Full Year 2026 Accent Group Ltd Earnings Call

August 21, 2026

Speaker #1: You have joined the meeting as an attendee and will be muted throughout the meeting.

Speaker #2: Investor briefing. We will begin with a presentation by Daniel Agostinelli, Group CEO, and Matthew Durbin, Finance Director, followed by a Q&A session. If you would like to ask a question, please select the raised-hand button to be placed in the virtual queue.

Ronnie xxx: Investor briefing. We will begin with a presentation by Daniel Agostinelli, Group CEO, and Matthew Durbin, Finance Director, followed by a Q&A session. If you would like to ask a question, please select the raise hand button to be placed in the virtual queue. The raise hand button can be found at the bottom of the Zoom interface. Now, Daniel, over to you. Thank you.

Operator: Investor briefing. We will begin with a presentation by Daniel Agostinelli, Group CEO, and Matthew Durbin, Finance Director, followed by a Q&A session. If you would like to ask a question, please select the raise hand button to be placed in the virtual queue. The raise hand button can be found at the bottom of the Zoom interface. Now, Daniel, over to you. Thank you.

Speaker #2: The raised-hand button can be found at the bottom of the Zoom interface. Now, Daniel, over to you. Thank you.

Speaker #3: Thank you, Ronnie. Good morning, everyone, and thank you for taking the time to attend the call today. Joining me on the call is our Finance Director, Matthew Durbin.

Dan Agostinelli: Thank you, Ronnie. Good morning, everyone, and thank you for taking the time to attend the call today. Joining me on the call is our Finance Director, Matthew Durbin. We will now take you through the results for the 52 weeks, ended 28 June 2026, and a trading update for the first seven weeks of FY27. There will be an opportunity to ask questions at the end. FY26 was a year of significant strategic progress to the Accent Group. We delivered against challenging macroeconomic backdrops. The consumer environment remained difficult throughout the year, and the Q4 in particular was materially impacted by the escalation of geopolitical tensions and a significant deterioration in consumer confidence. Notwithstanding that backdrop, our performance brands continued to grow. The Athlete's Foot, Hoka, Merrell, and Saucony all grew. We saw year-on-year growth for Skechers, Stylerunner, and UGG.

Daniel Agostinelli: Thank you, Ronnie. Good morning, everyone, and thank you for taking the time to attend the call today. Joining me on the call is our Finance Director, Matthew Durbin. We will now take you through the results for the 52 weeks, ended 28 June 2026, and a trading update for the first seven weeks of FY 2027. There will be an opportunity to ask questions at the end. FY 2026 was a year of significant strategic progress to the Accent Group. We delivered against challenging macroeconomic backdrops.

Speaker #3: We will now take you through the results for the 52 weeks ended 28 June 2026, and provide a trading update for the first 7 weeks of FY27.

Speaker #3: There will be an opportunity to ask questions at the end. FY26: It was a challenging—and, excuse me—FY26 was a year of significant strategic progress for the Accent Group.

Speaker #3: And we delivered against challenging macroeconomic backdrops. The consumer environment remained difficult throughout the year, and the fourth quarter, in particular, was materially impacted by the escalation of geopolitical tensions and a significant deterioration in consumer confidence.

Daniel Agostinelli: The consumer environment remained difficult throughout the year, and the Q4 in particular was materially impacted by the escalation of geopolitical tensions and a significant deterioration in consumer confidence. Notwithstanding that backdrop, our performance brands continued to grow. The Athlete's Foot, Hoka, Merrell, and Saucony all grew. We saw year-on-year growth for Skechers, Stylerunner, and UGG.

Speaker #3: Notwithstanding that backdrop, our performance brands continued to grow. The Athlete's Foot, HOKA, and Skechers all grew, and we saw year-on-year growth for Skechers, Stylerunner, and UGG.

Speaker #3: Nude Lucy delivered another record year of sales and profit. If I can now refer you to the operational highlights on page 5 of our investor presentation, which was released to the ASX this morning.

Dan Agostinelli: Nude Lucy delivered another record year of sales and profit. If I can now refer you to the operational highlights on page 5 of our investor presentation, which was released to the ASX this morning. The key highlights include total sales including franchisees of AUD 1.6 billion, up 0.9%, with total owned sales of AUD 1.53 billion, up 4.7% on FY25. Owned retail sales of AUD 1.4 billion, were up 4%. Wholesale sales of AUD 172 million are up 10.8%. Vertical owned brand sales of AUD 137 million, approximately 9% of total sales, with improving margins year on year. 876 stores across Australia and New Zealand with 43 new stores opened during the year. Sports Direct opened at Fountain Gate and Chatswood Chase during FY26. 17 Athlete's Foot franchise buybacks were completed. Turning to the overview on page 6. FY26 was a year of significant strategic progress.

Daniel Agostinelli: Nude Lucy delivered another record year of sales and profit. If I can now refer you to the operational highlights on page five of our investor presentation, which was released to the ASX this morning. The key highlights include total sales including franchisees of AUD 1.6 billion, up 0.9%, with total owned sales of AUD 1.53 billion, up 4.7% on FY 2025. Owned retail sales of AUD 1.4 billion, were up 4%. Wholesale sales of AUD 172 million are up 10.8%. Vertical owned brand sales of AUD 137 million, approximately 9% of total sales, with improving margins year on year.

Speaker #3: The key highlights include: total sales, including franchisees, of $1.6 billion, up 0.9%, with total own sales of $1.53 billion, up 4.7% on FY25. Own retail sales of $1.4 billion were up 4%.

Speaker #3: Wholesale sales of $172 million are up 10.8%. Vertical owned brand sales were $137 million, approximately 9% of total sales, with improving margins year on year.

Speaker #3: 876 stores across Australia and New Zealand, with 43 new stores opened during the year. Sports Direct opened at Fountain Gate and Chatswood Chase during FY26.

Daniel Agostinelli: 876 stores across Australia and New Zealand with 43 new stores opened during the year. Sports Direct opened at Fountain Gate and Chatswood Chase during FY 2026. 17 Athlete's Foot franchise buybacks were completed. Turning to the overview on page six.

Speaker #3: And 17 Athletes' Foot franchise buybacks were completed. Turning to the overview on page 6, FY26 was a year of significant strategic progress. I am pleased to report that the business delivered underlying EBIT of $105.3 million in a challenging macroeconomic environment.

Daniel Agostinelli: FY 2026 was a year of significant strategic progress. I am pleased to report that the business delivered underlying EBIT of AUD 105.3 million in a challenging macroeconomic environment. Under the portfolio simplification, we closed the loss-making Glue Store and Ozsale businesses and exited the low-performing Herschel, Superga, and Dickies distribution brands, removing approximately AUD 17.8 million of losses on an annual basis.

Dan Agostinelli: I am pleased to report that the business delivered underlying EBIT of AUD 105.3 million in a challenging macroeconomic environment. Under the portfolio simplification, we closed the loss-making Glue Store and Ozsale businesses and exited the low-performing Herschel, Superga, and Dickies distribution brands, removing approximately AUD 17.8 million of losses on an annual basis. On the growth investment, we launched an expanded Sports Direct with three stores plus online now currently trading, and continued The Athlete's Foot franchise reacquisition program with 17 franchisees acquired. Under cost and efficiency, we improved underlining cost of doing business by 80 basis points on FY25 and completed a material support office restructure, reducing over 100 roles. Finally, the 2030 strategic growth plan is progressing well.

Speaker #3: Under the portfolio simplification, we closed the loss-making Glue and Odd's sale businesses and exited the low-performing Herschel, Superga, and Dickies distribution brands, removing approximately $7–7.8 million of losses on an annual basis.

Speaker #3: On the growth investment, we launched an expanded Sports Direct, with three stores plus online now currently trading, and continued the Athlete's Foot franchise reacquisition program, with 17 franchisees acquired.

Daniel Agostinelli: On the growth investment, we launched an expanded Sports Direct with three stores plus online now currently trading, and continued The Athlete's Foot franchise reacquisition program with 17 franchisees acquired. Under cost and efficiency, we improved underlining cost of doing business by 80 basis points on FY25 and completed a material support office restructure, reducing over 100 roles. Finally, the 2030 strategic growth plan is progressing well. I will now hand you over to Matthew Durbin to talk you through the details of the results. Thanks, Matt.

Speaker #3: On the cost and efficiency, we improved underlying cost of doing business by 80 basis points in FY25 and completed a material support office restructure, reducing over 100 roles.

Speaker #3: And on the strategic direction, we released the 2030 Strategic Growth Plan and developed a material cost-out plan for benefit in FY27 and beyond.

Speaker #3: And finally, the 2030 strategic growth plan is progressing well. I will now hand you over to Matthew Durbin to talk you through the details of the result.

Dan Agostinelli: I will now hand you over to Matthew Durbin to talk you through the details of the results. Thanks, Matt.

Speaker #3: Thanks, Matt.

Speaker #4: Thanks, Daniel. Total sales including The Athlete's Foot franchisees were $1.63 billion, compared to $1.62 billion in FY25. EBITDA was $278.9 million, compared to $288.8 million in the prior year.

Matthew Durbin: Thanks, Daniel. Total sales, including The Athlete's Foot franchisees, were AUD 1.63 billion, compared to AUD 1.62 billion in FY25. EBITDA was AUD 278.9 million compared to AUD 288.8 million in the prior year. EBIT before the non-cash goodwill impairment was AUD 82.6 million, above the midpoint of the guidance range of AUD 79.5 million to AUD 84.5 million, provided in our trading update on 4 May. Before the AUD 2.1 million of advisor costs relating to the Frasers Group takeover proposal, operating EBIT would have been AUD 84.7 million, just above the top end of the guidance range. Underlying EBIT was AUD 105.3 million. This is reported EBIT adjusted to AUD 71.2 million of significant items. Those being AUD 17.8 million of losses from closed businesses, AUD 2.8 million of restructuring costs relating to the cost out program, AUD 2.1 million of advisor costs, and the AUD 48.6 million non-cash goodwill impairment.

Speaker #4: EBIT before the non-cash goodwill impairment was $82.6 million, above the midpoint of the guidance range of $79.5 to $84.5 million provided in our trading update on the 4th of May.

Speaker #4: Before the $2.1 million of advisor costs relating to the Frasers Group takeover proposal, operating EBIT would have been $84.7 million, just above the top end of the guidance range.

Speaker #4: Underlying EBIT was $105.3 million. This is reported EBIT adjusted for $71.2 million of significant items, those being: $17.8 million of losses from closed businesses, $2.8 million of restructuring costs relating to the cost-out program, $2.1 million of advisor costs, and the $48.6 million non-cash goodwill impairment.

Matthew Durbin: Underlying EBIT was AUD 105.3 million. This is reported EBIT adjusted to AUD 71.2 million of significant items. Those being AUD 17.8 million of losses from closed businesses, AUD 2.8 million of restructuring costs relating to the cost out program, AUD 2.1 million of advisor costs, and the AUD 48.6 million non-cash goodwill impairment.

Speaker #4: Underlying net profit after tax was $51 million, with underlying EPS of 8.5 cents per share. Statutory EPS was negative 2.3 cents per share. Reported EBIT, post the goodwill impairment, was $34 million, and the statutory profit result was a net loss after tax of $13.8 million.

Matthew Durbin: Underlying net profit after tax was AUD 51 million, with underlying EPS of AUD 0.085 per share. Statutory EPS was -AUD 0.023 per share. Reported EBIT post the goodwill impairment was AUD 34 million, and the statutory profit result was a net loss after tax of AUD 13.8 million. The AUD 48.6 million goodwill impairment is a non-cash charge and the technical outcome of the company's annual goodwill impairment assessment, which involves forward-looking assumptions and the exercise of judgment. Importantly, the impairment does not of itself affect the company's cash flows, banking covenants, its ability to pay dividends, or its day-to-day operations. Turning now to the operating review. Owned retail sales were AUD 1.4 billion, up 4.4% on FY25. LFL retail sales for the full year were down 0.5%, with H1 up 0.9% and H2 down 2%. The group added 43 new stores and closed 59 stores.

Speaker #4: The $48.6 million goodwill impairment is a non-cash charge and the technical outcome of the company's annual goodwill impairment assessment, which involves forward-looking assumptions and the exercise of judgment.

Speaker #4: Importantly, the impairment does not in itself affect the company's cash flows, banking covenants, its ability to pay dividends, or its day-to-day operations. Turning now to the operating review.

Matthew Durbin: Importantly, the impairment does not of itself affect the company's cash flows, banking covenants, its ability to pay dividends, or its day-to-day operations. Turning now to the operating review. Owned retail sales were AUD 1.4 billion, up 4.4% on FY25. LFL retail sales for the full year were down 0.5%, with H1 up 0.9% and H2 down 2%. The group added 43 new stores and closed 59 stores.

Speaker #4: Owned retail sales were $1.4 billion, up 4.4% on FY25. Like-for-like retail sales for the full year were down 0.5%, with half one up 0.9% and half two down 2%.

Speaker #4: The group added 43 new stores and closed 59 stores. The closures combined comprised 22 Glue, Herschel, and Superga stores, together with 37 stores across other Accent banners where sustainable rental outcomes could not be achieved.

Matthew Durbin: The closures comprised of 22 Glue Store, Herschel, and Superga stores, together with 37 stores across other Accent banners, where sustainable rental outcomes could not be achieved. That 37 included 17 Vans stores as part of the brand's optimization program. 20 stores closed in the normal course based on those sustainable rent outcomes. There was a strong retail performance across The Athlete's Foot, Hoka, Stylerunner, and others, and 48 Nude Lucy stores are now open, with another record year of sales and profit for Nude Lucy. Wholesale sales were AUD 172 million, up 10.8%, driven by Hoka, UGG, and the addition of Lacoste. Vertical Own Brand sales grew to AUD 137 million, representing approximately 9% of total owned sales, with improving gross margins year on year. Now turning to the growth plan update.

Speaker #4: That 37 included 17 Vans stores as part of the brand's optimization program. So, 20 stores closed in the normal course, based on those sustainable rent outcomes.

Speaker #4: There was strong retail performance across The Athlete's Foot, Hockey, Stylerunner, and others. Forty-eight new Nude Lucy stores are now open, with another record year of sales and profit for Nude Lucy.

