Welcome to the Accent Group FY 2021 full year results investor call. We have Daniel Agostinelli, Group CEO, and Matthew Durbin, Group COO and CFO with us this morning. We will open for questions towards the end of the call. Please listen out for your name as you are introduced through to ask your question. Thank you, Daniel. Over to you. Thank you. Good morning, everyone, and thank you for taking the time to attend the call today. I am joined on the call today by our Group COO, Matthew Durbin. We will now take you through the results for the full year ended June 27, 2021, an update on our growth plan, and a trading update for the first seven weeks of this year. There will be an opportunity to ask questions at the end. If I can now refer you to page four of our investor presentation, which was released to the ASX yesterday evening. Accent Group has delivered another record year of profit, with EBIT up 32.1% to AUD 124.9 million and net profit after tax up 38.6% to AUD 79.9 million. I am delighted with the results. First and foremost, I would like to acknowledge the performance and contribution of the entire Accent Group. Apologies. We've just lost the host line. Please hold and I'll connect them through again. Thank you so much for waiting. We now have your hosts, Matt and Daniel, back on the line. Please go ahead, Daniel. Apologies, guys. Some technical issues. I'll start it. Accent Group has delivered another year of record profit, with EBIT up 32.1% to AUD 124.9 million and net profit after tax up 38.6% to AUD 76.9 million. I'm delighted with the results, and first and foremost, would like to acknowledge the performance and contribution of the entire Accent team for their efforts throughout what was a highly disruptive year. The group's strong focus on VIP, vertical and virtual, along with our integrated digital store operating model, has delivered another record trading profit. Turning to page five. Some of the key operating highlights for the year include record sales of AUD 1.1 billion, exceeding AUD 1 billion for the first time. Digital sales growth of 48.5% on top of the 70% growth achieved in FY 2020. Online sales grew to nearly AUD 210 million. Opening 19 stores, including new store formats. Growth of 1.6 million new contactable customers. Our database is now at 8.4 million contactable customers. Continued growth and performance in Stylerunner, with four stores now trading and strong results from Stylerunner vertical product. The acquisition of Glue Store and Trend Imports, which provides a very strong foothold in the Australian youth apparel market, and a 100% growth in vertical own brands to AUD 25.6 million. The extension of our key Skechers distribution agreement by six years to December 2032, demonstrating the strength of the partnership we have with them and the Skechers' confidence in Accent in the owned market. I will now hand you over to Matthew Durbin to talk about the details of the results. Thanks, Daniel. I'm turning to digital on page seven. A key highlight of the year was the continued growth in digital, with online sales up almost 49% for the year, representing 21% of sales. This is on top of the nearly 70% growth achieved in FY 2020. Part two digital growth of 16% has achieved against the significant growth in half 2 FY 2020, comping the impact of the 140% growth experienced in the COVID-19-disrupted quarter four last year. Our digital infrastructure, which includes a flexible store or warehouse fulfillment model and multiple customer delivery options, continued to deliver a competitive advantage. The average customer delivery time through our normal channels is less than two days, and within one day through our various express channels. Seasonally, we continue to see year-on-year growth in site traffic, conversion rates, and average order value. Onto virtual and VIP on slide eight. Our contactable customer base grew by 1.6 million customers to 8.4 million customers. This continues to be the result of a strong drive to invite customers to join in-store. Our new Skechers loyalty program, The Athlete's Foot, the strength of our MyFit Rewards program. The new Skechers loyalty program launched in May with strong early results, 250,000 new customers joined the program in the first three months. From a standing start in April last year, virtual sales driven through calls, chat, and the Hero video app have grown significantly, achieving sales of AUD 6.3 million in the year. A new customer experience and virtual sales hub, featured on this slide, launched in May this year. Moving on to vertical on slide nine. The company's vertical product program continues to gain momentum, with sales of AUD 25.6 million, up more than 100% on the prior year. This result excludes the Accent Lifestyle of Glue, which generated an additional AUD 2 million in vertical-owned brands sales just in June. The key drivers of growth in vertical were Stylerunner The Label, Alpha, Ipno, the sock program across Platypus, The Athlete's Foot, and Hype, and The Athlete's Foot performance insoles. The company now has 10 vertical brands and is targeting at least AUD 70 million in vertical owned sales in FY 2022. Moving on to retail and wholesale sales on slide 10. Owned retail sales were up 19.6% to AUD 835 million, with strong growth from digital new stores. Inclusive of the TAF franchise stores, the group now operates 638 stores, including 31 websites. In the retail banners, Hype DC, The Athlete's Foot, Platypus, Skechers, The Trybe, Vans, and Dr. Martens were stand-out performers, with all other banners trading broadly in line with expectations. During the year, we opened 90 new stores across all formats and closed seven stores where sustainable renewal terms could not be agreed. The acquisition of Glue Store added 22 stores to the group and an additional nine websites across the acquired vertical and distributed brands. The chart on the right of page 10 demonstrates the continued growth in our store network with a breakdown provided on page 17. Moving on to wholesale. Wholesale sales were up 22% to AUD 132 