U.S. Markets open in 2 hrs

Edited Transcript of RCG.AX earnings conference call or presentation 22-Aug-19 11:00pm GMT

Full Year 2019 Accent Group Ltd Earnings Call

Sep 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Accent Group Ltd earnings conference call or presentation Thursday, August 22, 2019 at 11:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Daniel John Agostinelli

Accent Group Limited - CEO & Executive Director

* Matthew Durbin

Accent Group Limited - Group CFO & Joint Company Secretary

================================================================================

Conference Call Participants

================================================================================

* Peter Bell

Bellmont Securities - Co-Founder and Director

* Sam Haddad

Bell Potter Securities Limited, Research Division - Industrials Analyst

* Sam Teeger

Citigroup Inc, Research Division - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, and welcome to the Accent Group's Full Year F '19 Results Conference Call. I'd like to introduce you to the group's CEO of Accent Group, Daniel Agostinelli. Please go ahead, Daniel.

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [2]

--------------------------------------------------------------------------------

Good morning, everyone, and thank you for taking the time to attend the call today. I'm joined on the call by our group CFO, Matthew Durbin.

We will now take you through the results for the full year ended 30 June 2019 an update -- and update on our growth plan and the outlook for FY '20. There will be an opportunity to ask questions at the end.

If I can refer you to Page 4 of our investor presentation, which was released to the ASX yesterday evening, let me begin by saying how delighted I am that Accent Group has delivered another year of record profit with reported EBITDA up 22.5% to $108.9 million and net profit after tax 22.5% up to $53.9 million. I'm also proud of the shareholder returns the group has delivered over time, driving annualized compounding shareholder return of 25% since 2009. The Board has declared a final dividend of $0.0375 fully franked, bringing the total dividend for the year to $0.0825 per share, an increase of more than 22% on FY '18.

Now turning to Page 5. Some of the key operating highlights for the year. We opened 54 new stores, including a number of brand new store formats. Our digital sales growth was up 93%, gross profit margin improvement of 130 basis points. The growth in Athlete's Foot corporate store network to 49 stores.

We increased our e-mail and loyalty membership by nearly 1.3 million customers to 4.8 million customers across the group. The launch of 4 Trybe stores, which we're very proud of. And the launch and performance of our own vertical products, including socks, shoe cleaners, laces in the Platypus, Hype and The Athlete's Foot businesses.

In summary, the company continues to deliver against its key growth plan objectives. It's been another positive year, and I continue to be excited about the opportunities ahead for our business.

I will now hand you over to Matt Durbin, to talk about the details of the results.

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [3]

--------------------------------------------------------------------------------

Thanks, Daniel. If you could please turn to Page 6, which includes the summary of financial performance. I would like to highlight upfront that consistent with the half year the numbers we have included in our results release and presentation are presented on a statutory basis with no underlying adjustments. In the absence of any meaningful nonrecurring items, which there were none, this approach provides the most transparent basis for presenting our results, and we will adopt this approach moving forward.

Company-owned sales for the year were up 14.3%, with LFL sales up 2.3%. LFL sales strengthened in H2, up 3.5%. Gross margin percentage continued to improve, up 130 basis points on top of the 200 basis point increase in FY '18. This improvement is the ongoing outcome of our strategy to drive margin growth through the move of category and storewide discounting, margin improvement in The Athlete's Foot corporate stores, increased penetration of vertical, distributed -- and distributed brands and the introduction of new vertical products.

Our inventory position is clean with aged inventory levels below prior year. Total inventory was above prior year, predominantly due to the inventory investment in 54 new stores and the growth in TAF corporate store numbers.

Cost of doing business percentage to sales improved by 50 basis points due to our ongoing focus on frontline team productivity, sustainable lease renewals and the operating leverage from new stores and The Athlete's Foot stores acquired.

Please turn to Page 8 of the presentation. Owned retail sales were up 15.8% to $656.2 million, with strong growth from digital and new stores. Inclusive of the TAF franchise stores, the group now operates over 480 stores. In the retail banners, Platypus, Skechers, Vans and Dr. Martens were standout performers, all delivering strong growth. The other brands traded broadly in line with plan.

In The Athlete's Foot, sales were ahead of last year on a total and like-for-like store basis. During the year, we opened 54 new stores across all formats and closed 21 stores where sustainable renewal terms could not be agreed. In addition, 32 stores were refurbished. The chart on the left of that page demonstrates the continued growth in our store network, and the breakdown is provided on Page 21.