Speaker #4: Wholesale sales were $172 million, up 10.8%, driven by hockey, AG, and the addition of Lacoste. Vertical owned brand was $137 million, representing approximately 9% of total owned sales, with improving gross margins year on year.

Matthew Durbin: Wholesale sales were AUD 172 million, up 10.8%, driven by Hoka, UGG, and the addition of Lacoste. Vertical Own Brand sales grew to AUD 137 million, representing approximately 9% of total owned sales, with improving gross margins year on year. Now turning to the growth plan update.

Speaker #4: Now, turning to the growth plan update. The key initiatives under the 2030 Strategic Growth Plan, released to the ASX on the 13th of May, are progressing well.

Matthew Durbin: The key initiatives under the 2030 strategic growth plan, released to the ASX on 13 May, are progressing well. The plan targets at least AUD 1.9 billion in sales and a 9% plus EBIT margin and 950 stores by 2030, built around three pillars of efficiency, evolution, and expansion. On operating efficiencies, the approximately AUD 40 million in gross cost savings program identified through to 2028, representing a net benefit of AUD 15 to 20 million, is on track. Of this, there is AUD 30 million of gross savings and a net benefit of AUD 10 to 15 million that has been actioned for FY27. Savings are being realized across support office teams, occupancy, retail teams, IT, and marketing. We have a significant number of AI-oriented projects that are being deployed to support further efficiencies into FY28.

Speaker #4: The plan targets at least $1.9 billion in sales, a 9% plus EBIT margin, and 950 stores by 2030, built around three pillars of efficiency, evolution, and expansion.

Speaker #4: On operating efficiencies, the approximately $40 million in gross cost savings program identified through to '28, representing a net benefit of $15 to $20 million, is on track.

Speaker #4: Of this, there is $30 million of gross savings and a net benefit of $10 to $15 million that has been actioned for FY27. Savings are being realized across support office teams, occupancy, retail teams, IT, and marketing.

Matthew Durbin: Savings are being realized across support office teams, occupancy, retail teams, IT, and marketing. We have a significant number of AI-oriented projects that are being deployed to support further efficiencies into FY28.

Speaker #4: We have a significant number of AI-oriented projects that are being deployed to support further efficiencies into FY28. These savings are structural in nature and are expected to persist and compound through FY27 and FY28.

Matthew Durbin: These savings are structural in nature and are expected to persist and compound through FY27 and FY28. Looking at store portfolio optimization, we flagged that 102 stores are under review as they come up for lease renewal. With these renewals, this should support an EBIT uplift of at least AUD 7 million by 2030, with a targeted FY27 benefit of at least AUD 2 million. The Athlete's Foot reacquisition program remains on track and is delivering incremental EBIT as corporate ownership increases. This program is expected to contribute around AUD 14 million of incremental EBIT by 2030, including AUD 6 million in the FY27 year. The longest dated franchise agreement expires in August 2029. On customer and digital, the company has more than 10 million contactable customers and 29 websites across the portfolio.

Speaker #4: Looking at store portfolio optimization, we flagged that 102 stores are under review as they come up for lease renewal. With these renewals, this should support an EBIT uplift of at least $7 million by 2030, with a targeted FY27 benefit of at least $2 million.

Speaker #4: The Athlete's Foot reacquisition program remains on track and is delivering incremental EBIT as corporate ownership increases. This program is expected to contribute around $14 million of incremental EBIT by 2030, including $6 million in the FY27 year.

Matthew Durbin: This program is expected to contribute around AUD 14 million of incremental EBIT by 2030, including AUD 6 million in the FY27 year. The longest dated franchise agreement expires in August 2029. On customer and digital, the company has more than 10 million contactable customers and 29 websites across the portfolio.

Speaker #4: The longest-dated franchise agreement expires in August 2029. On customer and digital, the company has more than 10 million contactable customers and 29 websites across the portfolio.

Speaker #4: With continued investment in CRM, personalization, and digital experience, along with AI tools being deployed to support customer engagement and marketing efficiency. Turning to Sports Direct, Sports Direct continues to expand, with eight stores plus online expected to be operating by December 2026.

Matthew Durbin: With continued investment in CRM, personalization, and digital experience, along with AI tools being deployed to support customer engagement and marketing efficiency. Turning to Sports Direct. Sports Direct continues to expand with eight stores plus online expected to be operating by December 2026. The continued rollout across ANZ in line with the retail agreement. Store rollout is on track with the plan laid out in the retailer agreement with Frasers Group. The Sports Direct online channel continues to grow, and the business traded well during the FIFA Men's World Cup period, providing a tailwind into FY27. Management has continued to work constructively with Frasers' operational teams in building the Sports Direct business in ANZ in accordance with the strategic partnership agreement. Turning to new store expansion and brand growth. 43 stores opened in FY26 were led by Hoka, Skechers, Nude Lucy, Lacoste, and Sports Direct.

Speaker #4: And the continued rollout across A and Z is in line with the retail agreement. Store rollout is on track with the plan laid out in the retail agreement with Frasers Group.

Speaker #4: The Sports Direct online channel continues to grow, and the business traded well during the FIFA Men's World Cup period, providing a tailwind into FY27.

Matthew Durbin: The Sports Direct online channel continues to grow, and the business traded well during the FIFA Men's World Cup period, providing a tailwind into FY27. Management has continued to work constructively with Frasers' operational teams in building the Sports Direct business in ANZ in accordance with the strategic partnership agreement. Turning to new store expansion and brand growth. 43 stores opened in FY26 were led by Hoka, Skechers, Nude Lucy, Lacoste, and Sports Direct.

Speaker #4: Management has continued to work constructively with Fraser's operational teams in building the Sports Direct business in A and Z, in accordance with the strategic partnership agreement.

Speaker #4: Turning to new store expansion and brand growth, 43 stores opened in FY26 were led by HOKA, Skechers, Nude Lucy, Lacoste, and Sports Direct. The strong performance in the brand portfolio and growing vertical brands position Accent well for FY27.

Matthew Durbin: The strong performance in brand portfolio and growing vertical brands position Accent well for FY27. Note that in the May strategic plan, we called out a target of around 20 plus new stores, excluding Sports Direct, to continue to open each year, and that remains in place. The Frasers Group strategic retail agreement, turning to slide 12, continues to provide access to global brands, product, and supply chain benefits. Online sales have outperformed our expectations, and week-on-week sales in all stores have continued to grow as customers engage with the brand. A fourth store at Miranda was opened since year-end, and 8 stores plus online are expected to be operating by December 2026. For The Athlete's Foot, 17 buybacks were completed in FY26, with 28 franchise stores remaining. The TAF network is around 160 stores, comprising 132 corporate stores and 28 franchise stores. This is against 146 stores in FY17.

Speaker #4: Note that in the May strategic plan, we called out a target of around 20-plus new stores, excluding Sports Direct, to continue to open each year, and that remains in place.

Speaker #4: The Frasers Group strategic retail agreement, turning to slide 12, continues to provide access to global brands, product, and supply chain benefits. Online sales have outperformed our expectations, and week-on-week sales in all stores have continued to grow as customers engage with the brand.

Matthew Durbin: A fourth store at Miranda was opened since year-end, and 8 stores plus online are expected to be operating by December 2026. For The Athlete's Foot, 17 buybacks were completed in FY26, with 28 franchise stores remaining. The TAF network is around 160 stores, comprising 132 corporate stores and 28 franchise stores. This is against 146 stores in FY17.

Speaker #4: The fourth store, Miranda, was opened since year-end, and eight stores plus online are expected to be operating by December 2026. For The Athlete's Foot, 17 buybacks were completed in FY26, with FY28 franchise stores remaining. The TAF network is around 160 stores, comprising 132 corporate stores and 28 franchise stores. This is against 146 stores in FY17.

Speaker #4: Results achieved from the reacquired franchise stores are in line with the update. The Board has declared a fully-franked final dividend of 1.25 cents per share, to be paid on the 14th of September 2026.

Matthew Durbin: Results achieved from the reacquired franchise stores are bang in line with expectations. Dividends and trading update. The board has declared a fully franked final dividend of AUD 0.0125 per share to be paid on 14 September 2026. Total dividends for FY26 are AUD 0.045 per share, and this compares to AUD 0.07 per share in FY25. Compared to reported EPS before the goodwill impairment, the dividend represents a payout ratio of 78%, which is at the top end of the board's target range of 60% to 80% of net profit after tax, excluding the non-cash goodwill impairment. It remains the board's intention to continue to pay fully franked dividends out of available cash flow, with a target ratio subject to circumstances at the relevant time. Turning to the trading update and outlook.

Speaker #4: Total dividends for FY26 are 4.5 cents per share, compared to 7 cents per share in FY25. Compared to reported EPS before the goodwill impairment, the dividend represents a payout ratio of 78%, which is at the top end of the board's target range of 60% to 80% of net profit after tax.

Matthew Durbin: Compared to reported EPS before the goodwill impairment, the dividend represents a payout ratio of 78%, which is at the top end of the board's target range of 60% to 80% of net profit after tax, excluding the non-cash goodwill impairment. It remains the board's intention to continue to pay fully franked dividends out of available cash flow, with a target ratio subject to circumstances at the relevant time. Turning to the trading update and outlook.

Speaker #4: Excluding the non-cash impairment, goodwill impairment, it remains the Board's intention to continue to pay fully-franked dividends out of available cash flow, with a target ratio subject to circumstances at the relevant time.

Speaker #4: Turning to the trading update and outlook, total owned sales, excluding the loss-making businesses we have exited, are up 3.2% for the first seven weeks of FY27.

Matthew Durbin: Total owned sales, excluding the loss-making businesses we have exited, are up 3.2% for the first 7 weeks of FY27. LFL sales for the first 7 weeks are down 2% on the prior year. Pleasingly, gross margin percentage for July was up on prior year. We are encouraged with trade in the first 7 weeks, which has improved compared to the Q4 in respect of both sales and margin tracking. The trading environment continues to be volatile in the opening weeks of the year, noting that sales into August showed further improvement over July. The performance sports category, including The Athlete's Foot, remains resilient and has achieved positive LFL sales, as has Nude Lucy. Sports Direct has performed well, leveraging the World Cup, and week-on-week sales tracking continues to improve.

Speaker #4: LFL sales for the first seven weeks are down 2% on the prior year, and pleasingly, gross margin percentage for July was up on the prior year.

Speaker #4: We're encouraged by trade in the first seven weeks, which has improved compared to the fourth quarter, in respect of both sales and margin tracking.

Speaker #4: The trading environment continues to be volatile in the opening weeks of the year, noting that sales into August showed further improvement over July. The performance sports category, including The Athlete's Foot, remains resilient and has achieved positive LFL sales, as has Nude Lucy.

Matthew Durbin: The performance sports category, including The Athlete's Foot, remains resilient and has achieved positive LFL sales, as has Nude Lucy. Sports Direct has performed well, leveraging the World Cup, and week-on-week sales tracking continues to improve.

Speaker #4: Sports Direct has performed well, leveraging the World Cup, and week-on-week sales tracking continues to improve. Continued strength in sport provides high conviction with respect to the ongoing strategy to complete The Athlete's Foot reacquisitions and to drive the Sports Direct rollout.

Matthew Durbin: Continued strength in sport provides high conviction with respect to the ongoing strategy to complete The Athlete's Foot re-acquisitions and to drive the Sports Direct rollout. For FY27, the company has a range of high-conviction initiatives to drive EBIT growth. Leveraging off the FY26 underlying EBIT of AUD 105.3 million, the initiatives already underway as part of the 2030 strategic growth plan include AUD 10 to 15 million of net cost savings, this being approximately AUD 30 million of gross cost savings net of inflationary increases. These savings have already been actioned for FY27. There is an estimated AUD 10 to 20 million in gross margin upside from FX hedging, noting that the Australian dollar to the US dollar is currently sitting around 71 cents. An estimated AUD 10 million benefit from The Athlete's Foot franchise re-acquisitions, store portfolio optimization, and new stores.

Speaker #4: For FY27, the company has a range of high-conviction initiatives to drive EBIT growth. Leveraging off the FY26 underlying EBIT of $105.3 million, the initiatives already underway as part of the 2030 strategic growth plan include $10 to $15 million of net cost savings.

Speaker #4: This being approximately $30 million of gross cost savings, net of inflationary increases. These savings have already been actioned for FY27. There's an estimated $10 to $20 million in gross margin upside from FX hedging.

Matthew Durbin: These savings have already been actioned for FY27. There is an estimated AUD 10 to 20 million in gross margin upside from FX hedging, noting that the Australian dollar to the US dollar is currently sitting around 71 cents. An estimated AUD 10 million benefit from The Athlete's Foot franchise re-acquisitions, store portfolio optimization, and new stores.

Speaker #4: Noting that the Australian dollar to the US dollar is currently sitting around $0.71, and an estimated $10 million benefit from The Athlete’s Foot franchise reacquisitions, store portfolio optimization, and new stores.

Speaker #4: These growth initiatives for FY27 were put in place to ensure the business could maintain an acceptable level of profit in a trading environment where like-for-like (LFL) retail sales were up to low single-digit negative.

Matthew Durbin: These growth initiatives for FY27 were put in place to ensure the business could maintain an acceptable level of profit in a trading environment where LFL retail sales were up to low single-digit negative. Now taking to the financials. Underlying gross margin, excluding the closed businesses, was 54.1% compared to 54.9% in the prior year. The currency movement year on year impacted the result by a further 40 basis points. The result reflects the trading conditions and the heightened promotional activity, a disciplined approach to inventory management in a low sales environment, and the lower AUD. Underlying cost of doing business was 45.6% compared to 46.6% in the prior year. Meaningful cost savings were achieved in the year across support team, occupancy, IT, and marketing, reflecting the company's focus on operating efficiency as part of the 2030 strategic growth plan. Turning to the balance sheet on page 17.

Speaker #4: Now, taking you to the financials. Underlying gross margin, excluding the closed businesses, was 54.1%, compared to 54.9% in the prior year. Currency movement year-on-year impacted the result by a further 40 basis points.

Speaker #4: The result reflects the trading conditions and the heightened promotional activity, a disciplined approach to inventory management in a low sales environment, and the lower AUD.

