Good morning. My name is Jordan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Lovisa Holdings Limited Half Year FY 2023 results briefing. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, press Star followed by the number one on your telephone keypad. If you would like to withdraw your question at any time, press the pound key. Thank you for your patience. I will now turn the call over to Chief Executive Officer, Victor Herrero. You may begin the conference. Good morning, everyone, and thank you for taking the time to dial in. On the call today, you have our CFO, Chris Lauder, and myself, Victor Herrero, CEO. As you are aware, we published our half year results to the ASX this morning, we would like to talk you through them. I will now do a page turn through the presentation, we are happy to take any questions at the end. Before we get to the discussion on the results, I would like to start with a recap of the business strategy included on slide four, which set out the keys to our success to date and our focus for the future. Our strategy continues to be focused on the continued global expansion of our physical and digital store network and ensuring that we are investing ahead of the curve to be able to execute on our growth objective in both existing as well as new markets. I'm pleased today to present another strong result for the first half of fiscal year 23, which again evidenced of strength in the team, sorry, the product, and the potential of the business. If we turn to page 5, we will talk through some of the details of the first half. Our sales performance was a highlight, with a strong sales performance delivering first half comparable store sales up 12.5% versus the first half of fiscal year 2022. This, combined with the benefit of net 86 new stores opened in the half, resulted in total sales being up 44.8% in the first half of fiscal year 2022. Gross margin at 80.3% benefit from the price increases in the second half of fiscal year 2022, with a strong focus on optimizing gross margins. The cost of doing business was well controlled. We left making significant investment into growing the business. As a result, we delivered an EBIT of AUD 70 million, up 38%, 38.1% on the prior half. Also note that the of the numbers we will talk to today and included in our presentation include the effect of the new lease accounting standard. A full reconciliation is provided for you in the appendix to the presentation back to the previous standard of your reference if you need it. Our global rollout remains a key focus and was driven primarily by continued growth in the U.S., adding a net 37 to reach 155 stores at the end of the half. Recently, in the six months to December, we also opened in seven markets, which I will talk about later. Cash flow from operation was AUD 115.8 million, up 49% on prior year, reflecting solid working capital management. At the end of the period, we held a net AUD 24 million of cash, and as a result, the board has announced an interim dividend of AUD 0.38 to be paid in April. We now turn to the financial overview on page six. As I noted earlier, revenue for the half was up 44.8% with comparable store sales of 12.5%. Gross margin were higher benefit from the price increases in the second half of fiscal year 2022. The company achieved EBIT growth of 38.1% to AUD 70.1 million for the half and net profit after tax of AUD 47.7 million, up 31.9%. The growth. The strong performance of the half year meant that we were able to finish the half year once again with a very strong balance sheet position. We turn to page seven, you can see the sales performance for the half shows that the benefits of the store network expansion, combined with the strong comparable stores sales, driving the overall sales growth of 44.8% on the prior half year. Looking to the regions, Australia, New Zealand and Asia, cycled temporary store closures and disrupted trade in the first quarter of the prior year, half year, which helped deliver strong Q1 sales growth, with this performance able to be maintained throughout the half, a bit slowing in Q2. Africa continued to perform well and benefiting from the six net new stores, including two in Namibia. European sales reflect our continued new store growth and new market expansion in the period in Hungary, Romania, and Italy, adding to Poland, which opened at the end of fiscal year 2022, resulting in a net 25 new stores to drive sales growth of 32.9%. America continue its strong store rollout momentum, increasing by a net 37 stores, including two new markets in Canada and Mexico. This helped to deliver a 97.6% increase in sales in the region. Turning to page 8, gross profit was AUD 253 million and at an 80.3% gross margin, up on last year by 90 basis points, with the benefit of price increases put through the second half of last financial year. Pleasantly, the price adjustment continue to be well received by our customers. As a result, have contributed to both sales growth and growth, and gross margin expansion. I now hand over to Chris Lauder, our CFO, to talk through cost of doing business, cash flow and balance sheet. Thanks, Victor. If we turn to page nine, we'll talk about cost of doing business. Total cost of doing business for the half year was up 60%+ on