million, which is a new record for Accent Wholesale. New brand distribution agreements were signed with Herschel and Hoka during the year, with sales from those agreements to commence in half 2 FY 2022. We are also pleased to report the early renewal and extension of our key Skechers distribution agreement, which has been extended by six years to December 2032. Turning now to our growth plan update on pages 11 to 14. Our growth plan is well on track and helped to deliver another year of record growth. The Stylerunner strategy is on track, with four stores, including online, now trading. Digital sales continue to grow. International shipping to the USA, Singapore, and Hong Kong is now available with strong early results. There is significant focus driving our vertical product mix through Stylerunner The Label, Stylerunner The Label Accessories, and Exie. Those brands have grown to around 20% of sales through Stylerunner. Gross margin in Stylerunner continues to improve due to this increased vertical mix. The results from the first three concept stores in Armadale, Robina, and Miranda have been strong, and we expect to have at least 20 stores trading by early calendar 2022. A total of 40 store locations have been identified to be trading by Christmas next year, and we are targeting a network of 60 stores in Australia and New Zealand within the next three years. Moving on to Glue Store and our new Accent Lifestyle division. Glue provides a strong entry to the Australian apparel market. Significant work is underway on gross margin improvement, leveraging broader Accent capabilities, including continued growth in Glue's strong portfolio of vertical-owned brands, which are targeted to grow to 40% of sales over time. A new world-class store concept has been developed, with four new stores signed and to open with this new design concept before Christmas. We're targeting a network of at least 60 stores by 2023. Digital continues to grow strongly with ongoing investment in our integrated omnichannel capability and customer engagement initiatives. Digital sales for FY 2021 represented more than 20% of sales, giving us confidence that we are on track to achieve 30% of sales over time. This result was particularly pleasing in light of the strong digital margin growth achieved and the significant number of physical stores opened during the year. The project to build and deploy new websites for our major banners on the latest Magento two platform is well progressed, with a new Hype site to launch prior to November and other sites, including Platypus and Skechers, to roll out progressively through the year. These new sites will provide further benefits in site speed and capacity, driving improved conversion rates. A new virtual sales hub was operational in May, providing the infrastructure for a virtual video shopping experience for customers across our major banners. We're targeting vertical sales of more than AUD 10 million in FY 2022. VIP loyalty. With contactable customers at 8.4 million, we are well progressed towards our target of 10 million contactable customers. The scheduled loyalty program has been well-received, with 250,000 new members to this program since it launched in May. Both Platypus and Hype loyalty programs will launch in FY 2022. New stores. The pipeline of new stores remains strong, with at least 65 new stores expected to open in FY 2022 across all banners. This program reflects the continuing quality of the deals available and our rollout plans for Stylerunner and Glue gaining momentum. New store performance, where we were able to open at the moment, continues to be strong and ahead of the plan. The Athlete's Foot franchise buyback program continues, with target stores being progressively acquired. The Athlete's Foot had a record year of sales and profit. Vertical. Our vertical program continues to gain momentum, with FY21 sales of nearly AUD 26 million. This is expected to grow to more than AUD 70 million in FY22, as the Accent program gains momentum and we see new sales growth from Stylerunner The Label, Exie, Marketplace, and Accent Lifestyle, including Nude Lucy, Beyond Her, Lulu & Rose, Henleys, Article One, and First Muse. Margins continue to grow on this product as we grow volumes and improve our vertical sourcing capability. We anticipate vertical sales will grow at least 10% of sales, well ahead of our original timeline. Pivot and The Trybe. The Pivot store rollout is on track, with 15 stores expected to be open by December. Performance in The Trybe has been strong, with 66.4% sales growth for the year. The Trybe store rollout has recommenced and will ramp up in FY22. Turning to slide 15 to discuss dividends and trading update. The board have recommended a final dividend of AUD 0.0325 per share, fully franked, bringing total dividends for the year to AUD 0.1125 per share, a 35.7% increase from the prior year. In recommending the final dividend, the board determined that no residual WAVES sub C funds were required to use or used to calculate or pay the final dividend. Indeed, these will have been fully deployed by July. Trade in the first seven weeks has been impacted by store closures due to government-mandated lockdowns in Victoria, New South Wales, Queensland, South Australia, and the A.C.T. The group currently has more than 350 stores or 55% of its portfolio closed for trade. In most cases, they are operating as dark stores fulfilling online orders. As a direct result of these closures, LFL sales, including digital for the first seven weeks, were down 16%. Digital sales in the last three weeks with both Melbourne and Sydney closed have ramped up and were up 66.4% on the prior year. The company estimates that the impact to group EBIT of the COVID-related store closures across July and August will be at least -AUD 15 million to expectations. This impact is the result of both lost sales and the impact to gross margin from driving sales and ensuring that inventory levels are appropriately managed. The company has implemented a range of inventory management and cost-saving measures across