned the size of the store that is the way forward. We've learned what product seems to sell, what product doesn't. And we're still going through all those learnings at the moment. But we are certainly putting more stores on the ground. And I feel that we need at least another 10 stores on the ground for us to really get a better sample of what's happening in that space. But some of the new product, particularly Vertical products we've put in there, are certainly showing great signs.
All right. And I apologize if I missed this earlier, but what's the key driver for upgrading the number of stores? Previously at the AGM, you mentioned it's something around 80 stores you intend to open, and then that's been changed to 90 now.
Yes. So [ Neera ], the -- it's 2 things there, quality of the deals, but also the confidence we've got in some of the new banners and the rollout schedule in PIVOT, Stylerunner and Trybe. But we're also seeing strong growth through Skechers and Platypus. It's just -- there's opportunities coming everywhere.
And is that pulled -- are you just pulling forward from some of the stores you intend to roll out in 2022? Because, I mean, you're getting good deals at the moment.
Yes. Look, I wouldn't say it that way, [ Neera ]. I think we opened the stores when the leases come up. So no, I wouldn't say it as a pull forward. And as we get to the full year, we'll give more of an update about what we see the outlook as for next year.
All right. And just one more. Can you provide more color on Trybe? Like, I guess, you guys have done a review and now you plan to open new stores. I mean, what's changed, basically?
Yes. So when we -- yes, we've been running with that model now for about 18 months. About 12 months ago, we put a new GM into that business who's been just 100% focused on driving that. We take -- we took a lot of learnings out of the, I'll call it, the back-to-school period last year and the summer half. And we just didn't have our mix right in product, in sandals and the right sort of school shoes and the right sort of trainers and those sorts of things. We feel as though we've got that mix right and the model right now and the very strong results that we experienced through January convinced us of that. And that's given us the confidence.
[Operator Instructions] It would seem, Daniel, that is all the questions we have at this stage.
Terrific. Well, if there's no further questions, thanks very much to everyone for joining, and we'll look forward to talking to you all over the next couple of weeks.
Thank you.
Thanks, guys.
On behalf of your host, thank you so much for attending, everyone, today. I'm now going to disconnect everyone's lines. Have a great day. Thank you.