Now turning to omnichannel. Digital sales grew 93% on top of the 131% growth achieved in FY '18. The group now has 17 websites, including new websites for The Trybe, Subtype and Vans New Zealand, which were launched during the year.

During the year, same-day delivery and endless aisle were rolled out, providing customers with more convenient delivery options and direct in-store access to all the inventory in our store network. Click-and-collect and click-and-dispatch continue to drive growth as we annualized the launch and rollout last year. The Athlete's Foot digital sales continue to grow strongly, up 87% on top of the strong growth achieved in FY '18. Our customer database has also continued to grow, reaching 4.8 million customers. The next phase of growth in digital will focus on the utilization of data from our registered loyalty customers, leveraging new customer targeting and communications capability.

Onto wholesale performance on Page 11. Wholesale sales grew by 7% to $116 million, with strong performance in Vans, Dr. Martens, Merrell and CAT. Accent continues to drive growth of its exclusive brands through its vertical channels and key retail partners. Sketches wholesale was in line with expectations as we continue to build our store network, the brand performed significantly ahead of plan overall. We are delighted with the performance of our new vertical products which have generated $4.5 million in sales since launching in November. These products include socks, laces and shoe care, and achieved gross margins in excess of 70% compared to close to the 50% for third-party accessory brands.

Turning now to our growth plan update on Pages 13 to 15. The growth initiatives outlined in our FY '18 full year results are well on track. The Athlete's Foot corporate store acquisitions are ahead of schedule, and we plan to have at least 65 corporate stores by the end of FY 2020. Performance of the acquired stores is also on track. In particular, the store gross margin of the corporate stores is beginning to grow as we introduce our vertical brands and products. The new corporate stores generate on average around $1.5 million in sales per annum at a store EBIT margin of 13% to 15%. We expect the new stores acquired in FY '19 and the stores we plan to acquire this year will add positively to group profit in FY '20. Given the strong ongoing growth in online, we have upgraded our target for digital sales. At the end of FY '19, digital sales were on a run rate of 15% of total sales. We are now targeting 20% of sales to come from online within the next 3 years.

Our vertical product strategy has performed ahead of expectations, delivering $4.5 million of sales in FY '19. This program will expand considerably in FY '20, and we are targeting $15 million of sales this year at a gross margin above 70%. New product categories will include bags, caps, water bottles and an expanded range of socks, cleaners and shoelaces.

In FY '20, we plan to open more than 40 new stores and continue to set the potential for a further 30 to 40 stores over the next 2 to 3 years across Australia and New Zealand. Innovation in store formats and design continues. During the year, we opened a number of new store formats, including Platypus mega stores in Sydney and Melbourne, the first Australian CAT store, Subtype store in Melbourne and a TAF's flagship store in Melbourne. The new stores opened in FY '19 have traded ahead of expectations and have strong cash conversion with an average store payback of less than 18 months.

Moving on to international. As flagged at our half year result, we have not found any international opportunities that have met our requirements for risk and return on investment. We have, however, identified further growth opportunities in the Australian and New Zealand markets.

I'll hand you back to Daniel, to talk about 2 of these new opportunities.

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [4]

--------------------------------------------------------------------------------

Thanks, Matt. I'm very pleased to be talking to you today about 2 exciting new growth opportunities for Accent in the Australian, New Zealand market. The company has launched 4 new Trybe kid stores over the last 2 months, and the performance to date for all these stores has been well ahead of expectations. On this basis, we are planning to roll out further Trybe stores prior to Christmas this year and expect to have up to 12 stores in the market by end of F '20.

In addition to the success of our vertical brands, in particular, Skechers and Dr. Martens in November, we will roll out a range of vertical products in The Trybe stores, including socks, cleaners, caps, bags, water bottles and much more. Based on market analysis, we see the opportunity for at least 40 Trybe stores across Australia and New Zealand. Finally, we would like to introduce you to a new concept that we plan to trial in H2 this year named PIVOT. We plan to bring to the Australian market and Australian consumer a new branded lifestyle shoe concept, showcasing a wide range of shoes from our third-party global brands and our vertical distributed brands. This concept will target the sport, street and value-conscious consumer. The concept has had wide support from our brand partners, and will open in major shopping centers releasing in Australia.

We expect the first stores to open in H2 this year. I'll hand you back to Matt.

