Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 30% to $84.5 million.
- EBITDA grew by 51% to $18.1 million.
- Gross margin improved to 80.8%.
- Women's revenue surged by 54%, now accounting for 14% of total revenue.
- International growth with the US market up 261.5%.
Negative Points
- Advertising costs remain high at 32.7% of revenue.
- Inventory levels decreased by 19% year-on-year, indicating potential supply chain issues.
- No formal guidance provided for future financial performance.
- Dependence on word-of-mouth marketing, which may not be sustainable long-term.
- Potential challenges in expanding to new markets like Germany and Canada.
Q & A Highlights
Q: The ratio of advertising costs to revenue at 32.7% is an impressive improvement. What have you done differently to achieve this efficiency, and is 32.7% a realistic floor for the future?
A: (Nigel Underwood, CFO) We've introduced our women's line, which has a larger market. We've also focused on marketing efficiencies, website conversion rates, and customer retention. Partnerships and athlete shareholders have helped attract new customers at a low cost. Word of mouth has also been significant, especially in Australia. While we aim to keep reducing costs, future percentages may vary.
Q: Inventory is down 19% year on year. Is this due to timing, and will inventory levels increase as the business grows?
A: (Greg Taylor, CEO) Yes, it's partly due to timing of order deliveries. We plan to maintain inventory levels around the one-year mark and will increase inventory to restock popular items like the bralette, which has been very successful.
Q: Regarding John Lewis, what conditions need to be met for retail exposure in their stores?
A: (Greg Taylor, CEO) We started with an online trial, which has been successful. If online sales continue to perform well, we may test retail exposure in John Lewis's 30+ UK locations. We expect to provide updates within this financial year.
Q: Hanesbrands launched a value product for Bonds, addressing consumer desire to spend less on underwear. Are you seeing this trend, and how does it affect Step One?
A: (Greg Taylor, CEO) Our numbers show the opposite trend. We’ve seen a 51% growth in EBITDA and 30% growth in revenue. Customers are willing to pay for quality and comfort, as evidenced by our 63% return rate and 70,000 five-star reviews. Our strategy focuses on quality, which has proven successful.
Q: Can you elaborate on testing new markets like Germany and Canada?
A: (Greg Taylor, CEO) For Canada, we can ship from our US 3PL. In Germany, we're testing through Amazon, which allows us to gauge market interest without significant infrastructure investment. This aligns with our capital-light model.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