the prior half on a statutory basis, which includes the cost of the CEO LTI plan for the period and is post AASB 16. For ease of comparability with prior periods, we have presented the COB, CODB table on this slide on a pre-AASB 16 basis and provided the usual reconciliation between the statutory result and the pre-AASB 16 result in the appendices. For comparability purposes, we've also presented this chart excluding the impact of the CEO LTI expense on the period, which was AUD 15 million in the current half, compared to AUD 500K in the prior half year. On this basis, the CODB percentage for the half year was lower than that, was lower than prior year at 50.8%, reflecting good cost management in an environment where we've faced inflationary pressures and where we've continued to invest in rollout of new markets and structures to manage the growing scale of the business. Just to remind you all, the accounting treatment of Victor's LTI plans requires the amount of each tranche of the LTI to be expensed over its vesting period, based on current expectations of how much will vest. As a result of the annual vesting profile of the LTI plan, this results in a higher expense being recognized in the first two years of the three-year plan, with the final amount recognized for each tranche determined at its vesting date and trued up at that point. Turning to page 10, you'll see that the cash generated by the business has again been strong, with cash from operations before interest and tax of AUD 115.8 million for the half year, reflecting good management of our working capital. Capital expenditure for the period was AUD 31.8 million, predominantly from new store fit-outs, which represents a significant increase on the spend in the prior half year as the store rollout continued momentum with 101 new company-owned stores fit for the period. Cash tax payments reflect a more normal level following lower payments in recent years. These factors combined to deliver closing net cash of AUD 24 million, lower than the prior period as a result of higher capital expenditure and dividend payments. Turning to the balance sheet on page 11, you can see that it remains strong, which has allowed the board to announce an interim dividend of AUD 0.38 per share payable in April, which we've been able to fully frank as tax payments have returned to more normal levels. As we've said previously, the board will continue to assess dividend levels each half year and determine the appropriate level of dividend based on profitability, cash flows and future growth CapEx requirements in the context of prevailing economic conditions. The board do not currently have a specific dividend payout ratio and will continue to base dividend on the cash flow needs of the company and the structure of the balance sheet. Since the end of the half year, we have received conditional approval from our financiers, subject to execution of facility documents for extension of our existing cash debt facilities for a further three years, an increase in the facility limit to AUD 100 million to support future growth in the store network. Hand back to Victor. Thanks, Chris. If we turn to page 12, a quick update on store numbers. The key driver of future growth for Lovisa continues to be in our global store rollout. We finished the period with 715 stores trading across more than 30 countries with a net 86 new store opening opened for the year, including 37 in the U.S., as well as our first stores in seven markets across the globe in Hong Kong, Namibia, Mexico, Italy, Romania, Hungary, and a new franchise market in Colombia, to add to Canada and Poland that we opened at the end of fiscal year 2022. Acceleration of the global store rollout remains our priority. We have invested in the right team to deliver this. Turning to page 13, I will talk to the progress we have made in recent times in relation to digital. We have continued to invest in our digital platform to enhance performance, customer experience and fulfillment capability. We continue to have a long way to go. We have also made investment into digital partnerships, establishing a presence in online marketplaces in Europe with Zalando and Kaufland, and in the U.S. with Simon Premium Outlets. We will continue to work to develop further partnerships in this space as it provides us with further opportunity to extend the reach of the Lovisa brand, in particularly in newer markets. In page 14, I will talk to the trading update and outlook for the coming half of the financial year. Trading for the first seven weeks of the second half of fiscal year 2023 saw comparable store sales for this period up 12.3% and total sales up 24% on last year. Since the end of the half year, we have opened our two stores in new franchisee market, Peru, and the store network currently at 746, including 31 net new stores open for the half to date. We continue to focus on opportunity for expanding both our physical and digital store network, with structures in place to drive this growth in existing and new markets, and expect rollout momentum to increase going forward. Our balance sheet remains strong with available cash and debt facility supporting continued investment in growth. Since the end of the half, we have received conditional approval from