Speaker #4: Underlying cost of doing business was 45.6%, compared to 46.6% in the prior year. Meaningful cost savings were achieved in the year across the port team, occupancy, IT, and marketing, reflecting the company's focus on operating efficiency.

Matthew Durbin: Underlying cost of doing business was 45.6% compared to 46.6% in the prior year. Meaningful cost savings were achieved in the year across support team, occupancy, IT, and marketing, reflecting the company's focus on operating efficiency as part of the 2030 strategic growth plan. Turning to the balance sheet on page 17.

Speaker #4: As part of the 2030 strategic growth plan, turning to the balance sheet on page 17, inventory of $334.8 million was up on the prior year of $308.5 million.

Matthew Durbin: Inventory of AUD 334.8 million was up on the prior year of AUD 308.5 million. The increase reflects the timing of goods in transit, AUD 5.8 million, The Athlete's Foot re-acquisition program of AUD 5.1 million. That is the inventory associated with that program. Hoka inventory increase of AUD 2 million, Sports Direct of AUD 9 million, and Lacoste of AUD 10.3 million. The remaining increase relates to wholesale expansion, the timing of new stock purchases. Age inventory is clean and inventory remains well managed. Turning now to net debt and cash flow. The underlying business improved net debt by AUD 8.6 million over the year to AUD 91.4 million. The closed businesses has a net debt or cash flow impact of AUD 10.2 million, reflecting the losses associated with Ozsale, Glue Store, Herschel, Superga, and Dickies.

Speaker #4: The increase reflects the timing of goods in transit, $5.8 million; the Athletes' Foot reacquisition program of $5.1 million—that's the inventory associated with that program; HOKA inventory increase of $2 million; Sports Direct of $9 million; and Lacoste of $10.3 million.

Speaker #4: The remaining increase relates to wholesale expansion and the timing of new stock purchases. Aged inventory is clean and inventory remains well managed. Turning now to net debt.

Speaker #4: And cash flow—the underlying business improved net debt by $8.6 million over the year, to $91.4 million. The closed businesses had a net debt or cash flow impact of $10.2 million, reflecting the losses associated with those sales: Glue, Herschel, Superga, and Dickies.

Matthew Durbin: The underlying business improved net debt by AUD 8.6 million over the year to AUD 91.4 million. The closed businesses has a net debt or cash flow impact of AUD 10.2 million, reflecting the losses associated with Ozsale, Glue Store, Herschel, Superga, and Dickies.

Speaker #4: Strategic growth investment accounted for $39.5 million of investment, being $12.3 million for Sports Direct, continuing to utilize the $60 million in subscription funds received in May 2025, and $27.2 million for the reacquisition of 17 earnings-accretive Athletes Foot franchise stores. This has been our biggest year of acquisition of Athletes Foot franchise stores to date.

Matthew Durbin: Strategic growth investment accounted for AUD 39.5 million of investment, being AUD 12.3 million for Sports Direct, continuing to utilize the AUD 60 million in subscription funds received in May 2025, and AUD 27.2 million for the re-acquisition of 17 earnings-accretive Athlete's Foot franchise stores. This has been our biggest year of acquisition of Athlete's franchise stores to date. Net debt implies a leverage ratio of 1.18 times, which is well within the board's tolerance range for gearing and the company's banking covenants. As at 30 June 2026, the company had AUD 60.9 million of undrawn committed facilities and a further AUD 64.2 million of at-call funds within its funding agreements. During the year, we completed a debt refinancing, increasing the total facilities by AUD 102 million to AUD 372 million on improved terms, including an improved margin and tenure out to December 2028.

Speaker #4: Net debt implies a leverage ratio of 1.18 times, which is well within the board's tolerance range for gearing and the company's banking covenants. As at 30 June 2026, the company had $60.9 million of undrawn committed facilities and a further $64.2 million of at-call funds within its funding agreements.

Matthew Durbin: As at 30 June 2026, the company had AUD 60.9 million of undrawn committed facilities and a further AUD 64.2 million of at-call funds within its funding agreements. During the year, we completed a debt refinancing, increasing the total facilities by AUD 102 million to AUD 372 million on improved terms, including an improved margin and tenure out to December 2028.

Speaker #4: During the year, we completed a debt refinancing, increasing the total facilities by $102 million to $372 million, on improved terms, including an improved margin and a 10-year term out to December 2028.

Speaker #4: This provides a robust capital structure and the flexibility to pursue additional growth opportunities, including potential new distributed brands. Coming to capital investment on page 19.

Matthew Durbin: This provides a robust capital structure and the flexibility to pursue additional growth opportunities, including potential new distributed brands. Coming to capital investment on page 19. BAU CapEx on new stores, refurbishments, and IT was AUD 32 million in FY26, down from AUD 42.2 million in FY25. This reflected the reduction in the number of stores, the number of new stores that were opened between 2025 and 2026. BAU capital for FY27 is forecast to be about AUD 30 million. That will be ultimately dependent on the number of new stores opened. The Athlete's Foot reacquisition investment was AUD 27.2 million in FY26. It is forecast at around half that level based on the acquisitions, the reacquisitions that we believe will occur in FY27. There are more than five reacquisitions planned, and as we get into the remaining franchise stores, they tend to be the better performing ones.

Speaker #4: BAU CapEx on new stores refurbishments and IT was 32 million dollars in FY26, down from 42.2 million in FY25. And this reflected the reduction in the number of stores, the number of new stores that were opened between '25 and '26.

Speaker #4: BAU capital for FY27 is forecast to be about $30 million. That will ultimately be dependent on the number of new stores opened. The Athletes' Foot reacquisition investment was $27.2 million in FY26, and is forecast at around half that level based on the acquisitions, the reacquisitions, that we believe will occur in FY27.

Matthew Durbin: The Athlete's Foot reacquisition investment was AUD 27.2 million in FY26. It is forecast at around half that level based on the acquisitions, the reacquisitions that we believe will occur in FY27. There are more than five reacquisitions planned, and as we get into the remaining franchise stores, they tend to be the better performing ones.

Speaker #4: There are more than five reacquisitions planned, and as we get into the remaining franchise stores, they tend to be the better performing ones. Sports Direct investment was $12.3 million in '26.

Matthew Durbin: Sports Direct investment was AUD 12.3 million in 2026. That comprised of the CapEx, the working capital, and the investment in the operating the business. That amount is estimated to be AUD 15 to 20 million in FY27. Combined growth and investment in Sports Direct and The Athlete's Foot remains at about 50% of the investment mix in 2027, with the BAU expenditure broadly constant. I will now hand back to Daniel to wrap up.

Speaker #4: That comprises the CapEx, the working capital, and the investment in operating the business. That amount is estimated to be $15 to $20 million in FY27.

Speaker #4: Combined growth and investment in Sports Direct and The Athlete's Foot remains at about 50% of the investment mix in '27, with the BAU expenditure broadly constant.

Speaker #4: I'll now hand back to Daniel to wrap up.

Speaker #1: Thanks, Matt. Before we take questions, I want to acknowledge the resilience that the Accent team has shown in navigating a challenging year.

Dan Agostinelli: Thanks, Matt. Before we take questions, I want to acknowledge the resilience that the Accent team has shown in navigating a challenging year. The business has made and executed a number of difficult but necessary decisions, closing loss-making businesses, tightening costs, and articulating the 2030 strategic plan, and the benefits of those actions should start to show through in FY27 and beyond. We are encouraged by the early trade from Sports Direct, including the opening of Miranda since year-end and the strong performance of the online channel. Our hedging position is expected to provide gross margin support into FY27. Finally, I am proud of the team who remain focused on driving profitable sales, tightly managing costs, and executing our key growth initiatives. That concludes our presentation today, and we will be happy to take any questions. Thank you.

Daniel Agostinelli: Thanks, Matt. Before we take questions, I want to acknowledge the resilience that the Accent team has shown in navigating a challenging year. The business has made and executed a number of difficult but necessary decisions, closing loss-making businesses, tightening costs, and articulating the 2030 strategic plan, and the benefits of those actions should start to show through in FY27 and beyond. We are encouraged by the early trade from Sports Direct, including the opening of Miranda since year-end and the strong performance of the online channel.

Speaker #1: The business has made and executed a number of difficult but necessary decisions—closing loss-making businesses, tightening costs, and articulating the 2030 strategic plan—and the benefits of those actions should start to show through in FY27 and beyond.

Speaker #1: We are encouraged by the early trade from Sports Direct, including the opening of Miranda since year-end, and the strong performance of the online channel.

Speaker #1: Our hedging position is expected to provide gross margin support into FY27. Finally, I'm proud of the team, who remain focused on driving profitable sales, tightly managing costs, and executing our key growth initiatives.

Daniel Agostinelli: Our hedging position is expected to provide gross margin support into FY27. Finally, I am proud of the team who remain focused on driving profitable sales, tightly managing costs, and executing our key growth initiatives. That concludes our presentation today, and we will be happy to take any questions. Thank you.

Speaker #1: That concludes our presentation today. We will be happy to take any questions. Thank you.

Speaker #2: We will now begin the Q&A session. As a reminder, to ask your question, please select the raised hand button at the bottom of your screen to be placed in the queue.

Ronnie xxx: We will now begin the Q&A session. As a reminder, to ask your question, please select the raise hand button on the bottom of your screen to be placed in the queue. Thank you. Your first question comes from Sam Teeger with Citi. Your line is open. You may ask your question.

Operator: We will now begin the Q&A session. As a reminder, to ask your question, please select the raise hand button on the bottom of your screen to be placed in the queue. Thank you. Your first question comes from Sam Teeger with Citi. Your line is open. You may ask your question.

Speaker #2: Thank you. Your first question comes from Sam Teager with Citi. Your line is open. You may ask your question.

Sam Teeger: Hi, Daniel. Hi, Matt. Can you guys hear me okay?

Speaker #3: Hi Daniel, hi Matt. Can you guys hear me okay?

Speaker #1: Yep.

Dan Agostinelli: Yep.

Daniel Agostinelli: Yep.

Speaker #4: We can. Thanks, Sam.

Matthew Durbin: We can. Thanks, Sam.

Speaker #3: Great. Yeah, just look, given how difficult industry conditions have become after you provided guidance in May following the federal budget, well—well done on this result.

Sam Teeger: Great. Just look, given how difficult industry conditions have become after you provided guidance in May following the federal budget, well done on this result. It is pretty good.

Speaker #3: It's pretty good. Thank you.

Dan Agostinelli: Thank you, Sam.

Daniel Agostinelli: Thank you, Sam.

Matthew Durbin: Thank you.

Speaker #4: Yeah, there's a unique situation here. On one hand, you have Frasers trying to take over Accent, and their bidder statement contains some pretty critical things about Accent and the board.

Sam Teeger: Yeah. There is a unique situation here. On one hand, you have Frasers trying to take over Accent, and their bidder statement contains some pretty critical things about Accent and the board. But on the other hand, Accent still has to work in partnership with Frasers to roll out and execute Sports Direct in Australia. Can you give us your perspective and insight as to how the relationship is going and what you need from Frasers for Sports Direct to be a success?

Speaker #4: But on the other hand, Accent still has to work in partnership with Frasers to roll out and execute Sports Direct in Australia. Can you give us your perspective—an insight into how the relationship is going and what you need from Frasers for Sports Direct to be a success?

Speaker #1: Sam, we have Dave Forcy on our board, and the relationship with Dave is good. He's currently in the country and visiting stores, and obviously attended our board meeting.

Dan Agostinelli: Sam, we have Dave Forsey on our board, and the relationship with Dave is good. He is currently in the country and visiting stores, and obviously attended our board meeting. As per our agreement, we channel everything through Dave that I need to channel, and primarily my team with Dave and Dave's team are working very collaboratively in regards to all things Sports Direct. Whatever else the Frasers Group wants to do is going to be a question for them. But from my point of view, personally, and this is the drive I have got with my team. We are focused on seven or eight different items that hopefully will deliver what, or at least I am confident they will deliver of what we are setting out to do in what we have advised the market. I would like to give you a couple of those, Sam. We have Vans trending up.

Daniel Agostinelli: Sam, we have Dave Forsey on our board, and the relationship with Dave is good. He is currently in the country and visiting stores, and obviously attended our board meeting. As per our agreement, we channel everything through Dave that I need to channel, and primarily my team with Dave and Dave's team are working very collaboratively in regards to all things Sports Direct. Whatever else the Frasers Group wants to do is going to be a question for them. But from my point of view, personally, and this is the drive I have got with my team.

Speaker #1: And as per our agreement, we channel everything through Dave that I need to channel. Primarily, my team, with Dave and Dave's team, are working very collaboratively in regards to all things Sports Direct.

Speaker #1: Whatever our phraser group wants to do is going to be a question for them. But from my point of view, personally—and this is the drive I've got with my team—we are focused on seven or eight different items that hopefully will deliver what, or at least I'm confident they'll deliver on what we're setting out to do.

Daniel Agostinelli: We are focused on seven or eight different items that hopefully will deliver what, or at least I am confident they will deliver of what we are setting out to do in what we have advised the market. I would like to give you a couple of those, Sam. We have Vans trending up.

Speaker #1: In what we've advised the market—and I'd like to give you a couple of those, Sam—so, we've got bands trending up.

Speaker #1: We've got Hockey absolutely firing. We've got Lacoste making good noises. Our cost control should see a significant amount of cost dropping to the bottom line.

Dan Agostinelli: We have Hoka absolutely firing. We have Lacoste making good noises. Our cost control should see a significant amount of cost dropping to the bottom line. We have FX going our way. We have closed Glue and MySale, both drags on our earnings. Our TAF buybacks are positive, and our TAF business being in that sports space is very positive, with the team just doing some amazing things there. Our wholesale business is positive. At the end of the day, the Sports Direct, we have another four or five stores to open by 1 December. If you go into those stores and if you ask yourself a question, have we shown up? We certainly have. As soon as we get more of those stores on ground, the marketing engine will be turned on, and that is why I feel confident with what is going on.

Daniel Agostinelli: We have Hoka absolutely firing. We have Lacoste making good noises. Our cost control should see a significant amount of cost dropping to the bottom line. We have FX going our way. We have closed Glue and MySale, both drags on our earnings. Our TAF buybacks are positive, and our TAF business being in that sports space is very positive, with the team just doing some amazing things there. Our wholesale business is positive. At the end of the day, the Sports Direct, we have another four or five stores to open by 1 December.