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [5]

--------------------------------------------------------------------------------

Finally, we'd like to discuss dividends, current trading and our outlook for the balance of FY '19, which you can find on Slide 17. The Board have declared a final dividend of $0.0350 -- $0.0375 per share fully franked, reflecting the realignment of the interim and final dividends to better reflect the earnings and cash flow generated in each half. This brings total dividends to $0.0825 per share for the full year, an increase of 22%. Regarding trade, we are pleased by the start to the first half of this year. For the first seven weeks, like-for-like retail sales are up 2.7%. For the FY '20 year, we are expecting another year of profit growth driven through low single-digit LFL growth, including strong digital growth, 40 new stores, the 54 stores opened in FY '19, the 65 current and new corporate TAF stores.

Both gross profit margin and cost of doing business percentage are expected to be broadly in line with FY '19 as a percentage to sales. Trybe and PIVOT are expected to be broadly profit neutral in the FY '20 year, inclusive of start-up costs.

In conclusion, the business is well positioned to defend against new market entrants and capitalize on the growth opportunities moving forward. It is our intent to continue to avoid lazy discount-driven retailing, instead driving profitable sustainable sales and margin growth through our leading omnichannel offering, best-in-class customer fulfillment infrastructure, innovative store environments and the magic of our in-store customer experience. Moving forward, the performance of our company will be defined by growth in earnings per share and dividends and return on shareholder funds. The Board has reiterated its intent to return all excess cash to shareholders over time through dividends.

That concludes the formal part of the call. Thank you for your interest and attention, and we would be happy to take questions on the result. Thanks, Claire.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We do have a question from Peter Bell from Bellmont Securities.

--------------------------------------------------------------------------------

Peter Bell, Bellmont Securities - Co-Founder and Director [2]

--------------------------------------------------------------------------------

Look, I'm relatively new to following Accent so you have to excuse me if this is a bit of a basic question, but I've noticed this year as well as last year there's been pretty significant turnover of shares amongst the -- amongst Board and senior management. Can you just give us a bit of color on those movements and the stability, and what's happening with that management team in terms of possible changes and that sort of thing?

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [3]

--------------------------------------------------------------------------------

Peter, I wouldn't describe it that way at all to be honest. In terms of -- there's been a couple of directed sales, and one, to be very transparent, was by David Gordon, he's been a long -- yes, he's our Chairman and has been a long-term shareholder. He's sold down a few shares that he's held for in excess of 5 years. And the other was from one of our directors Michael Hapgood, he's sold down I think it was well less than 5% of his total holding. Other than that, I don't think there's been any substantial share sales by directors or management.

--------------------------------------------------------------------------------

Peter Bell, Bellmont Securities - Co-Founder and Director [4]

--------------------------------------------------------------------------------

Sure. I guess I was looking at that in conjunction with last year when there were very significant shares. I think from memory, Michael might have sold another 14 million or so last financial year, and so just sort of looking at a bit of a trend going on here. Wondering if that was symptomatic of some -- a bit more of a management change overall or what?

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [5]

--------------------------------------------------------------------------------

No. No, Peter. No. In fact that was nearly 2 years ago now when he transferred his shares -- or 1.5 years ago when he's transferred his shares, they were sold to Brett Blundy, who's now a just under 20% shareholder. So that was effectively a way for Brett to get on to our shareholder register.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

We now have a question from Dan Teeger (sic) [Sam Teeger] from Citigroup.

--------------------------------------------------------------------------------

Sam Teeger, Citigroup Inc, Research Division - Analyst [7]

--------------------------------------------------------------------------------

Just wondering, if you can just maybe please talk about the momentum in retail you're seeing in FY '20 today? Look, I appreciate you don't want to give any week-by-week update, but maybe just some broad comments. Are you seeing momentum build as more consumers get their tax refunds?

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [8]

--------------------------------------------------------------------------------

Sam, Daniel here. I'm not sure if we're seeing the momentum build, but if you look at our comp sales, I think that sort of points to positive consumer spending, at least in our stores and what we're seeing. We got a fair sample in the footwear market now. We're more excited about the innovative new concepts that we're building. And as an example, we've refitted about 6 stores and given them a fresher look. And they've -- all of those stores have responded very well to our comps. And the new products that are coming our way, particularly from the distributed brands are really starting to look good. I point you to we mentioned that Dr. Martens was performing exceptionally well. When that brand performs very well for us in our retail stores it also performs exceptionally well in our Platypus and Hype businesses, which are some 150 stores out there. So we're sort of -- we're seeing the innovations of new products and new fit-outs work a whole lot better than what we may deem that the tax refunds have done.