our financiers, subject to execution of facility document for extension of our existing cash debt facilities for a further three years, an increase in the facility limit to AUD 100 million to support future growth in store, in the store network. In summary, on page 15, our sales performance was strong both in comparable stores and new store rollouts. Our global expansion delivered new stores in seven new markets across Europe, Africa, Asia, and the Americas, resulting in a net 86 new stores opened, more than than for the whole of fiscal year 2022, finishing the period with a total network of 715 stores. Cost of doing business remains controlled despite inflationary pressures and the cost of new market openings, allowing for continued investment in team structure to support building the platform for future growth. This delivered an excellent result, with EBIT of AUD 70.1 million, up 38.1% on prior half year, and a net NPAT of AUD 47.7 million, up 31.9%, with our strong cash flow and balance sheet position allowing the board to announce an interim dividend of AUD 0.38 per share to be paid in April. I want to thank you, the entire global Lovisa team, for the amazing work that they are doing to deliver these outstanding results. With that, I want to thank you for your time today, and we are happy to take any questions. At this time, I would like to remind everyone, in order to ask a question, press star one on your telephone keypad. Your first question comes from the line of Sophie Carran from Goldman Sachs. Hi, Victor and Chris. Thanks for taking my questions. Just one around some of the investment you've made in the support structure. Can you just talk a little bit about more specifically, sort of what you've invested in there, how we should think about that scaling as the rollout accelerates, and then I guess more generally with that accelerating rollout, some of the things you're sort of doing to manage execution risk? Yeah. Hey, Sophie. Thanks for the question. Chris here. I guess just in terms of what we've invested in, so Obviously, with the number of markets that we've rolled out in the period and the number of stores we're rolling out at the moment, we need to invest in headcount to basically support that. We've now got... Obviously we've always had the support office here in Melbourne, the global support office, but we've now got an office in South Africa, supporting the globe and then a European office in Poland, as well as the office in L.A., supporting the Americas. We've had to build out the structures in those markets to make sure that we can execute on rolling out new countries and the store network. Definitely investment in headcount at all levels, leasing teams to find the new stores and get them signed up. We've also had to invest in supply chain. We've got a warehouse in Poland that we opened a couple of years ago, last year, whenever it was. What else? In terms of just our systems and processes to manage the larger business. We've had to invest some money in the IT side of things as well. What was the second part of the question? You sort of answered the second part, but I guess how we should think about that scaling as that rollout accelerates. Have you sort of set up the structure? Yeah. in a lot of the key markets or is there more, more to come? Yeah. I think we've set up the structures there or the baseline of those structures. The fact is, and we've said this over and over again over the last few years, that we need to continue to invest in those structures. It's not as simple as putting the structure in place and then just rolling out hundreds of stores and it all works. There's constant investment in, you know, regional management structures and, you know, operational leadership to make sure that we can continue to execute the way we need to execute to be successful. You know, our objective there is to make sure that we're actually investing, you know, ahead of that growth curve. You know, don't expect a lot of that leverage just to come through because we've got that baseline in place. We'll continue to hire more people and put more cost into the business to make sure that we're successful. That's helpful. Thank you. Just a second question, just around the comp store sales that you've reported second half 2023 to date. Just wondering if you can give any sort of color around any regional performance? Just thinking about the price increases that you put through in the third quarter last year, just any color around the sort of timing and quantum, just so we can sort of think about how those comp store sales trend once we start to cycle the price increases? Yeah. I mean, we probably sound like a broken record at this point, but we don't tend to break out regional comp sales. Can't give you too much more color than that. But in terms of the price increases, that was, I think it was around late February, March last year, it started to flow through. That's not reflected in these numbers. We'll start to cycle that pretty soon. Obviously that means that, you know, the comps in the remainder of the financial year will get tougher to cycle. Okay, that's helpful. Then just one final question before I jump back in the queue. Just on the gross margin, any more color you can sort of provide around