Speaker #1: We've got FX going our way. We've closed Glue and MySale, both drags on our earnings. Our Taft tie-backs are positive, and our Taft business, being in that sports space, is very positive.

Speaker #1: With the team just doing some amazing things there. Our wholesale business is positive. And at the end of the day, the Sports Direct—we've now opened, we've got another four or five stores to open by December 1st.

Speaker #1: And if you're going through those stores and ask yourself the question, have we shown up? We certainly have. As soon as we get more of those stores on the ground, the marketing engine will be turned on.

Daniel Agostinelli: If you go into those stores and if you ask yourself a question, have we shown up? We certainly have. As soon as we get more of those stores on ground, the marketing engine will be turned on, and that is why I feel confident with what is going on. Every other question to do with Frasers, I think has to go to our chairman or Frasers itself.

Speaker #1: And that's why I feel confident with what's going on. So every other question to do with Phrases, I think, has to go to our Chairman or Phrases itself.

Dan Agostinelli: Every other question to do with Frasers, I think has to go to our chairman or Frasers itself.

Speaker #4: Okay, thank you. And can we unpack the outlook in a bit more detail? I appreciate there's language in there referring to an acceptable level of profit.

Sam Teeger: Okay. Thank you. Can we unpack the outlook in a bit more detail? Appreciate there is language in there referring to an acceptable level of profit. To help us understand it better, if like-for-likes continue at say, a negative low single digit, is meaningful EBIT growth possible? What are you planning in FY27 around like-for-likes?

Speaker #4: But to help us understand it better, if like-for-likes continue at, say, a negative low single digit, is meaningful EBIT growth possible? What are you planning in FY27 around like-for-likes?

Speaker #4: Yeah, so Sam, I think it's difficult to provide more color than what we've put in the announcement. There are a couple of factual things. So, underlying EBIT was $105 million.

Matthew Durbin: Yeah. Sam, I think it is difficult to provide more color than what we have put in the announcement. There are a couple of factual things. Underlying EBIT was AUD 105 million, and we have put that on purpose in the outlook statement because that is clearly a number which is last year. In the absence of giving guidance, which we are not intending to do and have not done, that is a benchmark which is considered to be a reasonable benchmark. It is clear that we have got a range of valuable initiatives that have largely already been implemented or have a high level of certainty. It is also clear that trade for the first 7 weeks at -2 comps remains challenging. We are pleased that margin is up. We have said that we can deliver an acceptable level with slightly negative comps.

Speaker #4: And we've put that on purpose in the outlook statement because that's clearly a number which is last year. And in the absence of giving guidance, which we're not intending to do and haven't done, that's a benchmark which is considered to be a reasonable benchmark.

Matthew Durbin: It is clear that we have got a range of valuable initiatives that have largely already been implemented or have a high level of certainty. It is also clear that trade for the first 7 weeks at -2 comps remains challenging. We are pleased that margin is up. We have said that we can deliver an acceptable level with slightly negative comps.

Speaker #4: It's clear that we've got a range of valuable initiatives that have largely already been implemented or have a high level of certainty. And it's also clear that trade for the first seven weeks, at minus 2 comps, remains challenging.

Speaker #4: We're pleased that margins are up. But, and we've said that we can deliver an acceptable level with slightly negative comps. So whether that's less or more than last year, I think we've got a long, long way to trade.

Matthew Durbin: Whether that is less or more than last year, I think we have got a long way to trade. Let us see how margin and comp sales progress as we get towards November. Clearly, November, December, and January are the biggest and most critical months, and I think it will be difficult to provide much more color until we get through those months.

Speaker #4: And let's see how margin and comp sales progress as we get towards November. Clearly, November, December, and January are the biggest and most critical months.

Speaker #4: And I think it will be difficult to provide much more color until we get through those months. All right. No, that's clear. And last one: assuming there's no change in the consumer, based on what you've seen to start FY27, how much of the $10 to $20 million FX benefit do you think you will bank and won't need to be reinvested?

Sam Teeger: All right. No, that is clear. Last one. Assuming there is no change in the consumer, based on what you have seen to start FY27, how much of the AUD 10 to 20 million FX benefit do you think you will bank and will not need to be reinvested?

Speaker #1: Yeah, look, I think it's a similar...

Matthew Durbin: Yeah, look, I think that's a similar answer to one previously. What we know is that the AUD is trading at 71 cents. We also know that because we've put it in the slide, that our average achieved currency rate last year was 65 cents, and our average hedge book going forward is 69 cents. So, what's in place today already is a hedge book that's a 4 cent improvement over prior year. I've previously called out as a very general rule of thumb, every 1% is about AUD 5 million of gross margin benefit. So, if we get to keep all 4 cents of that's AUD 20 million. If we have to trade some of that away or more of it away, then that's what we don't know at the moment, which is why we've put a range of AUD 10 to 20 million.

Speaker #4: Answer to the one previously. What we know is that the dollar is trading at $0.71. We also know, and we've put it on the slide, that our average achieved currency rate last year was $0.65.

Speaker #4: And our average hedge book going forward is $0.69. So, what's in place today already is a hedge book that's a four-cent improvement over the prior year.

Speaker #4: And I've previously called out, as a very general rule of thumb, every 1% is about $5 million of gross margin benefit. So if we get to keep all four cents of that, that's $20 million.

Matthew Durbin: So, if we get to keep all 4 cents of that's AUD 20 million. If we have to trade some of that away or more of it away, then that's what we don't know at the moment, which is why we've put a range of AUD 10 to 20 million. The other thing we've said is that we did achieve an increase in July in gross margin, which is positive, but that was inclusive as well of the currency benefits that we had available for July. The promotional environment remains intense and the trading environment remains volatile, and the macro remains challenging.

Speaker #4: And if we have to trade some of that away, or more of it away, then that's what we don't know at the moment. Which is why we've put a range of $10 to $20 million.

Speaker #4: The other thing we've said is that we did achieve an increase in July in gross margin, which is positive. But that was inclusive as well of the currency benefits that we had available for July.

Matthew Durbin: The other thing we've said is that we did achieve an increase in July in gross margin, which is positive, but that was inclusive as well of the currency benefits that we had available for July. The promotional environment remains intense and the trading environment remains volatile, and the macro remains challenging.

Speaker #4: The promotional environment remains intense, and the trading environment remains volatile, and the macro remains challenging. Great, thanks, Clyde. Thank you, Sam.

Sam Teeger: Great. Thanks, guys.

Matthew Durbin: Thank you, Sam.

Speaker #2: Your next question will come from Sam Haddad with Petra Capital. Please unmute your audio and ask your question.

Ronnie xxx: Your next question will come from Sam Haddad with Petra Capital. Please unmute your audio and ask your question.

Operator: Your next question will come from Sam Haddad with Petra Capital. Please unmute your audio and ask your question.

Speaker #5: Good morning. Hi, Matt. And Daniel.

Sam Haddad: Good morning. Hi Matt and Daniel.

Speaker #4: Hi, Sam.

Matthew Durbin: Hi, Sam.

Speaker #5: Just following on from that last comment, so the gross margin uplift in the trade update is all FX. And can you give us a measure, in terms of the basis point benefit you're seeing from that?

Sam Haddad: Just following on that from the last comment. The gross margin uplift in the trade update is all FX. Can you give us a measure in terms of the basis point benefit you're seeing from that? I know it's only 1 month.

Speaker #5: I know it's only one month.

Speaker #4: Yeah. Look, Sam, it's too early to tell is the answer. Mathematically, a $20 million improvement from currency is more than 100 basis points of improvement.

Matthew Durbin: Yeah. Look, Sam, it is too early to tell, is the answer. Mathematically, an AUD 20 million improvement from currency is more than 100 basis points of improvement, and AUD 10 million is less than 100 basis points. But I think that is as much as I can say on that at this point.

Speaker #4: And $10 million is less than 100 basis points. But I think that's as much as I can say on that at this point.

Speaker #5: And just in terms of your outlook commentary, can you talk about the level of investment you'll need in Sports Direct? Because that, I would think, will still be a net negative in terms of level of investment versus where the platform's sitting at the moment in terms of profitability.

Sam Haddad: And just in terms of your outlook commentary, can you talk about the level of investment you will need in Sports Direct? Because that I would think would still be a net negative in terms of level of investment versus where the platform is sitting at the moment in terms of profitability.

Speaker #4: Yeah. So, in respect of Sports Direct, we've called out a range of total investment in Sports Direct in the FY27 year of $15 to $20 million.

Matthew Durbin: Yeah. In respect of Sports Direct, we have called out a range of total investment in Sports Direct in the FY27 year of AUD 15 million to AUD 20 million. We are investing heavily in marketing in Sports Direct and indeed have some commitments in the retail agreement in regards to marketing. As we are building the store base with that marketing investment ahead of the curve, I expect there will be a net cash outflow, net operating outflow associated with Sports Direct in this coming financial year, which is why we have flagged that AUD 15 million to AUD 20 million cash investment.

Speaker #4: We are investing heavily in marketing in Sports Direct, and indeed have some commitments in the retail agreement in regards to marketing. And as we're building the store base, with that marketing investment ahead of the curve, I expect there'll be a net cash outflow, net operating outflow associated with Sports Direct in this coming financial year.

Speaker #4: Which is why we flagged that $15 to $20 million cash investment.

Speaker #5: And on an EBIT, would it be a net detraction of, what, $4 million to $6 million or something like that? Is it fair in terms of...

Sam Haddad: And on an EBIT, would it be a net detraction of what, AUD 4 million to AUD 6 million or something like that? Is that a fair in terms of?

Speaker #4: Look, Sam, that's a reasonable estimate. It's a reasonable estimate.

Matthew Durbin: Look, Sam, that's a reasonable estimate. It's a reasonable estimate.

Speaker #5: Okay. And then on the tax, just to clarify that, you called out a $10 million benefit for the outlook there, but I remember it was $6 million in your Strategy Day prozo.

Sam Haddad: Okay. On The Athlete's Foot, just to clarify that, you called out AUD 10 million benefit for the outlook there, but I remember it was AUD 6 million in your strategy day Prezo. I'm just a bit confused there. What's the difference there? Which is correct?

Speaker #5: So, I just want to—I'm just a bit confused there. What's the difference there? Which is correct?

Speaker #4: Yeah. So the $10 million is correct. And that comprises three elements, Sam: $6 million in relation to TAF, $2 million in relation to the store optimization program—which, for fear of throwing around a gazillion numbers, that store optimization program was a total of $7 million out till 2030.

Matthew Durbin: Yeah. So the AUD 10 million is correct, and that comprises of three elements, Sam. So AUD 6 million in relation to The Athlete's Foot, AUD 2 million in relation to the store optimization program. Which for fear of throwing around a gazillion numbers, that store optimization program was a total of AUD 7 million out till 2030, and the FY27 component of that is around AUD 2 million. We're hoping at least AUD 2 million, which bridges to AUD 8 million. The other AUD 2 million then coming in from new stores. So hopefully that clarifies for you.

Speaker #4: And the FY27 component of that is around $2 million. We're hoping for at least $2 million, which bridges to $8 million, and the other $2 million then coming in from new stores.

Speaker #4: So, hopefully that clarifies things for you.

Speaker #5: Yeah. And just on the brand owners, are they starting to put prices up as they launch new products, in terms of the entry starting price point, on the back of the old price inflation backdrop?

Sam Haddad: Yeah. Just on the brand owners, are they starting to put prices up as they launch new products in terms of the starting price point on the back of the old price inflation backdrop? What are you doing in terms of that, in terms of managing your gross margin? Are you passing that on to consumers? What's the customer response been to those price increases?

Speaker #5: And what are you doing in terms of that, in terms of managing your gross margin? Are you pricing that onto consumers? And what's the customer response been to those price increases?

Speaker #4: Sam, there has been some of that. And where we've had to increase prices, resistance is not obvious. And I dare say that we will see some prices going up, yes.

Dan Agostinelli: Sam, there has been some of that, and where we have had to increase prices, resistance is not obvious. I dare say that we will see some prices going up, yes. But right now, it is minimal silhouettes that we have seen go up.

Daniel Agostinelli: Sam, there has been some of that, and where we have had to increase prices, resistance is not obvious. I dare say that we will see some prices going up, yes. But right now, it is minimal silhouettes that we have seen go up.

Speaker #4: But right now, it's minimal silhouettes that we've seen go up.

Speaker #5: Okay. And just finally, on your lifestyle banners, what's the sort of delta between like-for-like on your performance versus your lifestyle? Are your lifestyle stores still the major, predominant driver?

Sam Haddad: Okay. Just finally on your lifestyle banners, what is the sort of delta between on your performance versus your lifestyle? Are your lifestyle for the major predominant drag? Any color around the level of drag from lifestyle? Thank you.

Speaker #5: Any color around the level of drag from Lifestyle? Thank you.

Matthew Durbin: Look, I am not going to sort of go into detail on that, Sam. You can read through that, again, our comps for the first 7 weeks are down 2%, and we have said that the sports category is positive. Mathematically, the lifestyle category is going to be worse than 2%. I just think that reflects the challenging environment in that sector at the moment.

Speaker #4: Look, I'm not going to sort of go into detail on that, Sam. You can read through that. Again, our comps for the first seven weeks are down 2%.

Speaker #4: And we've said that the sports category is positive. So, mathematically, the lifestyle category is going to be worse than 2%. I just think that reflects the challenging environment in that sector at the moment.

Speaker #5: Okay.

Sam Haddad: Okay. Thanks for your time.

Speaker #4: Yep. Yep. Thanks, Sam.

Matthew Durbin: Yep. Thanks, Sam.

Speaker #2: Your next question will come from Chris Rooten with Frasers Group. Please unmute your audio and ask your question.

Ronnie xxx: Your next question will come from Chris Rooten with Frasers Group. Please unmute your audio and ask your question.

Operator: Your next question will come from Chris Rooten with Frasers Group. Please unmute your audio and ask your question.

Speaker #6: Caps, can you hear us?

Chris Rooten: Chaps, can you hear us?

Chris Wootton: Chaps, can you hear us?

Speaker #4: We can. Hey, Chris.

Matthew Durbin: We can. Hi, Chris.