the business. Having said this, we are also continuing to invest for the growth and the future in new stores, digital capability, and our new business formats. Due to the continuation of COVID-19 and the inherent uncertain environment, the company will not be providing guidance for the full year. I'll hand back to Daniel now to wrap up. In the current environment, we remain cautious and expect the current lockdown situation to be temporary in the near term. Our digital sales are growing strongly. We have a strong, conservatively geared balance sheet, and we have confidence that when we reopen stores, demand will be very strong, and we will be well-positioned to accelerate with strong inventory levels and many new stores. We are very excited about the opportunities ahead for both our core brands and the growth path to Stylerunner and Glue, which are both planned to ramp up over the coming 12 months. That concludes our presentation today, and we'll be happy to take any questions you may have. Thank you. The question and answer session has now commenced. We have our first question from Sam Teeger from Citi. Please go ahead, Sam. Well, good morning, guys. Good morning, Sam. Apologies for the technical difficulties earlier. Did you manage to get in okay? Yeah, I got most of it. Thanks very much, man. By the way, David, can we get a bit of an update around the latest round of landlord negotiations? To what extent do you guys think you're going to be getting more abatement from deferrals and, given what's happening, what do you see as a fair outcome for both retailers and landlords? Sam, at the moment, landlords like us are not quite sure when all this will end. We've had lots of dialogue with all of our landlord partners, and at this stage, it's essentially parked to figure out how long this will go for. In all circumstances, we are both looking for a fair outcome both ways. We assume it'll be no different to what happened in the earlier lockdowns of 2021. Yeah. To be honest, there's no real update on anything at this stage. We are working very closely with landlords on sorting that out as we move forward. Great. Thanks, Daniel. When you say that it's currently parked on, given the fact that the stores are closed, are you paying 100% of the rent at the moment? How do we think about cash outflows for rent, given the stores are closed and consumers unable to shop? No, the landlords have simply asked us to just cease paying rent on those affected stores. We're working through a program to come up with some sort of amicable outcome in the coming weeks, actually. Oh, that's good to hear. The AUD 15 million impact to July and August, that's implying some type of step-up in discounting. Can you maybe quantify or talk a bit more about how discounting depth and breadth compares to last year? I guess when we're thinking about FY 2022, or at least in the first half of 2022, given the discounting going on, is it fair to say that gross margins are likely to be below PCPs? Yeah. Good question, Sam. To give you a sense, for the last three to four weeks, with Melbourne and Sydney both closed, we have been driving customers to the online sites, and the best way to do that is to offer deals. This time last year, we were pretty much at full price for that whole period. I'll call out a number. Our retail margins, when we're at full price, tend to run along at about 60% gross margin. It's fair to say we've been in the low 50% for this period, to give you some sense of the magnitude of the impact on gross margin. It's a little unknown about what happens. Right now we are planning that fairly comprehensive lockdowns are likely to continue for September and into October in the case of Sydney. We anticipate we will continue to need to drive a higher level of discounting in the prior year to make sure we keep our inventory levels in check and that we don't end up with any aging issues as we get towards the end of the year. I think it is fair to say that margin will be under pressure because of that, Sam, but it's too early to tell where it's going to land. Got it. Great. Just in terms of Pivot, just wondering if you could talk a bit more about what's happening in that business. It feels that while Accent is still committed to Pivot, it's probably been put to the bottom of the pile below some of your other growth businesses. Appreciate that Pivot maybe has less opportunity for vertical products compared to a Stylerunner. Maybe if you can just talk a bit more about what you've seen from Pivot, what you've learned from it, any other issues the team's trying to work on. Yeah. Sam, essentially poor old Pivot has been closed virtually since we opened it. It's been in and out of some sort of a lockdown the whole way through its essentially 12-month existence. What we are seeing is that the outer stores in particular have been quite strong for us, and we are able to achieve very favorable commercial terms to run those stores. Indeed, our growth plan will be definitely more in the outer stores. In terms of priorities, well, like everything else, we have always maintained that we are throwing out a heap of bullets. Whichever one lands on target will be the ones that we will push as priorities. Pivot is still one of those bullets. Obviously, the growth of Stylerunner and Glue have sort of taken priority at this stage. We are still opening Pivot stores. As maintained, we will get to a certain level of growth and determine what we do next moving forward. Once again, I want to reiterate, where we've opened up in what we're calling country-type areas, the stores have been quite strong. Right. When you say outer stores, you're referring to country areas? Yeah. Yes, exactly. What we're calling probably C-grade centers where there's essentially no operators selling sportswear and so on. Yeah. Thanks very much. Thanks, Sam. Thank you. Our next question is from Sam Haddad from Bell Potter Securities. Please go ahead. Hi, Dan. Hi, Matt. Hi, Sam. Just a question on the supply chain. We're hearing some noise in the news about disruption. Can you give