some of the moving parts from whether it's a price point or on the cost side? Do you think that can sort of be sustained at that 80%+ margin level? I mean, obviously a lot of it is from the price increases. You know, you can see that coming through the comps, and you can see it coming through the gross margin improvement. We've done better with our suppliers as well. That's helped. There's been negatives in there as well. You know, obviously, you know, part of the period, the freight costs were reasonably high. Currency wasn't necessarily in our favor, but we managed to offset that by, you know, the adjusting prices and negotiating harder. Victor, I'm not sure if you've got anything else to add. Yeah, I think it's a balance, Sophie. This is Victor. From the price increases, but at the same time from a more nimble supply chain where I think that we are partnering with our suppliers and also the logistic cost, no? That is now significantly lower versus maybe one year ago. It's a combination of several things, you know, the margin. Great. That's helpful. Thank you both. Welcome. Your next question comes from the line of Marni Lysaght from Macquarie. Hi, Victor, Chris. Hope you can hear me? Hi, Marni. Hi, Marni. Hi. Morning, morning. Just wanna have a few questions for me. Just on like-for-likes, I just remember back, a year back for the FY 2022 results, there was some adjustments being made there given you were cycling various lockdowns, etc. Can you just clarify, the comp sales growth you've given us for the first half and to early second half, is that making any kind of similar adjustments? Like, what is, what does that consist of? It's completely consistent with how we reported it previously, which was, our comp sales only reflects stores that were open and trading. Where, you know, Australia had some markets in lockdown in the prior period, then those stores are out of comp. It's only stores that were actually trading in the period. Okay. That's why there's such a, you know, between a comp number and the total sales growth, for that period. Okay. Okay. Just another one for me. What's the run rate of early second half? Like a monthly run rate you can kind of you can gauge from the early second half net new stores. Is that a go-forward indicator? Because I just recall, like, you know, analyzing your business over time, that you tend to roll out stores in the second half and that being skewed to the back end. Is it, you know, obviously, I remember this time last year, you were struggling to open up stores because some of the issues with trades and so. Kind of just some color on that run rate and how we think about the rest of the half in terms of rollouts. Yeah, I think what we said in the full-year results call was that, you know, the run rate that we're running at, you know, it's a reasonable assumption that we'll continue at that rate and just building that. I think we're probably in a similar position now that the numbers we've opened in the first seven weeks of second half, we would like to think that we can continue that momentum through the, yeah. As we always say, it's heavily dependent on our ability to get leases executed, get trades locked in, get on site and get the stores open. It can be lucky, but we'd like to be able to think we can continue that momentum. Okay. Just a final one from me. You started giving us the cash flow statement in the slide deck on a post-AASB 16 basis. Is it... If we wanted to convert that back to pre, is it just some of the other previous disclosures, it's a simple addition of the lease payments and the investment cash flows, you know, relative to what the operating cash flows are. Is that still a fair way to kind of get a proxy of operating cash flow pre-AASB 16 to kind of assess cash conversions? Yeah. Yeah, I think it's the only way you can do it. I mean, obviously interest, it's already up in operating cash flow up there. That's, that's the other part of that. It's the interest and the, and the lease payments effectively add up to, you know, what would've been in the rent line, I guess so. If you're trying to get back to the cash conversion, then yeah, that's the best bet, I think. What would you say has been a driver of your cash conversion this past half compared to kind of what it did in the prior half? I think you've gotta adjust for the non-cash component of LTI. Obviously that's a big number. Mm-hmm. In that period. Mm-hmm. Yeah, that gives us a obviously what looks like a really favorable working capital movement. Mm. Mm. Yeah, if you strip that out, obviously it's not as big a number, but it's still good. Obviously, you know, it's an area we focus on heavily. In terms of, you know, managing our inventory and managing our supplier payment terms. So, you know, we've obviously. We're happy with the job that we've done on that in the period. Excellent. I'll jump back in the queue. All right. Thanks, Marni. Thank you. Your next question comes from Alexander Mees from Morgans. Thanks. Morning, Victor and Chris. Congratulations on a good result. Just, firstly, with regard to doubling the size of your facility and also talking about accelerating or increasing momentum, is it fair to assume that we're looking at more store openings in 2024 than 2023 at this stage? Would you be disappointed if that wasn't the case? It's always the recurring question, no? I think we will open profitable stores, and we will open opportunities, no? What we can tell you is that we are seeing a lot of white space everywhere, and we'll continue trying to accelerate whenever is possible in every market where we are present, and maybe we'll open several other markets in the future. I think just in the context of the facility increase. 