Speaker #6: Hey, Chris.

Dan Agostinelli: Hi, Chris.

Daniel Agostinelli: Hi, Chris.

Chris Rooten: Hi, chaps. Thanks for taking my questions. I do have quite a few, but obviously in the interest of time, I will just stick to three.

Chris Wootton: Hi, chaps. Thanks for taking my questions. I do have quite a few, but obviously in the interest of time, I will just stick to three.

Speaker #7: Hi, chaps. Thanks for taking my questions. I do have quite a few, but obviously, in the interest of time, I will just stick to three.

Matthew Durbin: Yep.

Speaker #7: The first one is probably for Matt. Why do you think holding your discount rate flat on the goodwill impairment assumptions is correct when market conditions, including rising inflation and base rates, are deteriorating?

Chris Rooten: First one is probably for Matt. Why do you think holding your discount rate flat on the goodwill impairment assumptions is correct when market conditions, including rising inflation and base rate, are deteriorating? Following on from that, your EBITDA growth is also increased year on year when, again, the same point, market conditions are deteriorating.

Chris Wootton: First one is probably for Matt. Why do you think holding your discount rate flat on the goodwill impairment assumptions is correct when market conditions, including rising inflation and base rate, are deteriorating? Following on from that, your EBITDA growth is also increased year on year when, again, the same point, market conditions are deteriorating.

Speaker #7: And following on from that, your EBITDA growth has also increased year on year when, again, the same point—the market conditions are deteriorating.

Speaker #4: Yep, thanks for that, Chris, and reasonable questions. So, we feel as though the discount rate that we've had historically has been at the conservative end of the range.

Matthew Durbin: Yep. Thanks for that, Chris, and reasonable questions. We feel as though the discount rate that we've had historically has been at the conservative end of the range. We have in-depth discussion with our auditors about a reasonable range, and they take an independent view of that range as well. Given historically, we feel that that range has been at the more conservative end, we didn't feel that there was any need to change that this time around. In respect of the 5-year growth rate that we've applied for impairment testing, we feel as though the business is at the bottom of the cycle. There are also a number of initiatives, I'm going to call them, in our control and not requiring capital investment, including the cost out initiatives, including the improved currency rate in particular, that we feel it is reasonable to have a growth rate.

Speaker #4: We have in-depth discussions with our auditors about a reasonable range, and they take an independent view of that range as well. Historically, we feel that that range has been at the more conservative end.

Speaker #4: We didn't feel that there was any need to change that this time around. In respect of the five-year growth rate that we've applied for impairment testing, we feel as though the business is at the bottom of the cycle.

Speaker #4: There are also a number of initiatives—I'm going to call them—in our control and not requiring capital investment, including the cost-out initiatives and the improved currency rate, in particular, that we feel make it reasonable to have a growth rate.

Matthew Durbin: There are also a number of initiatives, I'm going to call them, in our control and not requiring capital investment, including the cost out initiatives, including the improved currency rate in particular, that we feel it is reasonable to have a growth rate.

Speaker #4: I'll say for those of you who've delved into the depths of the notes, that growth rate is 2.2%. Previously, it was 1.6%. We feel as though 2.2% is still a very reasonable position, given all of those initiatives.

Matthew Durbin: I'll say for those of you who've delved into the depths of the notes, that growth rate is 2.2%, and previously it was 1.6%. We feel as though 2.2% is still a very reasonable position given all of those initiatives.

Chris Rooten: I suppose on the discount rate, that seems like moving the goalpost to suit, potentially. On the EBITDA, again, it's the classic hockey stick, which we all know and love in accounting world. So I still think those assumptions are quite punchy, and I guess we will see what happens. My next question is EBIT margin related. We talk about an EBIT margin of 9% plus in your 2030 plan, but it's actually gone backwards this year. How do you reconcile still getting to that 9%?

Chris Wootton: I suppose on the discount rate, that seems like moving the goalpost to suit, potentially. On the EBITDA, again, it's the classic hockey stick, which we all know and love in accounting world. So I still think those assumptions are quite punchy, and I guess we will see what happens. My next question is EBIT margin related. We talk about an EBIT margin of 9% plus in your 2030 plan, but it's actually gone backwards this year. How do you reconcile still getting to that 9%?

Speaker #6: I suppose on the discount rate, that seems like moving the goalposts to suit, potentially. And on the EBITDA, again, it's the classic hockey stick, which we all know and love in accounting worlds.

Speaker #6: So I still think those assumptions are quite punchy, and I guess we will see what happens. My next question is EBIT margin related. So, we talk about an EBIT margin of 9% plus in your 2030 plan, but it's actually gone backwards this year.

Speaker #6: How do you reconcile still getting to that 9%?

Speaker #4: Yep, thanks for that question. So again, there are a couple of elements, and the most significant of those is the currency. We put a chart in the back of the pack that shows what's happened to margin and currency over the last three or four years.

Matthew Durbin: Yep. Thanks for that question. Again, there's a couple of elements, and the most significant of those is the currency. We put a chart in the back of the pack that shows what's happened to margin and currency over the last three or four years. You can see there is a strong correlation. I think, again, going back to some of those numbers I referenced with Sam earlier, with the Aussie dollar sitting AUD 0.70, in fact, its very long-term average, by the way, is about AUD 0.70. That's a straight out benefit, assuming we don't have to trade it away on more than 100 basis points at the gross margin level. On the other side of the coin, we've taken out AUD 30 million in gross cost savings in FY27.

Speaker #4: And you can see there is a strong correlation. And I think, again, going back to some of those numbers I referenced with Sam earlier, with the Aussie dollar sitting at $0.70.

Speaker #4: And, in fact, its very long-term average, by the way, is about 70 cents. That's a straight-out benefit, assuming we don't have to trade it away.

Matthew Durbin: That's a straight out benefit, assuming we don't have to trade it away on more than 100 basis points at the gross margin level. On the other side of the coin, we've taken out AUD 30 million in gross cost savings in FY27.

Speaker #4: I'm more than 100 basis points at the gross margin level. And on the other side of the coin, we've taken out $30 million in gross cost savings in FY27.

Speaker #4: And we've targeted for a net benefit of $10 to $15 million after inflation. And we've targeted a further $10 million for a net benefit of $5 million in 2028.

Matthew Durbin: We've targeted for a net benefit of AUD 10 million to AUD 15 million after inflation, and we've targeted a further AUD 10 million for a net benefit of AUD 5 million in 2028. I'll add that we're well progressed identifying where that next AUD 10 million is going to come from, and we're going to get amongst implementing that between now and May next year. Frankly, if conditions remain where they are, we may well need to go harder into the cost base. We're not ruling that out. If we need to, we'll do that. So, if I look at those elements and then I look at the underlying margin without the loss-making businesses, you can relatively easily bridge to a number that's high eights or early nines. I hope that makes sense. Again, that remains to be seen, but we're doing our very best to make that happen.

Speaker #4: I'll add that we're well progressed in identifying where that next $10 million is going to come from, and we're going to get amongst implementing that between now and May next year.

Speaker #4: And frankly, if conditions remain where they are, we may well need to go harder into the cost base. We're not ruling that out, and if we need to, we'll do that.

Speaker #4: So, if I look at those elements, and then I look at the underlying margin without the loss-making businesses, you can relatively easily bridge to a number that's higher, or early nines.

Matthew Durbin: So, if I look at those elements and then I look at the underlying margin without the loss-making businesses, you can relatively easily bridge to a number that's high eights or early nines. I hope that makes sense. Again, that remains to be seen, but we're doing our very best to make that happen.

Speaker #4: I hope that makes sense. Again, that remains to be seen, but we're doing our very best to make that happen.

Chris Rooten: I suppose, let me pick up. You started with talking about the currency, and if you can predict the currency rates, Matt, you are in the wrong job, and you can pick my lottery numbers, frankly. I would be more conservative on them personally. Okay. Thank you for that. I have one final question. Free cash flow. As far as I can tell, free cash flow is negative and net debt has increased. Wondering how you can justify continuing to pay dividends when that is the case.

Chris Wootton: I suppose, let me pick up. You started with talking about the currency, and if you can predict the currency rates, Matt, you are in the wrong job, and you can pick my lottery numbers, frankly. I would be more conservative on them personally. Okay. Thank you for that. I have one final question. Free cash flow. As far as I can tell, free cash flow is negative and net debt has increased. Wondering how you can justify continuing to pay dividends when that is the case.

Speaker #6: I suppose, let me pick up — you started with talking about the currency. And if you can predict the currency rates, Matt, you're in the wrong job.

Speaker #6: And you can pick my lottery numbers. Frankly, I would be more conservative on them personally. Okay, thank you for that. And then I've got one final question.

Speaker #6: Free cash flow—so as far as I can tell, free cash flow is negative, and net debt has increased. So, I'm wondering how you can justify continuing to pay dividends when that is the case.

Speaker #4: Yes. So, if I exclude our loss-making businesses and then look at the investment that we've made in The Athlete's Foot and in Sports Direct, ahead of the curve, I acknowledge that in this year, with those investments, operating cash flow was negative.

Matthew Durbin: Yep. If I exclude our loss-making businesses and then look at the investment that we have made in The Athlete's Foot and in Sports Direct ahead of the curve, I acknowledge in this year, with those investments, operating cash flow was negative. That is a fact. There are three things moving forward that we feel as though are going to be very supportive of the dividend. Those are the cost out, again, that we have taken and the impact that that is going to have on earnings. So the operating cash flow in the coming year. As you can see in next year, lower investment required in The Athlete's Foot, and we will start to get benefit coming in from that. Look, the dividend consideration is an important one. We have also said at the board that we are going to pay out 60% to 80% of profit after tax.

Speaker #4: That's a fact. There are three things moving forward that we feel are going to be very supportive of the dividend, and those are the cost-out again that we've taken and the impact that that's going to have on earnings.

Speaker #4: So, the operating cash flow in the coming year—and as you can see, in next year, lower investment is required in The Athlete's Foot, and we'll start to get benefit coming in from that.

Matthew Durbin: As you can see in next year, lower investment required in The Athlete's Foot, and we will start to get benefit coming in from that. Look, the dividend consideration is an important one. We have also said at the board that we are going to pay out 60% to 80% of profit after tax. Over time, that is a very sustainable ratio.

Speaker #4: So look, the dividend considerations are an important one. We've also said at the board that we're going to pay at 60 to 80 percent of profit after tax.

Speaker #4: And over time, that's a very sustainable ratio.

Matthew Durbin: Over time, that is a very sustainable ratio.

Speaker #6: That's all the questions I have for today, Matt. We'll catch up later on the others. Thank you.

Dan Agostinelli: That is all the questions I have for today, Matt. We will catch up later on the others. Thank you.

Chris Wootton: That is all the questions I have for today, Matt. We will catch up later on the others. Thank you.

Speaker #4: Appreciate it. Thank you, Chris.

Matthew Durbin: Appreciate it. Thank you, Chris.

Speaker #1: Your next question comes from Chami Ratnapala with Bell Potter. Please unmute your audio and ask your question.

Ronnie xxx: Your next question comes from Chami Ratnapala with Bell Potter. Please unmute your audio and ask your question.

Operator: Your next question comes from Chami Ratnapala with Bell Potter. Please unmute your audio and ask your question.

Speaker #7: Hi, guys. Hopefully, you can hear me.

Chami Ratnapala: Hi, guys. Hopefully you can hear me.

Speaker #4: Yep, we can. Thanks, Chami.

Matthew Durbin: Yep, we can.

Dan Agostinelli: Thanks, Shammi.

Daniel Agostinelli: Thanks, Shammi.

Speaker #7: Yeah, well done getting through that tough year. And it seems like a reasonably good start to the year. Just wondering about the trading conditions at the moment.

Chami Ratnapala: Well done getting through that tough year and seems like reasonably a good start to the year, irrelevant of the trading conditions at the moment. Maybe two questions from me. You did talk to a level of improvement in August. For a few retailers, we have seen this, and that is even as, I mean, GP margins are getting that benefit from FX. Maybe could you talk to the key drivers here and maybe as a bit of an outlook into the key trading period, which categories are showing a bit of the improvement?

Speaker #7: Maybe two questions from me. You did talk to a level of improvement in August. For a few retailers, we have seen this, and that's even as IM in GB margins are getting that benefit from FX.

Speaker #7: But maybe could you talk to the key drivers here, and perhaps provide a bit of an outlook for the key trading period? Which categories are showing some improvement?

Speaker #4: Yeah, Chami. We started to feel a little bit of momentum in July in some banners, particularly in anything to do with sport. As we've been calling out for a while, it continues to be very resilient.

Dan Agostinelli: Yeah, Shammi. We started to feel a little bit of momentum in July in some banners, particularly in anything to do with sport. As we have been calling out for a while, it continues to be very resilient. August, again, was whilst challenging, positive. I think a lot of it has got to do with just simply some new products that have come to market, although I maintain that innovation still seems a little bit weak. Certainly there has been an uptick, particularly with two brands for us. One was ASICS, one was New Balance, and that has been quite solid for us. I guess, I tend to wait for the P&L to make any decision. That is when decisions are made. This cost control, and cost reviews that we have done are really starting to show benefits for us, in terms of earnings.

Daniel Agostinelli: Yeah, Shammi. We started to feel a little bit of momentum in July in some banners, particularly in anything to do with sport. As we have been calling out for a while, it continues to be very resilient. August, again, was whilst challenging, positive. I think a lot of it has got to do with just simply some new products that have come to market, although I maintain that innovation still seems a little bit weak.

Speaker #4: And August, again, was, whilst challenging, positive. And I think a lot of it's got to do with just simply some new products that have come to market, although I maintain that innovation still seems a little bit weak.

Speaker #4: But certainly, there's been an uptick, particularly with two brands for us. One was ASICS, one was New Balance. And that's been quite solid for us.

Daniel Agostinelli: Certainly there has been an uptick, particularly with two brands for us. One was ASICS, one was New Balance, and that has been quite solid for us. I guess, I tend to wait for the P&L to make any decision. That is when decisions are made. This cost control, and cost reviews that we have done are really starting to show benefits for us, in terms of earnings.

Speaker #4: And I guess I tend to wait for the P&L to make any decision—that's when decisions are made. And this cost control and cost reviews that we've done are really starting to show benefits for us.