some color from your perspective on what you're seeing through your channels and what the risks are? Yeah, sure, Sam. I'll take that and then hand to Daniel. Far we're hearing that there are some delays. We're certainly experiencing delays because of shipping. It's a couple of weeks. It's not particularly profound. Everyone would be aware of the issues with COVID in Southern Vietnam and China. We are hearing that there will be some delays and some small cancellations with some key brand partners. Right now, we're not anticipating any significant impact. Our inventory levels are very healthy at the moment, and the inventory is current, and we've got a strong pipeline coming through. That's how we're seeing it. It's not massive for us, as you're seeing it, Daniel. I don't know. Do you want to add to that? No, not a whole lot to add to that. We're very close, Sam, to our third-party suppliers and indeed, all of our factories making our vertical. Of course, there's one or two weeks delay, that sort of stuff, but not enough for us to have any concern at this stage. Given the uncertainty with COVID and what that could have impact on disruptions to the supply chain. I know things are okay at this stage, but you've had, both to my estimate, John, slightly on the heavy side on inventory by about AUD 30 million or so. Is that a blessing in disguise, given the potential risk nonetheless that may still exist? Yeah. Look, Sam, you never necessarily want to be sitting on more stock than you have. I think your assessment is fair in terms of sitting on the heavy side at the moment. I think it places us well, and in fact, if delays out of China increase as we get towards November and December, we'll be very well-positioned. As I said, that inventory that we're sitting on is very current. In fact, the majority of it's arrived in the last four to six weeks, and it's in our stores. Unfortunately, we haven't been able to show it to a lot of customers in stores over that period. The majority of the AUD 30 million you talk about, two-thirds of that is in what we call core. We've chosen not to discount that product in any channel. We're happy to hold on to that product, given that we're quite optimistic to when lockdowns do end, that we should see a pent-up demand. The overall planning team have done a spectacular job with the rest of the team, managing our, what we call crimson stock, which is what we call very aged stock, and that's the cleanest it's been basically forever. Just on that AUD 15 million guidance, or that new AUD 15 million in terms of the impact, that's for July and August to the end of August only. Is that correct? That's correct, Sam. That's our estimate to the end of August. It doesn't pick up- Okay. What might happen in September, October, et cetera. Okay. Yeah. Okay. Just final question from me. Just some color as to what you've achieved so far with Glue Store. You've said that you're pretty pleased with the progress in the first 90 days. What's been achieved? Sam, well, first and foremost, we're delighted with the acquisition. Certainly, good news is that we've got a fantastic team in that business, led by a very strong CEO, with Darren Todd. What has been achieved is that we have now developed a new concept, which will open in Chadstone. Well, hopefully open in Chadstone in the next four weeks. We've signed a further three stores to all open by December. We will refit our Melbourne Central store, and we will refit our Highpoint store, which are key stores for the business. There's been further strength in back-end functions. We have a team that will soon move our overall computer system over to Apparel21, and indeed, working on cleansing our inventory and further harmonizing terms with all of our main suppliers. There's been a lot going on in the short time we've had the business. Online sales for Glue have just been fantastic. It gives us a great platform to leap from as we move forward with this business. The other pleasing news, Sam, within the Glue business is that it houses four or five vertical brands. One in women being Nude Lucy, it's super strong and the forward pipeline of product looks very promising. Sorry, just one final question from me. With the 65 stores that you flagged and with negotiations with landlords still ongoing, is that tied to successful negotiations, or can you still open those stores if there's still delays in those negotiations being agreed to? Yes, they are tied to ensuring we achieve the right terms, commercial terms. We've got landlords who really want, particularly Stylerunner and Glue, across the country. We feel very confident that we will succeed with that program. If we were open, we'd probably be going faster again. Right now we're not. We're kind of preparing and being optimistic about 2022. Sam, to add to that, I don't think the negotiation on the payments will hold up the 65 stores if that's what you're asking. We're going to get the 65 stores that we need and, Daniel said earlier, we're confident we'll get our outcome on the payments. It's just going to take a bit of time. Okay. That's helpful. Thank you for your time. Thanks, Sam. Thank you. We currently have eight guests waiting in the question queue. Our next question is from Keegan Booysen from Jarden. Please go ahead, Keegan. Good morning, guys. First one from me. Just on the inventory position, it looks like you guys are planning for a strong growth in the second quarter, in the Christmas trading period. Do you still feel pretty comfortable with the level of inventory is, just given the last couple of weeks of lockdown and uncertainty around demand? Yeah, that's a good question, Keegan. I think the answer is there's a lot of uncertainty. We're not worried about our inventory levels at the moment, and we're very well positioned. We're hopeful that as we get into November and December, stores will be able to reopen. We think if it's anything like previous where stores have reopened, demand will be strong. As we sort of talked about earlier, we're sitting heavier than we might otherwise have planned to be