'Cause obviously, you know, our existing facility was due to expire in a few months' time, so we needed to renegotiate that. Just with the larger size of the business and the fact that, you know, we're focusing on having some debt in the capital structure, it just made sense to increase the facility limit to AUD 100 to make sure it, you know, sees us through the next 3 years. That's prudent. just secondly on price increases. Obviously, you mentioned that customers have responded well to that. We are annualizing those price increases very shortly. I'm wondering if you're thinking about taking prices up further in the third or fourth quarter this year. We don't have any plans to increase prices so far. We will continue being or looking at our customers, we try to always give them the best offer for a fast fashion company, you know. Affordable prices with a lot of fashion, you know, in jewelry. I don't expect any price increases over the next or the foreseeable future. Thanks. Just finally, if I may, more for modeling purposes, Chris, just with regard to the AUD 15 million LTI expense. I'm just wondering, I appreciate the mechanism and the way it's expense of investing period, but is it possible to disaggregate how much of that 15 relates to FY 2023? Can I just say no? We're not gonna break it out between the different tranches and exactly how much of it relates to which period, because it probably won't help you that much because the way that we have to account for it obviously spreads the expense over the vesting period. Last year we had to book some of the FY 2023 and FY 2024 tranche into FY 2022. This year we've got that in both of those years, again in this number, as well as a little bit of the FY 2022 tranche. We had to catch up a bit on what we booked last year, so we probably, you know, didn't book enough. We would, our expectations have now increased on what we think is going to vest, so we've had to top that up. If you look at the number that we've put in there for the first half, which is around AUD 15 million, that's obviously six months' worth of that expense. A full year would be around double that, which is obviously higher than the total of AUD 28 million, which is the opportunity for the current year, in its own right, which, you know, shows that there is some catch-up from last year in that number. I guess the main thing to be thinking about is that, you know, look at what the profile of the expense would be if you were, if we were booking it at 100% of the opportunity for each year and spreading that across the three years. That will give you an idea of roughly where we're thinking. I can't give you a, you know, direct answer on that because that would be basically giving you guidance, which we're not doing. It was worth a try there, wasn't it, Chris? It was. Thanks so much. The next question comes from the line of Wilson Wong from Jarden. Hi, Victor and Chris. Can you just talk to the market opportunity and relative store economics in the new markets in Romania, Peru and Colombia? Well, Colombia and Peru is through a franchisee partner. There is opportunities and both of them are potential markets. Regarding Romania, as you may know, is one Eastern European country, European Union member and with more than 10 million people with a kind of a disposable income similar to Poland. I think the potential of the market is there, and we believe that we can have a rollout that's a considerable rollout of stores there. Sure. Thank you. I think just the main message also, I mean, these markets are brand new. We don't intend to get into the finer details of new markets until we've got some experience there because we will just be, you know, obviously guessing. We need some experience before we can do that. What are you looking for in particular in that trial period of whether you sort of step up investment in that, in those markets and/or whether you sort of tail it off? We're looking for the stores to hit our investment hurdles. I mean, that's about it. We make assumptions on what we think the stores are gonna do in terms of, you know, average sales per store, what's the wage cost, how much is the rent gonna cost, how much does it cost to build a store? Then once we've rolled out a few stores and had some trading experience under our belt, we can see whether those assumptions are right and we're actually gonna hit our hurdles. That's about it. Sure. Just on Europe, obviously challenging trading conditions in the region at the moment. Like, how have the Lovisa stores been trading sort of on a like-for-like basis? Any sort of color you can give there, would be helpful. As I said, we don't give breakdowns of our like-for-like by geographic region. What you can see is in the slide deck, in the accounts is the breakdown of total sales by region. You know, European sales were, you know, up nearly 33% on the prior year. You can obviously look at the increasing number of stores versus that percentage to see roughly how stores are trading in terms of comp. We're happy with how Europe's playing off with those sort of numbers coming out. Sure. My last question is just around the competitive environment. How are you sort of seeing that? Over the last sort of six months or so. 