Speaker #4: In terms of earnings, there certainly has been some sort of momentum shift, and I can't go as far as saying it's a fantastic thing.

Dan Agostinelli: There certainly has been some sort of momentum shift, and I cannot go as far as saying, it is fantastic and we are punching the air because we are not. There has been a bit of an uplift in just a little bit of momentum across the businesses. The Athlete's Foot continues to be very resilient.

Daniel Agostinelli: There certainly has been some sort of momentum shift, and I cannot go as far as saying, it is fantastic and we are punching the air because we are not. There has been a bit of an uplift in just a little bit of momentum across the businesses. The Athlete's Foot continues to be very resilient.

Speaker #4: We're punching the air because we're not, but there has been a bit of an uplift and just a little bit of momentum across the businesses.

Speaker #4: But Athletes Foot continues to be very resilient.

Speaker #7: Thanks for that, Daniel. And then just on an underlying level, if excluding FX, how has the promo impact on the GMs been versus last year for the start of FY27?

Chami Ratnapala: Thanks for that, Daniel. Just on an underlying level, excluding FX, how has the promo impact on the GMs been versus last year for the start of FY27?

Speaker #4: Yeah, thanks, Chami. So, you can see that promo certainly had an impact last year, and I would say that that's sort of continued at a similar level of intensity.

Matthew Durbin: Yeah. Thanks, Shammi. You can see that promo certainly had an impact last year, and I would say that that's continued at a similar level of intensity. As we get further and further into this year, that's already in the base. The unknown is whether it ramps up more as we get towards November, December, and January. With tight macro, that's certainly a possibility. I would not say the promotional intensity has abated at all at this point. Hopefully that helps. I think that consumer is still chasing value. There is no doubt of that.

Speaker #4: As we get further and further into this year, that's already in the base. So the unknown is whether it ramps up more as we get towards November, December, and January.

Speaker #4: With a tight macro, that's certainly a possibility. But I wouldn't say the promotional intensity has abated at all at this point. So hopefully, that helps.

Speaker #4: I think the consumer is still chasing value. There's no doubt about that.

Speaker #7: Perfect. If I can squeeze in one more just on New Lucy—I think verticals are growing at 7%. I'm assuming that New Lucy must be growing much faster.

Chami Ratnapala: Perfect. If I can squeeze in one more just on Nude Lucy. I think verticals are growing at 7%, assuming that Nude Lucy must be growing much faster. Could you talk to basically the performance in that division?

Speaker #7: Could you just talk, basically, about the performance in that division?

Speaker #4: Yeah, look, New Lucy's been really, really strong in terms of its performance. And mathematically, you're absolutely right—we had a lot of stores annualizing this year, which was great and positive.

Matthew Durbin: Yeah. Look, Nude Lucy has been really, really strong in terms of its performance. Mathematically, you are absolutely right. We had a lot of stores annualizing this year, which was great, and comps positive both last year and into the first seven weeks in Nude Lucy. We have also got some other things going on, which I will throw to Daniel to talk about.

Speaker #4: Both last year and into the first seven weeks in New Lucy. So, we've also got some other things going on, which I'll throw to Daniel to talk about.

Speaker #3: Yeah, further to that, we've certainly learned a lot through the journey of New Lucy. And we've got an amazing team that runs that business.

Dan Agostinelli: Yeah, further to that, we have certainly learned a lot through the journey of Nude Lucy and we have got an amazing team that run that business. The product innovation has been great and obviously the most important people, being our customers, are voting positively. On other good news that I am certainly excited about and my team are, we have got a few stores open with a new business called ODE, which is O-D-E, and we will very shortly launch a website. The brand is performing exceptionally well within the Stylerunner business, and it is the same story as Nude Lucy. We trialed a couple of stores just as pop-ups, and they have been solid. We officially will open at Warringah Mall and Miranda and potentially a third store all before 1 December.

Daniel Agostinelli: Yeah, further to that, we have certainly learned a lot through the journey of Nude Lucy and we have got an amazing team that run that business. The product innovation has been great and obviously the most important people, being our customers, are voting positively. On other good news that I am certainly excited about and my team are, we have got a few stores open with a new business called ODE, which is O-D-E, and we will very shortly launch a website.

Speaker #3: The product innovation has been great. And obviously, the most important people being our customers are voting positively. On other good news, that I'm certainly excited about—and my team are—we will officially, we've got a few stores open with a new business called Ode.

Speaker #3: Which is O-D-E. And we will very shortly launch a website. The brand is performing exceptionally well within the Stylerunner business. And it's the same story as Nude Lucy.

Daniel Agostinelli: The brand is performing exceptionally well within the Stylerunner business, and it is the same story as Nude Lucy. We trialed a couple of stores just as pop-ups, and they have been solid. We officially will open at Warringah Mall and Miranda and potentially a third store all before 1 December. The new product pipeline looks terrific and it is obviously enjoying what others in that vertical space enjoy, which is the much higher margins. But very exciting for us.

Speaker #3: We trialed a couple of stores, just as pop-ups, and they've been solid. We will officially open at Warringa Mall in Miranda, and potentially a third store, all before December 1.

Speaker #3: And the new product pipeline looks terrific, and it’s obviously enjoying what others in that vertical space enjoy, which is the much higher margins. But very exciting for us.

Dan Agostinelli: The new product pipeline looks terrific and it is obviously enjoying what others in that vertical space enjoy, which is the much higher margins. But very exciting for us.

Speaker #7: Perfect. That's great. Thanks for that, Matt and Dan. Thanks for taking my questions.

Chami Ratnapala: Perfect. That is great. Thanks for that, Matt and Dan. Thanks for taking my questions.

Speaker #4: Thanks, Chami.

Matthew Durbin: Thanks, Shammi.

Speaker #1: Your next question comes from James Lee with Goldman Sachs. Please unmute your audio and ask your question.

Ronnie xxx: Your next question comes from James Lee with Goldman Sachs. Please unmute your audio and ask your question.

Operator: Your next question comes from James Lee with Goldman Sachs. Please unmute your audio and ask your question.

Speaker #8: Hey, I'm Daniel and Matt. Thank you for taking my question. Just a point of clarification on the July trading update and your commentary around gross margins.

James Lee: Hey, Daniel and Matt, thank you for taking my question. Just a point of clarification on the July trading update and your commentary around gross margins. I think at the H1, the wording we used around gross margins is continuing business. Now gross margins is up for July year-over-year. Just to clarify, is that when comparing to the underlying business that still continues into 2027, i.e., is the PCP comparing to artificially lower because you had MySale and Glue Store?

James Leigh: Hey, Daniel and Matt, thank you for taking my question. Just a point of clarification on the July trading update and your commentary around gross margins. I think at the H1, the wording we used around gross margins is continuing business. Now gross margins is up for July year-over-year. Just to clarify, is that when comparing to the underlying business that still continues into 2027, i.e., is the PCP comparing to artificially lower because you had MySale and Glue Store?

Speaker #8: I think at the half-year, the wording we use around gross margins is 'continuing business.' And now, gross margins are up for July, year over year.

Speaker #8: Just to clarify, is that when comparing to the underlying business that still continues into '27? I mean, is the PCP comparing to something artificially lower because you had MySale and Glue?

Speaker #4: In that—no, that's like a number, James. So we're sort of—you've really got to exclude those from the base. Otherwise, it's not a fair comparison, because you're going to get a lift straight off the back of that.

Matthew Durbin: No, that is a like number, James. You have really got to exclude those from the base. Otherwise, it is not a fair comparison because you are going to get a lift straight off the back of that.

Speaker #4: So it was an improvement. It was an improvement with those out of the base, if that makes sense. Yep.

James Lee: Yeah.

James Leigh: Yeah.

Matthew Durbin: So it was improvement with those out of the base, if that makes sense.

James Lee: Yep.

James Leigh: Yep.

Matthew Durbin: Yep.

Speaker #8: That's very clear. And then, maybe just to follow up—by my numbers, if you back out kind of the trading, particularly into May and June, I note June last year didn't hit expectations either.

James Lee: That is very clear. Then maybe just to follow up. By my numbers, if you back out kind of the trading, particularly into May and June, I know June last year didn't hit expectations either. Against that, this May/June also looked pretty negative and clearly the macro environment is very tough. I have heard that from a number of retailers. Do you mind giving us a little bit of color on May and the June promotional periods and what you think didn't work, what consumers were telling you?

James Leigh: That is very clear. Then maybe just to follow up. By my numbers, if you back out kind of the trading, particularly into May and June, I know June last year didn't hit expectations either. Against that, this May/June also looked pretty negative and clearly the macro environment is very tough. I have heard that from a number of retailers. Do you mind giving us a little bit of color on May and the June promotional periods and what you think didn't work, what consumers were telling you?

Speaker #8: And against that, this May and June also looked pretty negative. And clearly, the macro environment is very tough. I've heard that from a number of retailers.

Speaker #8: Do you mind giving us a little bit of color on the May and June promotional periods, and what you think didn't work? What were consumers telling you?

Speaker #4: Yeah, look, I think I'll just deal with a couple of bits of that, and then I might throw it to Daniel to talk about promotions through that period.

Matthew Durbin: Yeah, look, I will deal with a couple of bits of that and then I might throw to Daniel to talk about promotions through that period. Look, we were trading pretty well actually up until the end of March last year. The macroeconomic environment and the geopolitical events that started to ramp up in April, I feel impacted us right through that April, May, and June period. What you say is correct. It was a poor period over a poor period the prior year. We cannot back away from that. I am attributing a fair bit of that to that macro and geopolitical environment. We certainly went hard on promotion through that period to make sure we got our share. The question is what would have happened if not for that? There was a lot of volatility in petrol prices and many other things through that period.

Speaker #4: Look, we were trading pretty well, actually, up until the end of March last year, and the macroeconomic environment and the geopolitical events that started to ramp up in April, I feel, impacted us right through that April, May, and June period.

Speaker #4: And what you say is correct. It was a poor period over a poor period the prior year. We can't back away from that. I'm attributing a fair bit of that to the macro and geopolitical environment.

Speaker #4: We certainly went hard on promotion through that period to make sure we got our share. So the question is, what would have happened if not for that?

Matthew Durbin: We certainly went hard on promotion through that period to make sure we got our share. The question is what would have happened if not for that? There was a lot of volatility in petrol prices and many other things through that period. That is a little bit of a crystal ball. We cannot back away from that. It was a tough environment over a tough environment.

Speaker #4: There's a lot of volatility in petrol prices and many other things through that period. So, that's a little bit of a crystal ball, but, yeah, we can't back away from that.

Matthew Durbin: That is a little bit of a crystal ball. We cannot back away from that. It was a tough environment over a tough environment.

Speaker #4: It was a tough environment, over a tough environment.

Speaker #3: Yep. And James, you're right. I mean, of course, June is a really strong period for us. It was supposed to be a strong period with the all-important mid-year, or June sale as we call it.

Dan Agostinelli: Yep. James, you are right. Of course, June is a really strong period for us, or supposed to be a strong period with the all-important mid-year or June sale, as we call it. Both last year and this year, they just haven't fired to many retailers' expectations. Thankfully from our point of view, I am really proud of how the team managed our inventory. Our inventory is clean. As you are aware, we have got some the best part of AUD 250 million or a bit more of inventory. So any mistakes there really cause issues. But we are very well controlled and all our sights are on what are we going to do in November with Cyber. That is going to be a very, I guess, telling story. But I am very excited about what the team has put together.

Daniel Agostinelli: Yep. James, you are right. Of course, June is a really strong period for us, or supposed to be a strong period with the all-important mid-year or June sale, as we call it. Both last year and this year, they just haven't fired to many retailers' expectations. Thankfully from our point of view, I am really proud of how the team managed our inventory. Our inventory is clean. As you are aware, we have got some the best part of AUD 250 million or a bit more of inventory.

Speaker #3: And both last year and this year, they just haven't fired to, I guess, many retailers' expectations. Thankfully, from our point of view, I'm really proud of how the team managed our inventory—our inventory is clean.

Speaker #3: As you're aware, we've got some of the best part of $250 million, or a bit more, of inventory. So any mistakes there really cause issues.

Daniel Agostinelli: So any mistakes there really cause issues. But we are very well controlled and all our sights are on what are we going to do in November with Cyber. That is going to be a very, I guess, telling story. But I am very excited about what the team has put together.

Speaker #3: But we are very well controlled, and all our sites are on. What are we going to do in November with cyber? That's going to be a very, I guess, telling story.

Speaker #3: But I'm very excited about what the team's put together.

Speaker #8: Great. Thank you very much, guys.

James Lee: Great. Thank you very much, guys.

James Leigh: Great. Thank you very much, guys.

Speaker #1: Your next question will come from Arian DeRosi with Jardin. Please unmute your audio and ask your question.

Ronnie xxx: Your next question will come from Arian Dehghani with Jarden. Please unmute your audio and ask your question.

Operator: Your next question will come from Arian Dehghani with Jarden. Please unmute your audio and ask your question.

Speaker #5: Hi, guys. Can you hear me?

Arian Dehghani: Hey, guys. Can you hear me?

Aryan Norozi: Hey, guys. Can you hear me?

Speaker #4: Yeah, we can. Hi, Ari.

Matthew Durbin: Yeah, we can. Hey, Ari.

Speaker #5: Hi, happy all. Just a few quick ones from me, please. Just on the $10 to $15 million of net cost out, is that assuming 0 to 2% like-for-like growth, as per the strategy day?

Arian Dehghani: Hi, hope you are well. Just a few quick ones from me, please. Just on the AUD 10 to AUD 15 million in net cost out, is that assuming 0% to 2% LFL growth per the strategy day? For that first part of it.

Aryan Norozi: Hi, hope you are well. Just a few quick ones from me, please. Just on the AUD 10 to AUD 15 million in net cost out, is that assuming 0% to 2% LFL growth per the strategy day? For that first part of it.

Speaker #5: First part of it.

Speaker #4: Yep. Sorry, you just broke up there, mate. Would John want to answer that one? And then we'll move on to the next.

Arian Dehghani: Yep. Sorry, you just broke up there, mate. Is that?

Aryan Norozi: Yep. Sorry, you just broke up there, mate. Is that?