because of the sales shortfall that we've experienced with stores closed across July and August. We're also taking measures to make sure that that inventory level is managed through this period according to the circumstances that we're facing. I hope that helps. Yep. Yeah, sure. That AUD 15 million cost you spoke to on July and August, is that the sort of run rate we should expect if lockdowns continue the way they have been? I think that's a fair assumption as well, Keegan. I think that is. With Victoria and New South Wales closed more than 50% of our stores, reasonable to expect that that run rate continues. If Melbourne opens up as we get into October, and September, my apologies, then it won't be quite as bad. Second one. How are you guys thinking around investments in the current brands and store growth versus adding more brands to the portfolio? Are you looking to continue looking for brands with more of an apparel skew? I think, the Glue acquisition provided us with a really strong portfolio of owned vertical brands, along with Stylerunner and Exie. Right now we feel as though we've actually got a very strong portfolio of brands in that space and, with Glue, a really good direct channel to customers. I think right now we're going to focus for at least the next 12 months on what we've got and capitalizing on those moves that we've made. Stylerunner in particular in the activewear space is just going really strongly for us. Daniel, I don't know if you want to add any color to that. No, also in terms of third parties, Keegan, there's many people approaching us at the moment. Unless it makes sense and it can be, first and foremost, vertically sold or semi-vertically sold through all of our banners, we tend to not entertain any of those discussions. One I can point you to is the new Hoka brand signing. The first sale for us has been particularly strong. When those sort of opportunities come around, we will certainly entertain those discussions. Thanks. I guess last one from me as well, just wondering how you're thinking about New Zealand a little more, particularly around which of the brands in your portfolio have the most potential over there and what we can expect from a store growth perspective, particularly around the split between Australia and New Zealand growth terms. New Zealand in general has been super strong for us. It's a very solid business for Accent. We're currently at 77 stores there. We will be at 100 stores, if not by December 1, shortly after or early in 2022. We will open our first Stylerunner store in November in New Zealand. We feel there's a lot of runway for that brand in New Zealand. We'll have an operating website there shortly. Indeed, Glue has a lot of potential to grow in New Zealand. How many stores at this stage, we don't know. I'd be unhappy if we couldn't at least do 20 of each of those two banners alone in that country. On top of that, we have not opened a The Trybe store in New Zealand yet. We're currently in negotiations, but we feel The Trybe has got some runway in New Zealand for sure. Fantastic. Thanks, guys. Thanks, Keegan. Thank you. Our next question is from Ray Tolson, who is a retail shareholder. Please go ahead, Ray. Good morning, Daniel and Matt. Thanks for letting the retail shareholders have a question at a time. Just one issue. With all that rapid expansion and diversification, and quite apart from trying to do it during COVID, there's surely got to be a risk that stuff could spin out of control given the number of moving parts requiring attention. How are you coping with all of this? That's a great question. I'll take that first and then hand to Daniel for a bit more color. We did an executive team restructure here early in the year, in February, March, and we aligned our executive team here around business lines. Previously, we were working across functional lines. We've now got a standalone GM responsible for each of the banners who's able to drive that business as if it's their own. Then we've got shared services. That has absolutely helped make sure we keep laser-sharp focus on each of these different businesses we're driving. I hope that helps explain how we're managing that at the moment. Yep. Can I add much more, Brian? A good strength in that. In our humble view, we've got the best retail team around us, and I've got a very capable can-do GM team that drive each banner, as Matt mentioned, day in, day out. That's been a very strong move towards how we're actually growing the business in these different areas. Okay. Thank you. You might be working 24-hour days. 23, right? Okay then. Thank you. Thanks, Arianne Niji. Thank you. We have our next question from Arianne Niji, from Barrenjoey. Please go ahead. Hi, guys. Hope you're well. I have one about the inventory piece, but just in terms of committed orders for the next few months, is it current inventory the peak you will be at, or are there more orders or inventory to land over the next few months into Christmas? That's a good question, Arianne Niji. There are more orders coming through. There's a continuous pipeline coming through. Our inventory levels would usually peak around October, going into November cyber, and that's how we would usually plan it. You can anticipate that they will peak in October. Sam Haddad previously called out an AUD 30 million inventory overage to what we would have originally planned, and that's where we're expecting it to peak, AUD 30 million more than we otherwise would have liked. We're not saying that that's going to cause any issues, and we've just been balanced about how we move through that inventory, pushing a bit of additional promotion through our website. Cool. sorry, the AUD 30 million, is that AUD 30 million at the moment you've got over than what you would like to, and then you're expecting that AUD 30 million to continue into October in your peak levels? Is that right? Correct. That's correct. Yep. Cool. Just a clarification, in terms of the margin, the good color around the gross margin, about 50% versus 60%. Is that your realized gross margin in the first seven weeks versus the same time last year, or is that just a hypothetical? What was that, Matt? Yeah. Look, I'm not going to call out specifically what we've realized. I wanted to try and illustrate there's about a 7% differential that we've experienced in the first seven weeks. 