--------------------------------------------------------------------------------

Sam Teeger, Citigroup Inc, Research Division - Analyst [9]

--------------------------------------------------------------------------------

All right. I understand. Sounds good. And Daniel, some of your Platypus flagship stores are incredible. It's a great consumer experience visiting them. But are you able to provide some comments about how maybe the sales productivity and the overall profitability compares to the rest of the fleet?

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [10]

--------------------------------------------------------------------------------

Look, I mean I don't think there's too many people that would be making huge money on Pitt Street Mall given the rates. But what it does for our brand is just amazing, and what it has done for our brand. There's other markets trying to do things with us now, in particular, the music industry, which we will launch the hottest latest act in there next month. So from that point of view it's terrific. But to be honest with you, Sam, I'm more interested in some stores that we've opened of late, in particular, Platypus in Elizabeth and Adelaide. It's a -- it's not the best center in the world, but based on the lease terms the returns are spectacular compared to opening a store in the CBD of Sydney. And I also -- we've had incredible success in places like Aubrey, Rouse Hill in Sydney. And as we mentioned earlier, the new stores that we've opened are all well above expectations. So we finally found that all -- not finally, but we found a model that goes forward with better cost structures in areas that we've never traded in before.

--------------------------------------------------------------------------------

Sam Teeger, Citigroup Inc, Research Division - Analyst [11]

--------------------------------------------------------------------------------

All right. Sounds good. And just in terms of the CODB investments you're going to be making in FY '20, can you guys just help understand them in a bit more detail, and if you can quantify them that would be helpful.

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [12]

--------------------------------------------------------------------------------

Yes. Sam, I think it's difficult to quantify them. There's certainly investment in Trybe as we go into FY '20. There's certainly investment in the start-up of the PIVOT concept. We're continuing to invest in our digital infrastructure and digital marketing because that's -- yes, that continues to drive up a really good return on investment. So I would think about those 3 areas. And from an acquisition perspective, there's still sort of cash out, buying up TAF stores, albeit that doesn't hit the CODB line.

--------------------------------------------------------------------------------

Sam Teeger, Citigroup Inc, Research Division - Analyst [13]

--------------------------------------------------------------------------------

Right. And also if you can, The Trybe stores look pretty good, but can you maybe talk about the decision to accelerate that rollout ahead of the back-to-school sales?

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [14]

--------------------------------------------------------------------------------

Absolutely. What -- we started off with saying, let's get in the game and open some stores that look fresh and put some fantastic medium need products in there. And the success particularly on the Friday, Saturday, Sundays that we are seeing have really allowed us to rethink that strategy and maybe not wait for back-to-school. Every -- all the evidence we have from our other banners says that Trybe should be a fairly good winner in the back-to-school business. And as you're aware in the business we're in, you need to place orders 6 months out before you expand -- open new doors. So we felt that there was enough evidence there on the current numbers for us to accel the rollout.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

We don't have any further questions at this stage. Is anyone there?

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [16]

--------------------------------------------------------------------------------

Okay.

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [17]

--------------------------------------------------------------------------------

Just wait.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

We do have a question from Sam Haddad from Bell Potter.

--------------------------------------------------------------------------------

Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [19]

--------------------------------------------------------------------------------

Congratulations on the strong result. Just on the competitive environment. If we just cast our mind back over the last 6 months, entering the second half of the financial year, your gross margins were tracking up 100 basis points. I think you sort of guided that you were sort of looking to try to sustain that. I do understand that you do have that clearance activity through June every year. Just -- was that clearance activity stronger than the PCP and what was the reason for that? Was that the competitive environments or was that inventory build? Just some color on how that sort of played out through the half.

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [20]

--------------------------------------------------------------------------------

Thanks, Sam. Good question. So we took a decision in May, actually, to make sure, given the reasonably strong year we have in margin and going to this year where we're facing a more challenging exchange rate environment to come out of FY '19 as crystal clean as we could on inventory. So we made a decision through May and June to take further markdowns of aged and becoming aged inventory. And we've finished -- cleaners in this company is ever finished, in fact, our aged stocks in this company now are below 1% because of that activity we've taken. So we feel we're really well placed to charge into FY '20, and that had some impact to the margin. But overall, we felt it was the right decision to position us for this year.