Matthew Durbin: Do you want me to answer that one, and then we will move on to the numbers?

Speaker #5: Yeah, yeah. Yep, yep.

Arian Dehghani: Yeah. Yep.

Aryan Norozi: Yeah. Yep.

Matthew Durbin: Yep.

Speaker #4: Yes, I understand the question. No problem. Yes, in the strategy day, we stated that in an environment of 0 to 2% growth, there would be $10 to $15 million.

Arian Dehghani: Yes, please.

Aryan Norozi: Yes, please.

Matthew Durbin: I get the question, no problem. Yes. In the strategy day, we put that that was in an environment of 0% to 2% growth, that there would be AUD 10 million to AUD 15 million. Clearly, comps for the first seven weeks are below that 0% to 2% range. So, yes, we won't bank AUD 10 million to AUD 15 million of those into the EBIT if comps continue to go at 2% for the rest of the year. Does that answer the question you're asking?

Speaker #4: Clearly, comps for the first seven weeks are below that 0 to 2% range. So yes, we won't bank $10 to $15 million of those into the EBIT if comps continue to go at 2% for the rest of the year.

Speaker #4: Does that answer the question you're asking?

Speaker #5: Yeah, yeah. Yep. And the second part of that is, just on my numbers, very roughly, the fixed cost inflation assumed within the sort of net number is only about 2% to 3%.

Arian Dehghani: Yeah.

Aryan Norozi: Yeah.

Matthew Durbin: Yeah.

Arian Dehghani: Yep. The second part of that is just on my numbers, very roughly, if the fixed cost inflation assumed within the net number is only about 2% or 3%, which seems relatively low considering EBAs at running at 5% and inflation. So what explains that, please?

Aryan Norozi: Yep. The second part of that is just on my numbers, very roughly, if the fixed cost inflation assumed within the net number is only about 2% or 3%, which seems relatively low considering EBAs at running at 5% and inflation. So what explains that, please?

Speaker #5: Which seems relatively low, considering EDAs are running at 5 and rent inflation. So, what explains that, please?

Speaker #4: Yep. Look, we assumed a high 4s inflation in that number. In terms of the front-line team costs, we were very hard in all other areas of our business to keep costs under control just in the normal course.

Matthew Durbin: Yep. Look, we assumed a high forwards inflation in that number, in terms of the frontline team costs. We worked very hard in all other areas of our business to keep costs under control just in the normal course. So, I sort of acknowledge that there's a couple of percent in it. It probably goes a little bit to the range of 0% to 2%. If you're at the upper end of that range of 2%, it offsets a lot more inflation, and if you're at 0%, it doesn't. So, I think that's the best explanation I can give to that.

Speaker #4: So I sort of acknowledge that. There's a couple of percent in it. It probably goes a little bit to the range of zero to two.

Speaker #4: If you're at the upper end of that range, of 2%, it offsets a lot more inflation. And if you're at zero, it doesn't. So, I think that's the best explanation I can give to that.

Speaker #5: Gotcha. And then, just to clarify the price question: with Sports Direct, you mentioned—is it reasonable to assume Sports Direct is an incremental $4 to $6 million EBIT drag in '27 or '26?

Arian Dehghani: Gotcha. Just to clarify the highest question. Is Sports Direct, you mentioned, reasonable to assume Sports Direct is an incremental AUD 4 to 6 million EBIT driving 2027 or 2026? So FY27.

Aryan Norozi: Gotcha. Just to clarify the highest question. Is Sports Direct, you mentioned, reasonable to assume Sports Direct is an incremental AUD 4 to 6 million EBIT driving 2027 or 2026? So FY27.

Speaker #5: So FY27 EBIT from Sports Direct will be $4 to $6 million. Meanwhile, I mean, 26?

Matthew Durbin: Yep

Arian Dehghani: EBIT from Sports Direct will be AUD 4 to 6 million lower than 2026.

Aryan Norozi: EBIT from Sports Direct will be AUD 4 to 6 million lower than 2026.

Speaker #4: Yep. So, similar to the answer I gave to Sam's question there—and we haven't put out a specific number—but $4 to $6 million is a reasonable estimate.

Matthew Durbin: Yep. Similar to the answer I gave to Sam's question there, we haven't put out a specific number, but AUD 4 to 6 million is a reasonable estimate.

Speaker #5: Yep, right. Incremental, but that's not absolute. Yep. And then, can I just clarify: July, Danny—I think you mentioned August—lots of positives. Do we actually mean that's up year-on-year, or are you just saying positive momentum?

Arian Dehghani: Yeah. Right. Incrementally.

Aryan Norozi: Yeah. Right. Incrementally.

Matthew Durbin: Yeah.

Arian Dehghani: That's not absolute. Yep. Can I just clarify, Danny, I think you mentioned August like the likes of positive. Were you actually meaning it like up year-on-year or just saying positive momentum?

Aryan Norozi: That's not absolute. Yep. Can I just clarify, Danny, I think you mentioned August like the likes of positive. Were you actually meaning it like up year-on-year or just saying positive momentum?

Dan Agostinelli: Positive momentum.

Daniel Agostinelli: Positive momentum.

Speaker #3: Positive momentum. Positive momentum, mate. Yeah. Not positive.

Matthew Durbin: Positive momentum.

Dan Agostinelli: Positive momentum, mate.

Daniel Agostinelli: Positive momentum, mate.

Matthew Durbin: Yep.

Dan Agostinelli: Yeah.

Daniel Agostinelli: Yeah.

Matthew Durbin: Not positive.

Speaker #4: Yep.

Arian Dehghani: Yep. No. Very last one. Just the new Fair Work employment rate for the youth wage rate. Can you give us an idea, please, on just, because that starts from 1 December this year, just what the impact will be to EBIT this year and then 2028 and 2029, and whether that is factored into the net cost out as well, please?

Aryan Norozi: Yep. No. Very last one. Just the new Fair Work employment rate for the youth wage rate. Can you give us an idea, please, on just, because that starts from 1 December this year, just what the impact will be to EBIT this year and then 2028 and 2029, and whether that is factored into the net cost out as well, please?

Speaker #5: No. And sorry, very last one—just the new Fair Work employment rates for the youth wage rate. Can you give us an idea, please, on just does that start from the 1st of December this year?

Speaker #5: Just what the impact will be to EBIT this year, and then in '28 and '29, and whether that's sort of factored into the net cost out as well, please?

Speaker #4: Yep, yep. So, I've previously called out our best estimate of that cost over the duration of the increase, which is three years from memory, is $5 million, or just over $5 million.

Matthew Durbin: Yep. We have previously called out our best estimate of that cost over the duration of the increase, which is three years from memory, is AUD 5 million or just over AUD 5 million. It is just over AUD 1 million a year or AUD 1.3 million a year each year. That is factored into our plans.

Speaker #4: And so, it's just over a million dollars a year, or $1.3 million a year each year. And that is factored into our plans.

Speaker #5: Perfect. Really appreciate it, guys. Thank you.

Arian Dehghani: Perfect. Really appreciate it, guys. Thank you.

Aryan Norozi: Perfect. Really appreciate it, guys. Thank you.

Speaker #4: Yep. Thanks, Ari.

Matthew Durbin: Yep. Thanks, Harry.

Speaker #1: Your next question will come from Garth Francis with MST Marquee. Please unmute your audio and ask your question.

Ronnie xxx: Your next question will come from Garth Francis with MST Marquee. Please unmute your audio and ask your question.

Operator: Your next question will come from Garth Francis with MST Marquee. Please unmute your audio and ask your question.

Speaker #6: Good morning, Daniel and Matt. Thanks for taking my questions. You just called out 102 stores that are still under rent review, and you closed 37 and 26.

Garth Francis: Morning, Daniel and Matt. Thanks for taking my questions. You just called out 102 stores that are still under rent review. You closed 37 in 2026, so there is obviously fewer stores in the base.

Speaker #6: So there's obviously fewer stores in the base. Are you comfortable—is that 102 net of the closures that you called out, or is that another 102 that we could potentially see closed over the next few years?

Matthew Durbin: Yep.

Garth Francis: Are you comfortable? Is that 102 net of the closures that you called out, or is that another 102 that we could potentially see closed over the next 2 years? And how are those going? And if you could give an indication of how many you expect to close on a net basis would be helpful.

Speaker #6: And how are those going? And, if you could, giving an indication of how many you expect to close on a net basis would be helpful.

Speaker #4: Yep, I'll have the first go on that, then I'll let Daniel talk to Mark and Titian on that go. So, the 102 is what's coming up for lease expiry between now and 2030.

Matthew Durbin: Yep.

Dan Agostinelli: Yeah.

Daniel Agostinelli: Yeah.

Matthew Durbin: I'll have the first go on that, then I'll let Daniel talk to Mark on visions on that go. The 102 is what's coming up for lease expiry between now and 2030. It doesn't really include what we closed this year because we've only sort of set that out in May. There might be a couple of those that closed in the May-June period, but largely it's 102 over the next period out till 2030. Look, I'd hope that we don't have to close 102 stores or anything like it. Indeed, we have pretty good success and we get to a pretty good commercial outcome with most of our negotiations with landlords.

Speaker #4: So it doesn't really include what we closed this year, because we've only sort of set that out in May. There might be a couple of those that closed in the May–June period, but largely it's 102 over the next period, out till 2030.

Speaker #4: Look, I'd hope that we don't have to close 102 stores or anything like it. And indeed, we have pretty good success and we get to a pretty good commercial outcome with most of our negotiations with landlords.

Speaker #4: Having said that, if you look at the, I'm going to say, the net closures that we would have preferred probably to have come to some deal with the landlords on, there were 20 of those that closed in the 2026 year.

Matthew Durbin: Having said that, if you look at the, I'm going to say, the net closures that we would've preferred probably to have come to some deal with the landlords on, there were 20 of those that closed in the 2026 year. In fact, that was not a dissimilar number to what closed in 2025. So, if we talked about 20 closures a year, 20 to 25 closures a year over the next three years, that would not be an unreasonable place to think that's where we might be. Mathematically, I'm going to say that 60 or 70 of those are 102.

Speaker #4: And in fact, that was not a dissimilar number to what closed in '25. So if we talked about 20 closures a year—20 to 25 closures a year—over the next three years, that would not be an unreasonable place to think that that's where we might be.

Speaker #4: Now, mathematically, I'm going to say that 60 or 70 of those 102.

Speaker #3: Yeah, Garth, we've been quite disciplined here. If the stores are—if they're just not showing the right returns, even if they're profitable, we're having a real good look at these stores and simply not renewing.

Dan Agostinelli: Yeah, Garth, we've been quite disciplined here. If the stores are just not showing the right returns, even if they're profitable, we're having a real good look at these stores and simply not renewing. Or indeed, we have the ability to convert to a different banner. In some cases, that's worked very well. An example of that is we've closed or converted a heap of Vans stores that simply haven't been working over the past few years with that brand. Because of that work, particularly into July, August, we're starting to see great benefits. So much so that the Vans retail business is currently no longer a drag.

Daniel Agostinelli: Yeah, Garth, we've been quite disciplined here. If the stores are just not showing the right returns, even if they're profitable, we're having a real good look at these stores and simply not renewing. Or indeed, we have the ability to convert to a different banner. In some cases, that's worked very well. An example of that is we've closed or converted a heap of Vans stores that simply haven't been working over the past few years with that brand. Because of that work, particularly into July, August, we're starting to see great benefits. So much so that the Vans retail business is currently no longer a drag.

Speaker #3: Or indeed, we have the ability to convert to a different banner. And in some cases, that's worked very well. An example of that is we've closed or converted a heap of Vans stores that simply haven't been working over the past few years with that brand.

Speaker #3: And because of that work, particularly into July and August, we're starting to see great benefits. So much so that the Vans retail business is currently no longer a drag.

Speaker #6: Terrific, thanks. And then, the seasonality of the business—just with the trading that has been difficult—has shifted. When is your expectation that it reaches something that is more normal?

Garth Francis: Terrific, thanks. The seasonality of the business just with the trading that has been difficult has shifted. When is your expectation that it reaches something that is more normal? Are you expecting that sort of very big accentuated first half to continue?

Speaker #6: Or are you expecting that sort of very big, accentuated first half to continue?

Speaker #4: Oh, Jesus. I don't know, Garth, is the answer. I would hope that we'd start to get back to a more normal, I'm going to say, trading and EBIT pattern.

Matthew Durbin: Oh, Jesus. I do not know, Garth, is the answer. I would hope that we would start to get back to a more normal, I am going to say, trading and EBIT pattern. If you look historically, it has been sort of 55 H1, 45 H2. That has not been the case for a couple of years. It is a little bit like how long is a piece of string, I think.

Speaker #4: If you look historically, it's been sort of 55 first half, 45 second half. That hasn't been the case for a couple of years. It's a little bit like, how long is a piece of string, I think.

Speaker #6: Fair enough. And then just on the inventory build— you guys seem to be quite happy with that. It's well up on last year. There are obviously store rollout initiatives, but you highlighted that the store base is smaller.

Garth Francis: Fair enough. Just the inventory build, you guys seem to be quite happy with that. It is well up on last year. There are obviously store rollout initiatives, but highlighted that the store base is smaller. What gives you confidence that you are not going to have to, that that inventory will remain clean and you are not going to have to be promotional just to clear those levels?

Speaker #6: How do you. What gives you confidence that you're not going to have to that that inventory will remain clean and you're not going to have to be promotional?

Speaker #6: Just to clear those levels.

Speaker #4: Yeah, look, again, that's a good question. No doubt we're constantly challenged. Last year, there were pockets of inventory that emerged that we had to deal with through May and June.

Matthew Durbin: Yep. Look, again, that is a good question. No doubt where comps were challenging last year, there were pockets of inventory that emerged that we had to deal with through May and June. We called out that part of the impact in gross margin last year was that impact of having to clear through inventory in a low margin environment. We have planned for this year at a much more conservative level of inventory than we have in fact ever before. Let us see how we go. The age inventory is clean. We have got a pretty good track record over many years of managing this, and I feel as though we are in an okay shape.

Speaker #4: And we called out that part of the impact on gross margin last year was due to having to clear through inventory in a low-margin environment.

Speaker #4: We've planned for this year at a much more conservative level of inventory than we have, in fact, ever before. So, let's see how we go.