60% to low 50s. That's the differential that we're experiencing in this environment. Perfect. Just in terms of the Glue piece, obviously you recently acquired that business. What gives you confidence around tripling or nearly tripling the store count? Have you seen any performance in terms of early trading momentum, customer surveys? What's giving you that confidence to go to that target date? I think there's a couple of things that give us confidence. I'll take that first and then hand to Daniel. That chain used to be a 35-store chain. Indeed, hasn't had any proper investment in store development, new store rollout. They've been closing stores rather than opening them. We don't think at all, this fed into our acquisition thesis, that that is at all a function of lack of demand in that segment. Indeed, those stores in good centers for Glue, even though some of those fit out. It's five to, in some cases, seven to eight years old. Those stores were still doing very, very good numbers at time of acquisition. We had full insight into that. If you take the other chains in our space, they're already at those sorts of numbers. Our view is we've just got to get in the game and compete the way we know how to. There's a terrific team over there. It's a great brand portfolio, and we don't see why we shouldn't be able to take our share in that segment of the market. Nothing really to add. I mean, that's exactly it. The momentum we're seeing, particularly with the vertical brands in that business, it's showing solid growth. We will also renegotiate some legacy rents where we have our stores expiring. We may even indeed close some, but we will certainly accelerate the opening of those in 2022. Perfect. Final one for me, please. I appreciate that you don't want to give color around brick-and-mortar from state to state. Just in terms of states that are not locked down at the moment, how are they performing? Is that pretty much in line with the run rate in the second half, or is that softer as well? It's pretty much in line with the run rate in the second half. Western Australia, which hasn't really been impacted, it's been business as usual over there. We're seeing strength where we're open and open consistently. There's certainly impacts, and it's almost difficult to tell because there's been that many shutdowns, but certainly in South Australia and Western Australia, business as usual over there. Sorry. Go ahead, Daniel. I think it's important to also call out that when we come out of a shutdown or a lockdown, business doesn't just bounce back the next day. It normally takes four, five, even 10 days before our customers get enough confidence to get back shopping with the shopping habits. What we've seen when we do come out of lockdown to date, and indeed what we're hearing from international operators is that it has been strong, and we expect it's going to be strong again. Sorry, if I can just sneak one more in. Just in terms of the second half 2021 gross margins, they were below pre-COVID levels and down year-on-year. I would've thought most of that half would've been quite strong in terms of full price sell-through. What was happening there with the Secure Online mix? Yeah, that's a good question there. Good pick-up, though. The answer to that is, as we got into late May and June, Melbourne went into lockdown. In fact, in June, Sydney went into lockdown. This drive we've had to online and digital action started back in June. That certainly had an impact. We also wanted to make sure that we started this year with our aged inventory in crystal clean shape, and that drove us to making sure that inventory was all correctly priced through June, which came at a cost to margin in June. That's perfect. Really appreciate that. Thanks. Sorry. Thank you. Our next question is from Naveen Pattni from E&P. Please go ahead, Naveen. Good morning, guys. My question is around Stylerunner and Glue. I appreciate they're still pretty early on in terms of the rollout, but we've clearly seen some positive signs there. How should we think about the new economics of these businesses versus your more established brands in terms of items like revenue per store or, just generally, the profit margin profile of these brands versus your more established brands? It's a good question, Naveen. We haven't talked too much about that. I won't talk about Glue today, given how new it is, given we've still had a lot of shutdowns in that network. I'll talk a little bit about Stylerunner. We have previously. We're seeing Stylerunner sales densities strong and in line with best practice. The average size of a Stylerunner store is about 200 sq m. You can assume that we're achieving AUD 10,000 of sales per sq m plus out of those banners. In the better sites, higher than that. The other thing to note is our call outs on vertical in Stylerunner, and the Stylerunner products having grown to 20%. You can assume we've previously called out that vertical margins run at 65%-70%, compared to a third-party margin running at 50%-55%. You're talking about, over time, a strong 10% margin differential. We still need to grow out the Stylerunner label Exie within the Stylerunner banners. Margin is certainly growing. If that makes sense on the unit economics of those. In terms of Glue, we need more time on that, and we need to have a period where we've got all our stores trading, and we've got a big drive in that business to vertical brands as well. As Daniel alluded to, we've also harmonized the trading terms for Glue to our group terms, which will also improve margins in that. We need some more time. Okay, great. That's really helpful. Just a point of clarification on Stylerunner. You talked about 20 stores opening early next year. Are you referencing early calendar year or financial