Release Date: February 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First half sales increased by 3% to $2 billion, marking a record result.
- Gross margin improved by 30 basis points to 46.5%, maintaining pricing and promotional discipline.
- Statutory PBT of $204 million exceeded the guidance range, translating to a statutory NPAT of $143 million.
- The company has a strong financial position with no drawn-back debt and a positive cash balance.
- Online sales grew by 10% to $260 million, validating the omni-retail business strategy.
Negative Points
- Cost of doing business as a percentage of sales increased by 90 basis points due to inflationary pressures on rent, electricity, and wages.
- Rebel's like-for-like sales declined by 1% to $673 million, with a 23% drop in segment PBT.
- Macpac's gross margin declined by 200 basis points due to unfavorable exchange rate movements and a shift to lower-margin products.
- Inflationary pressures are expected to continue impacting wages and rent in the second half.
- The company is facing challenges in increasing the number of units per transaction, as customers are putting less in their baskets.
Q & A Highlights
Q: How do you balance maintaining customer loyalty without excessive discounting, especially in a competitive environment?
A: Anthony Heraghty, CEO: We focus on maintaining visitation and transaction volumes. Our strategy is to drive customers into the store without excessive discounting. We monitor visitation and transaction data closely and adjust promotions as needed to maintain customer engagement without eroding margins.
Q: Rebel's performance in key areas like footwear and apparel has been weak. What are the reasons and how do you plan to address this?
A: Anthony Heraghty, CEO: We acknowledge the issues in Rebel's footwear category, particularly missing out on the cushioning trend. We are addressing this by introducing new brands like HOKA and improving our in-stock positions. We are also focusing on enhancing customer service levels.
Q: Can you provide insights into the impact of price changes and inflation on your sales?
A: Anthony Heraghty, CEO: While there has been some price inflation, our focus remains on maintaining transaction growth. We have seen some moderation in inflation, but our primary goal is to ensure strong customer visitation and transaction volumes.
Q: How are you managing wage costs in light of ongoing enterprise agreement negotiations?
A: Anthony Heraghty, CEO: We are maintaining a premium over the retail award and having constructive discussions with our team members. We aim to balance fair wages with operational efficiency and will provide more details once negotiations are finalized.
Q: What factors are influencing your decision to focus on margin preservation rather than chasing top-line growth?
A: Anthony Heraghty, CEO: Our strategy is to maximize gross margin dollars rather than just focusing on the rate. We adjust promotional activities based on market conditions and customer behavior to ensure we maintain a healthy balance between volume and margin.
Q: Can you elaborate on the impact of the new Rebel loyalty program on customer spending behavior?
A: David Burns, CFO: It's early days, but we have seen strong uptake and redemption of loyalty points. We expect to see more significant impacts on visitation and spending behavior as the program matures and customers become more familiar with it.
Q: What is your approach to capital management and special dividends?
A: Anthony Heraghty, CEO: We are committed to maintaining our guided gearing range. While the previous special dividend was a step in that direction, we recognize the need for a methodical approach to return to our target range. Decisions on capital management will be made annually.
Q: How are you managing cost pressures, particularly in terms of wages and rent?
A: Anthony Heraghty, CEO: We continuously optimize our cost structure, focusing on aligning wages with traffic and managing rent through competitive lease negotiations. We are vigilant about cost control and adapting to inflationary pressures.
Q: Can you provide more clarity on the impact of currency, freight, and factory prices on your gross margins?
A: David Burns, CFO: Currency fluctuations have been unfavorable, but we have seen positive impacts from lower ocean shipping rates and improved onshore logistics costs. Overall, these factors have balanced out, resulting in a net neutral impact on our intake margins.
Q: Are you on track with your store opening plans, and how do you find suitable sites?
A: Anthony Heraghty, CEO: Yes, we have a strong pipeline of new store openings and extensions. Our property strategy is well-executed, and we are confident in our ability to find suitable sites to meet our expansion goals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