Speaker #4: But I just think the aged inventory is clean. We've got a pretty good track record over many years of managing this, and I feel as though we're in okay shape.

Speaker #3: Garth, some of the increases in that area in terms of inventory—keep in mind, we've now opened the three Sports Direct stores. We have two or three stores' worth of stock in our DC for the stores that are coming.

Dan Agostinelli: Garth, some of the increases in that area in terms of inventory, keep in mind we have now opened the three Sports Direct stores. We have a further two or three stores worth of stock in our DC for the stores that are coming. We have also put on the Lacoste brand.

Daniel Agostinelli: Garth, some of the increases in that area in terms of inventory, keep in mind we have now opened the three Sports Direct stores. We have a further two or three stores worth of stock in our DC for the stores that are coming. We have also put on the Lacoste brand.

Speaker #3: And we've also put on the Lacoste brand.

Speaker #6: Correct. And then just in terms of the wages, where are those savings coming from? Are you cutting at the store level? Because it feels like there shouldn't be a lot to go from there.

Garth Francis: Great. Then just in terms of the wages, where are those savings coming from? Are you cutting at store level? Because it feels like there shouldn't be a lot to go there. If it is, have you called out IT and back office? I mean, is that impacting the business internally from a cultural perspective, and how are you managing that?

Speaker #6: And if it is, have you called out IT and back office? I mean, is that impacting the business internally from a cultural perspective, and how you're managing that?

Speaker #4: Let me just answer the front line, and then we can talk about the cultural impact. Look, it's a matter of record—we've taken 100 heads out of the support office.

Matthew Durbin: Let me just answer the front line, then we can talk about the cultural impact. Look, it's a matter of record, we've taken 100 heads out of support office. If I think about the stores teams, and what we've done there, that's been a very detailed benchmarking exercise. To put some color around that, we have some stores that are, I'm going to say, very similar size, very similar turnover in the same banner. For argument's sake, one might've been running on a wage percent sales of 14% and the other one 16%. So what we've identified is that there's no good reason where one can run on 14% and another one that has exactly the same profile should be running on 16%. All of the benefits in the store wages have come from that benchmarking exercise and then just being more disciplined on rosters.

Speaker #4: If I think about the stores teams, and what we've done there, that's been a very, very detailed benchmarking exercise. So, to sort of put some colour around that, we have some stores that are, I'm going to say, very similar size, very similar turnover, in the same banner.

Speaker #4: And for argument's sake, one might have been running on a wage percent of sales of 14%, and the other one 16%. So what we've identified is that there's no good reason where one can run on 14% and another one that has exactly the same profile should be running on 16%.

Matthew Durbin: For argument's sake, one might've been running on a wage percent sales of 14% and the other one 16%. So what we've identified is that there's no good reason where one can run on 14% and another one that has exactly the same profile should be running on 16%. All of the benefits in the store wages have come from that benchmarking exercise and then just being more disciplined on rosters.

Speaker #4: And all of the benefits in the store wages have come from that benchmarking exercise, and then just being more disciplined on rosters. So that is a big part of the $30 million that we've called out for this coming financial year.

Matthew Durbin: That is a big part of the AUD 30 million that we've called out for this coming financial year. We think there's probably a bit more in that in FY28, because as everyone gets a bit better, then you take the best and you try and roll that practice through. Let's call it a continuous improvement exercise. But that's led to a big chunk of change for FY27.

Speaker #4: We think there's probably a bit more in that in FY28 because, as everyone gets a bit better, then you take the best and you try and roll that practice through.

Speaker #4: So, it's a—let's call it a continuous improvement exercise. But that's led to a big chunk of change for FY27.

Speaker #6: Yeah.

Speaker #3: Yeah. And of course, Garth—sorry—when you actually... So, Garth, when you actioned such 100 people, and they weren't bad people, they were good people.

Garth Francis: Yeah.

Dan Agostinelli: Yeah, and of course, Garth, we. Sorry. When you action-

Daniel Agostinelli: Yeah, and of course, Garth, we. Sorry. When you action-

Matthew Durbin: Go, yeah.

Dan Agostinelli: Garth, when you actioned 100 people, they were not bad people. They were good people. We have simply got to make necessary decisions of how to ensure we move forward. Whilst when you do this stuff, of course, morale and culture and stuff takes a bit of a hit. I am surprised that it has been okay. We just move on and everyone is doing a little bit more and it is okay. On top of that, we have now got 50 odd people in Vietnam offshore, and it has been quite amazing what we are seeing in terms of their ability and the value they are bringing. It is just a changing world in all that area.

Daniel Agostinelli: Garth, when you actioned 100 people, they were not bad people. They were good people. We have simply got to make necessary decisions of how to ensure we move forward. Whilst when you do this stuff, of course, morale and culture and stuff takes a bit of a hit. I am surprised that it has been okay. We just move on and everyone is doing a little bit more and it is okay. On top of that, we have now got 50 odd people in Vietnam offshore, and it has been quite amazing what we are seeing in terms of their ability and the value they are bringing. It is just a changing world in all that area.

Speaker #3: But we've simply got to make necessary decisions about how to ensure we move forward. But, whilst you do this stuff, of course, morale and culture and stuff take a bit of a hit.

Speaker #3: But I'm surprised that it's been okay. We just move on and everyone's doing a little bit more, and it's okay. On top of that, we've now got 50-odd people in Vietnam offshore.

Speaker #3: And it's been quite amazing what we're seeing in terms of their ability and the value they're bringing. So it's just a changing world in all that area.

Speaker #6: Terrific. And then maybe just—sorry, if I could squeeze in one last one, just on the wage front and store productivity. What sort of measure—I mean, are you measuring conversion, and are you worried that what you're doing at the store level is what's contributing somewhat to the like-for-like negative sales?

Garth Francis: Terrific. Then maybe just, sorry if I could squeeze in one last one just on the wage front and store productivity. What sort of measure? I mean, are you measuring conversion and are you worried that what you are doing in the store level is what is contributing somewhat to the negative LFL sales? Or do you attribute that mostly just to the product that has not worked that well in the lifestyle banners?

Speaker #6: Or do you attribute that mostly just to the product that has not worked that well in the lifestyle banners?

Speaker #4: That's a really open question. We don't think what we've done with store wages in stores is impacting our LFL sales. We're tracking that like a hawk.

Matthew Durbin: That is a really open question, mate. We do not think what we have done with store wages in stores is impacting our LFL sales. We are tracking that like a hawk store by store as we make changes to rosters. We have not seen anything that would suggest that what we have done has impacted it. I think you would have to put that down to the broader macro. Yes, we have talked about, right now there is not the innovation in lifestyle product globally that we would like.

Speaker #4: Store by store by store, as we make changes to rosters. And we haven't seen anything that would suggest that what we've done has impacted it.

Speaker #4: So I think you'd have to put that down to the broader macro, and yes, we have talked about right now there's not the innovation in lifestyle product globally.

Speaker #4: That we would like.

Speaker #3: Yeah. And these conversations are daily with our brands. We're looking for innovation. We've seen some great green shoots come from ASICS and New Balance, which I think are going to be great right up into this December.

Dan Agostinelli: Yeah. These conversations are daily with our brands. We are looking for innovation. We have seen some great green shoots come from ASICS and New Balance, which I think are going to be great right up into this December. You just got to take a look at Nike. I mean, the innovation is pretty weak, and once that comes back to where it will, and it will in my view. These things are cyclical, particularly in the fashion space. I think we should see upside as soon as we get four or five shoes that are different, and the customer wants.

Daniel Agostinelli: Yeah. These conversations are daily with our brands. We are looking for innovation. We have seen some great green shoots come from ASICS and New Balance, which I think are going to be great right up into this December. You just got to take a look at Nike. I mean, the innovation is pretty weak, and once that comes back to where it will, and it will in my view. These things are cyclical, particularly in the fashion space. I think we should see upside as soon as we get four or five shoes that are different, and the customer wants.

Speaker #3: But you just got to take a look at Nike. I mean, the innovation's pretty weak, and once that comes back to where it will—and it will, in my view—these things are cyclical, particularly in the fashion space.

Speaker #3: And I think we should see upside soon, as we get four or five shoes that are different and the customer wants.

Speaker #6: Terrific. Thank you.

Garth Francis: Terrific. Thank you.

Speaker #1: Thanks, Garth. We've got time for one more question, guys, in the interest of time. So we'll take one more, and then we'll wrap up.

Matthew Durbin: Thanks, Garth. We have got time for one more question, guys, in the interest of time. We will take one more and then we will wrap up. Thanks.

Speaker #1: Thanks.

Speaker #2: Your last question will come from Alex McLean with Evans & Partners. Please unmute your audio and ask your question.

Operator: Your last question will come from Alex McLean with Evans & Partners. Please unmute your audio and ask your question.

Matthew Durbin: Your last question will come from Alex McLean with Evans & Partners. Please unmute your audio and ask your question.

Speaker #6: Morning, team. Thanks for taking my questions. Just two quickly. Sports Direct run rates—I think you put some slides in the strategy day. Just wondering if you could give us some insight and an update on that.

Alex McLean: Morning, team. Thanks for taking my questions.

Matthew Durbin: Thanks.

Alex McLean: Just two quickly. Sports Direct run rates, I think you put some slides in the strategy day. Just wondering if you could give us some insight and an update on that.

Speaker #4: Yeah, I can. So we had two stores and a website trading in May, and I think we called out that as our annual run rate off that of $15 million.

Matthew Durbin: Well, I can. We had two stores and a website trading in May, and I think we called out there was an annual run rate off that of AUD 15 million. I am pleased to say that that annual run rate has continued to lift, as we would expect it to, as we have opened the Miranda store. We talked about online continuing to run. Look, given we had only put that chart in the pack two months ago, I just felt it was too early to update that. I feel like as we get to November, we will have a few more stores open. That will be a good opportunity to update on that as we get to that point. We are pleased with how things are going there. Yep.

Speaker #4: I'm pleased to say that the annual run rate has continued to lift, as we would expect it to, as we've opened the Miranda store.

Speaker #4: And we talked about online continuing to run. Look, given we'd only put that chart in the pack two months ago, I'd feel it was too early to update that.

Speaker #4: But I feel like, as we get to November, we'll have a few more stores open. That'll be a good opportunity to update on that as we get to that point.

Speaker #4: But we're pleased with how things are going there.

Speaker #6: Okay. And then just maybe a question around your largest distributed brand, Skechers. How is that brand, from a product proposition and value proposition, placed in what I guess you'd characterise as a challenging macro?

Alex McLean: Okay. Then just maybe a question around your largest distributed brand, Skechers. How is that brand from a product proposition and value proposition placed in what I guess you would characterize as a challenging macro?

Speaker #3: I mean, Skechers, as per usual, has always been resilient. Last year, around about this time or into May, June, July, we had a very, very strong silhouette called the Slip-ins.

Dan Agostinelli: I mean, Skechers, as per usual, has always been resilient. Last year, around about this time or into May, June, July, we had a very, very strong silhouette called the Slip-ins, which was very, very strong worldwide. It's certainly not as strong this year, but those guys just continue to innovate. There's a new one called the Cozy Fit, I think it is, which is starting to show some great signs. So hopefully that takes up the slack and we'll move forward. But the Skechers stores are very resilient. Online is strong within that banner. What has been super strong for us in that banner has been our DFO network.

Daniel Agostinelli: I mean, Skechers, as per usual, has always been resilient. Last year, around about this time or into May, June, July, we had a very, very strong silhouette called the Slip-ins, which was very, very strong worldwide. It's certainly not as strong this year, but those guys just continue to innovate. There's a new one called the Cozy Fit, I think it is, which is starting to show some great signs. So hopefully that takes up the slack and we'll move forward. But the Skechers stores are very resilient. Online is strong within that banner. What has been super strong for us in that banner has been our DFO network.

Speaker #3: Which was a very, very strong worldwide. It's certainly not as strong this year. But those guys just continue to innovate. There's a new one called the Cozy Fit, I think it is.

Speaker #3: Which is starting to show some great signs, so hopefully that takes up the slack and we can move forward. But the Skechers stores are very resilient.

Speaker #3: Online is strong within that banner, and what has been super strong for us in that banner has been our DFO network.

Speaker #6: Okay, that's helpful. And then just one final one—a lot of questions around the macro, what gross margins are doing. You've made the comment about promotional activity.

Alex McLean: Okay, that's helpful. Just one final one. A lot of questions around the macro, what gross margins are doing. You've made the comment around promotional intensity being high.

Speaker #5: The host would like you to unmute your microphone. You can press star six to unmute.

Operator: The host would like to unmute your microphone. You can press star 6 to unmute.

Alex McLean: Can you just clarify, promotional intensity is high, but it hasn't actually changed that much? Are you calling out that-

Speaker #6: It hasn't actually changed that much, or are you calling out that?

Speaker #5: You are muted.

Operator: You are muted.

Speaker #6: It’s like it’s gotten worse, I guess, across the last, call it, quarter or six months.

Alex McLean: It's like it's gotten worse, I guess, across the last, call it quarter or six months?

Speaker #4: No, I think it's been high now for a while; that's how I'd characterise that, Alex. So no, we're not trying to indicate that there's been a step up.

Matthew Durbin: No, I think it's been high now for a while, is how I'd characterize that, Alex. We're not trying to indicate that there's been a step up. It just continues. And who knows, this might be a new norm. But if it is, I think we're well positioned to tackle it. But certainly the customer's chasing value. Every other week, someone in our segment's having a sale or promoting product, and we're making sure we compete.

Speaker #4: It just continues, and who knows, this might be a new norm. But if it is, I think we're well positioned to tackle it.

Speaker #4: But certainly, the customer's chasing value. Every other week, someone in our segment is having a sale or promoting a product, and we're making sure we compete.

Speaker #6: Okay, that's helpful. All right, thanks for your time, guys.

Alex McLean: Okay. That's helpful. All right. Thanks for your time, guys.

Speaker #4: All right. Thanks, mate. Thank you, everyone. Appreciate your time.

Matthew Durbin: All right. Thanks, mate. Thank you, everyone. Appreciate your time.

Speaker #3: Thank you.

Dan Agostinelli: Thank you.

Daniel Agostinelli: Thank you.

Operator: Goodbye

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