year? Yep. For the 20 stores, it's early calendar 2022. Sometime in January or February. We're hopeful that it might even be before Christmas. We're just not sure with lockdowns and so forth. Sure. All right. Thanks, guys. Thank you. Thank you. Our next question is from James Bannon from PAC Partners. Please go ahead, James. It's James. Yes, thank you. Morning, guys. Could I just ask you to put some color around the other major variable or thin variable in the next year, and that's the employee benefits line. Last year, you banked AUD 24 million via JobKeeper. Two questions I guess off the back of that. One, if that wasn't there, what sort of steps would have been taken to mitigate the impact on the bottom line? Secondly, the current version of JobKeeper Mark 2, what sort of impact is that having in terms of flowing through the accounts, given that's supposed to be going directly to the employee? Good question. Just to pick up quickly on last year. We'd made a fairly clear statement that we felt all of the JobKeeper funds had been fully deployed last year and by July. We feel as though the net benefit across the year of those JobKeeper funds to our bottom line was actually zero, if that helps. In the first half last year, in our accounts, we called out a net benefit of AUD 9 million in the first half. In terms of keeping our team stood up, we kept our entire permanent team stood up through the second half, through the various lockdowns that occurred in the second half, and that fully deployed the remaining AUD 9 million across that period. In terms of what we would've done if we hadn't had it, I think that's a theoretical question. We probably won't answer that. Let's move to what we're doing at the moment. It's fair to say that with New South Wales and Victoria all closed in store, we have got our permanent teams in those stores, working 15 hours a week. They're still working in our stores, where the demand is there for filling dark store orders, fulfilling online orders. All of those team members are able to take advantage of the government subsidy, which is going directly to them. Based on our calculations, we're broadly in the same position from a cash perspective, if not a little better off. There's absolutely no benefit accruing to Accent from that government subsidy. It's going straight to the employees, as it should, and our team members are benefiting from that. We can also add that our entire support team is currently stood up, regardless of the shutdowns. We're doing our best to ensure that that continues. Great. Thanks very much. Thank you. Thank you, James. Our next question is from Sam Teeger from Citi. Please go ahead. One quick follow-up. You have the 65 new stores that you're planning to open this year. Given lockdowns at the moment and the fact that maybe some fittings and fixtures might be delayed given they're on boats, is that likely to be skewed towards the second half? Trying to get a sense of the impact that lockdowns have on your ability to open stores in the kind of time that you had planned. Sam, look, a good question. It's something that we're toying with all the time. We actually got ahead of the game, seeing some of this occur, where we ordered, particularly in the main banners, Platypus, Skechers, Dr. Martens. As we were signing stores, we were ordering fixtures in bulk. In the main, those bulk fixtures are either in Australia or New Zealand, are waiting for handover dates from shopping center landlords. From our point of view, it'll be skewed as it would've been in the first place. There will be lots of openings in the first half. All right. Thank you, Sam. We have two questions left in the queue. If you would like to ask a question, please press star one on your telephone keypad now. Our next question is from Jo Little from Morgans. Please go ahead. Morning, guys. My question's been answered, but just on General Pants, obviously there's a confidential process going on, and you're very optimistic about Glue. Could that be of interest to you at a price or too much overlap? Jo, too much overlap. We can categorically say we're not involved in the process and won't be. Perfect. Sorry, just wanted to reiterate. You're saying, Daniel, two-thirds of your product, which is core you haven't been touching in relation to discounting. It's basically one-third of your product driving the GM down 7% year-on-year? Yeah. Yep. That's fair, Jo. Yep. Yeah. Okay. Would it be fair to say that a chunk of that stock was more legacy or aged and hasn't come into the country in the last few months? No, it wouldn't be fair to say that. We'd cleared all of that aged stock out in May and June last year. The stock that we have been working on is stock that we otherwise would've had at full price through this period, if that makes sense. Yeah. Perfect. Thank you. Just lastly, sorry, I keep saying that. Stylerunner seems like you've got some early wins there internationally. Can you just give us a bit more color there? Should we be priming ourselves for some kind of physical launch, or do we need to get Australia locked away and just run the digital thing for now? Yeah. Look, I think it's as you said, Jo, we've dipped our toe in the water. It's a long way from shipping internationally to doing anything else, and primary focus is in Australia, particularly for the next 12 months. Digital is clearly the sensible way to approach international markets, in our view, in the first instance. Thanks, guys. Appreciate it. Thanks, Jo. Thank you. We have our next question from Quinn King from QNN Investments. Please go ahead, Quinn. Yeah. Hi, Daniel and Matthew. Congratulations on being on some really strong results. Well done. My question's just been answered in regards to Stylerunner and international shipping to U.S. and Singapore and whatnot. Maybe if you can just expand on where do you see this brand overseas in five years' time? Daniel, I might let you take that one. Well, currently, I mean, Runway, we've got lots and lots of Runway in Australia and New Zealand. We definitely want to cement that, and