--------------------------------------------------------------------------------

Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [21]

--------------------------------------------------------------------------------

So with the trading update, the gross margins rebounded, or would you like not to comment on that?

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [22]

--------------------------------------------------------------------------------

We've got -- I'd prefer not to comment. I think what we have said though is that gross margin percentage we expect this year to be in line with last year. So even with that currency headwind, the activity that we've got going on in relation to vertical product and our vertical brands, ongoing margin expansion in TAF, right now, we're feeling reasonably positive to be able to put that guidance out.

--------------------------------------------------------------------------------

Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [23]

--------------------------------------------------------------------------------

Sure. And just from like comments -- you made comments 6 months ago about JD Sports and their competitive position. Have they become more aggressive in price or any change in those dynamics since over the last 6 months? And again, to any particular platform?

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [24]

--------------------------------------------------------------------------------

I -- Sam, I don't think they've become more aggressive. I think it's just -- their model is -- that's just the way they trade. So no, we haven't seen anything like that. They've opened a few more stores, that's for sure. But as we've articulated prior, we seem to have both found a consumer that either likes us or likes them. And we're happily trading against them in almost every center we're in with them. And we certainly are looking to expand in centers where they are at purely because there's a hunger for more space and more sales. I'd point you to Penrith, where we have a fantastic Hype store, we have a fantastic Platypus store and there's a big JD Sports store there. We will now, as of November, expand the Hype store threefold.

--------------------------------------------------------------------------------

Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [25]

--------------------------------------------------------------------------------

Okay. And just -- and thanks for the additional color on the TAF corporate program. So just to help us through the modeling, you're getting a royalty on the franchisee stores. So that's -- once you take on the full margin, you do disclose that it's a 13% to 15% margin, but the uplift to you guys, the accretion is sort of half that margin. So do the calcs there, you've got $100,000 per store, you've got 50 corporate stores. But also there's some upfront investment costs that you bought -- that you walked through the first -- through FY '19. Can you give us some color on that upfront investment costs and what -- just so that we can get a better gauge on the accretion for FY '20?

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [26]

--------------------------------------------------------------------------------

Yes. So the way to think about that is we have to invest in support office infrastructure to support that store network and that support office infrastructure covers off area manager roles, it covers off regional manager roles, buying office roles and planning roles. So there's a number of additional team members that we have to employ to do that. A lot of that investment was actually made sort of coming out of FY '19, then maybe a little more depending on how many stores we acquire this year. And all up, that amounts to some couple of millions of dollars, if that makes sense.

--------------------------------------------------------------------------------

Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [27]

--------------------------------------------------------------------------------

Right. And the decision to roll out 40 stores, that's on top of the 30 to 40 that you called out 6 months ago. So what's the thinking behind that? Was that available sites that have become available? Or is it -- just some color on what's changed in that respect, please?

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [28]

--------------------------------------------------------------------------------

Sam, there seems to be quite a lot of -- quite a lot more interest from our landlord, particularly with Platypus. We seem to be getting -- we seem to be making the model successful in areas that we never felt possible. And in some cases, more profitable than some of the A grade centers that we're in. So from that point of view, we've got landlords coming at us, offering us better deals, in some cases out clauses should it not work and so on. And of course because the model is fairly strong, we're getting quite a bit of support from the contribution level from -- in terms fit-out contribution. So when you line all that up, the return on equity looks terrific. So from our point of view, we're simply wanting to expand on that thinking and that hunger that the landlords have. And also most importantly, our consumers seem to have our customers for us opening in these sorts of places. And when I say these sorts of places, I mean we were not even in Rouse Hill. It's a great shopping center, and it's just one of those that we just didn't think about. But here it is, we've opened a store there, and I'm delighted with the numbers coming out of it.

--------------------------------------------------------------------------------

Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [29]

--------------------------------------------------------------------------------

So these are more regional or?

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [30]

--------------------------------------------------------------------------------

A combination of both, Sam, a combination of both. But if you look at Dr. Martens, we started with one store and thought we'd try it. The returns have been brilliant. So we've now got 4 stores. We'll open another 3 of those this year. So when you -- it's very easily -- you get to 40 stores pretty quickly across all these banners, 5 here, 6 there, 7 there and so on. On top of that goes with -- for the first time in many, many years, we started to open a few Athlete's Foot stores, where we're simply going into centers that the business was not in, and they've been terrific to date.