particularly ensure that the vertical piece continues to do what it's doing now with further growth. We're very happy with what's going on with that vertical piece in that business, which really gives us lots of confidence about what this model can do. In terms of what we see in five years, well, we'd love to have a very strong website, particularly in the U.S., and places like Singapore and so on, and taking some learnings from other retailers that have done that. Some stores could follow, and that will be determined by what customers think of our products and our model. Right now, we're having trouble thinking five months out with what's going on. We're not really turning our mind to five years. There is a genuine want and desire from the team to expand that model outside of our borders. Thanks, guys. That's it for me. Cheers. Thanks, team. Thank you. We have one more question from Sanjay Patel from CapFund. Please go ahead, Sanjay. Good morning, gentlemen. Look, just got three. First one being, how are you seeing your competitive landscape, especially with COVID for the last year and a half? Are you seeing that the smaller players have dropped off, that's given you an opportunity to sort of pick up opportunity? On the alternative, are you seeing other new players coming in that are looking to get into this space that you're in? Look, I think the competitive landscape is fairly much as it ever was. I certainly think that in this period, and as we get deeper and deeper into this, the bigger guys with strong balance sheets are gonna have the opportunity to take market share. I think the fact that we were able to acquire Glue through that period at a pretty compelling price was good. Major competitors are still our major competitors. They're all strong. We all have our own unique value propositions, and I think we continue to get our share in the market. This is probably the best way to answer that. Ben, I don't know if you want to add some color. Yeah, look, that's pretty much answered it, I think. What we are finding is, particularly at the moment, and we feel this will continue for many years to come, is that our country stores in particular, where we're opening country stores or C-grade centers, which we never would've entertained three or four years ago, have suddenly become very strong. By that I mean that particularly in our Platypus model and The Athlete's Foot, we've opened in places like Rockhampton, Ipswich, Echuca, Shepparton, Wagga, those type of places. The sales of them have been well above any expectation we had. We see lots of runway in that space as well. That's not necessarily just coming from owner-operators of one or two store operations falling off. It's really coming because we're providing a much fuller extent of product in those markets where they may not have had prior to what we've done of late. On top of that, where we do open those sorts of stores, our digital sales are growing in those areas. That's the most pleasing part for us. We're able to grow the overall share. Fantastic. Thank you. Just my next question. With the very tight labor market and seemingly tighter labor market that's coming through, are you seeing difficulties in getting the staff for your growth ambitions? Are you seeing cost pressures starting to come through with existing staff? Well, cost pressures have been there forever. I've been doing this for 35 years and there's always cost pressures on that line, that's for sure. I've never met anyone at Accent or anywhere else who'd be happy to accept less. It could be our sector. Like everyone else, yes, we have some trouble, but by and large, when we advertise the positions, we certainly get a very big turnout for the age group we operate within. On top of that, I'd like to point out that our culture is quite strong in terms of operating within this youth-type area, and that's allowing us to attract very strong applicants at all levels, to be honest. Okay, thank you. Probably just my last one. With the focus on cyber at the moment, what is your cyber strategy, and have you had any instances of hacking or any problems with that in the recent past? Yeah, that's a good question. We've got a very strong focus on cyber. We employed a new role. We've got a head of cybersecurity, which is a new role to our business about six months ago. He's a very senior experienced guy who is making sure that we're protected. We engage external hacking consultants to try and penetrate our systems, do penetration testing, all of those sorts of things. I'm not going to say it'll never happen because I think it's very difficult in this environment. We feel as though we're doing everything we can to avoid it. We haven't had any major incidents to date. We've got our fingers crossed that we won't, but you can never say never in this environment, unfortunately. Okay, thanks very much, and congratulations on the result. Thank you. Thank you. Thank you. We've got one more question from Peter Richardson. He's a private investor. Please go ahead, Peter. Morning, Ben and Matt. You included a slide on the gross margin and FX rate. It obviously is something you see as important. I guess it shows that you've sustained pretty good gross margins whilst you've had a lower Australian dollar. You're suggesting maybe a rate of AUD 0.74 for the following year. Have you forward hedged that or is that just the forecast? No, that's our forward hedging position that we're indicating there. We previously called out a hedging policy to hedge about 50% of our forward commitments over 18 months. That AUD 0.74 rate is indicating what those hedges are priced at. Okay, thank you. Thank you. Thank you. There are no more questions at this time. We will conclude the question and answer session. Back over to you, Matt. Fantastic. Well, thank you everyone for joining this morning. Great questions. Really appreciate all your support and we'll talk soon. Thank you very much. Thanks, guys. That now concludes the Accent Group FY 2021 full year results investor call. Thank you for attending and enjoy the rest of your day.