--------------------------------------------------------------------------------

Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [31]

--------------------------------------------------------------------------------

Yes. And just to get -- just to double-check, is the Trybe rollout, is that on top of the 40 stores? That's in addition...

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [32]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [33]

--------------------------------------------------------------------------------

Correct. That's on top of the...

--------------------------------------------------------------------------------

Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [34]

--------------------------------------------------------------------------------

Yes. So the Slide 21, it doesn't quite reflect that. So -- okay. Can you clarify it? And on the PIVOT -- just on the PIVOT concept, is that -- the value segment there, can you talk about the competitive landscape there? Is that more where the independents play and therefore more fragmented? Because I would have thought Rebel is also playing that space.

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [35]

--------------------------------------------------------------------------------

Absolutely. It is the Rebel space and a few others out there that we feel, particularly with our vertically driven brands, that we -- and the support we've had from our third-party brands that no one has to date seems to have put all of these, what we call value, it's not discounted product, it's value product, which certain businesses like Dick's Sporting Goods in America and DSW, and they do huge, huge volumes. We know this because of the internal learnings from the brands we distribute. We know how big this market is. And there doesn't seem to be a chain in Australia that can house all of these value products under one roof. And we have a model that our landlords and our own suppliers seem to like very much, and the support has been overwhelming. So we will obviously get into that space. But most importantly, Sam, I'd like to point out that this new business of PIVOT will not have any product that sits in any of our other banners, Platypus, Hype, Skechers and so on. It'll be purely a value-driven proposition. So it looks like, smells like the real -- the high-end trendy latest shoe, but that the price point is around the $90 to $100 mark rather than $150 to $200.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

We have a question from Dan Teeger (sic) [Sam Teeger] from Citigroup.

--------------------------------------------------------------------------------

Sam Teeger, Citigroup Inc, Research Division - Analyst [37]

--------------------------------------------------------------------------------

So it's Sam Teeger.

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [38]

--------------------------------------------------------------------------------

Dan.

--------------------------------------------------------------------------------

Sam Teeger, Citigroup Inc, Research Division - Analyst [39]

--------------------------------------------------------------------------------

Yes. Dan's actually my brother, I don't know where his name came from. Daniel, the PIVOT concept sounds really exciting. Just keen to understand the way you've -- like, I know you said the inventory and the product is going to be different in PIVOT to what you have in your other banners. But just say, Australia goes into hard times and a recession, how do you ensure that consumers won't be trading down out of your more premium format such as Platypus and Hype into PIVOT?

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [40]

--------------------------------------------------------------------------------

That's a good question, Sam. I'm not sure we actually have the answer to that or anyone does. But if you look at over time. I mean right now, you can still buy this product in some areas, and it's not the latest and greatest thing. We're not talking about the young trendy fashionable guy, I don't think he's going to shop in these stores no matter what the market does. There's an insatiable requirement for these guys to have the latest and greatest which the likes of Adidas and Nike and all the big guys. They market to those guys at a very different level. And I personally don't see that changing regardless of a recession is my view. But essentially saying, what -- the thinking we've got here is that if you look at the overall market in Australia and New Zealand, when you include all footwear, it's about a $5 billion sale of business around both countries. Which in a way, we look at our business, including our franchise stores, we have about $1 billion of that market. That leaves us with a whole heap of white space. So what we're trying to do is take -- is expand into that white space area where we can actually add value by our distributed brands. We have know-how, we have structure, and we can get to market a whole lot faster. And that's really what's driving this. And of course, there seems to be a major void in this area of value-driven branded products in Australia. You only need to go to any state in America and exporting goods and the likes. I mean they are very powerful business that don't disrupt the high-end business at all. It's really a different consumer.

--------------------------------------------------------------------------------

Operator [41]

--------------------------------------------------------------------------------

At this stage, we have no further questions.

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [42]

--------------------------------------------------------------------------------

Good. Then thanks, Claire. Thanks, everyone, for joining us today. I appreciate it.

--------------------------------------------------------------------------------

Daniel John Agostinelli, Accent Group Limited - CEO & Executive Director [43]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Matthew Durbin, Accent Group Limited - Group CFO & Joint Company Secretary [44]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

Thank you. And on behalf of the Accent Group and Express Virtual Meetings, I'd like to thank you for attending the conference call today. The conference has now ended. You can have your fun. Have a lovely day. Thank you.