'Cause we're just looking at the gross margin improvement, implies there hasn't been much pressure to discount product, unlike some of your peers. Well, the competitive environment is still there, it's. At the same time, it didn't change so much during the last six months. Regarding the, well, we are a fast fashion company with affordable prices, you know. We don't rely so much on discount, no more than in value and in our product proposition. Sure. Thanks, guys. Thank you. The next question comes from the line of Sam Teeger from Citi. Hi, Victor. Hi, Chris. Thanks for the presentation today. Yeah, thank you. Like-for-like sales up 12.5% this half the date. I'm not asking to get into regional performance because I understand you don't discuss it, but, you know, are your comps positive all around the world, or are there any signs that your target consumer is softening? I know in the past you provided high-level comments about Asia, so, just trying to get a sense of, you know, is this lower age customer demographic being really resilient right now, or are there any signs of softening anywhere? Yeah. I mean, that's just another way of providing you with market by market commentary. Sam, I mean, we've talked about Asia previously because it was a, you know, a sizable impact from COVID. There's a hangover, it lasted longer than other markets, which thankfully has turned around, as you can see from the total sales numbers coming out of that region. Yeah, I mean, obviously, there's plenty of talk out there around, you know, softening retail trading conditions. You know, we're all operating in that same environment. It remains to be seen how resilient our customer is. You know, we'd like to think that they are because of the nature of our business and the nature of our customers. You know, so far it's just probably a bit early to tell and comment on that. All right. Given the upside in the debt facility, you know, just keen for any comments on your appetite for acquisitions. Far, we don't plan to do any acquisition, and in case it's happening, will be opportunistically whenever it's something is presented that day. We don't have any plans to have any further acquisitions. Right. Victor, you know, since China's relaxed the quarantine requirements, have you been up there in recent times, or are you planning to go there soon? I haven't been recently to Hong Kong. Clearly it's a place that I plan to go because as you know, a part of our supply chain is coming from China. Clearly it's an important thing. As well, as I mentioned before, once there is less uncertainty of the market, maybe we'll consider in the foreseeable future to open China. Right. Thank you. Thanks, Sam. Your next question comes from the line of Allan Franklin from Canaccord Genuity. Morning, guys. Thank you for your time. Just looking for a bit of context on the OpEx side, obviously excluding the LTI. Just sort of noting, it looks like your employee costs are sort of down as a percentage of revenue, there's sort of a lift in other costs. Just any sort of color you can sort of talk to. Appreciate you're reinvesting in different parts of the business. Any sort of color on the other costs and what's lifting that as a percentage of revenue? Yeah. Yeah. Yeah. I'll give you a little bit of color, Allan. Thanks for the question. Yeah, obviously the wages as a% to sales, if that's what you're looking at, if you strip out the LTI, have gone down. You know, that's obviously benefiting from 12% comps. That's, you know, the total that the rate of increase in wage rates haven't gone up by that%, so that's probably what you're seeing there. And then obviously that line includes investment in the support structures, you know, that I mentioned earlier to drive the growth. In that other expenses line, that's the bucket that everything else goes into. You know, we've had to spend money on opening new markets, that doesn't come for free. It's not just spend a few hundred AUD on setting up a company and off you go. There's a lot of work to do in terms of understanding the requirements of each of those markets. You know, lawyers, accountants, you name it, to make that work. Working out how we get things through customs and setting our systems up to actually be able to trade in one of these markets because it's not straightforward in some countries. In that other expenses line, yeah, there's definitely cost for, you know, IT, consultants, lawyers, accountants, that sort of thing. Yeah, sure. Just pivoting on the digital marketplace strategy, and in Europe in particular, I guess sort of what are you trying to drive from those marketplaces and sort of adding a product in there? Is it brand awareness first and foremost, and then try and drive consumers into your, into your stores? Well, both. No, I think, you are increasing your brand relevancy, because it's a B2C business, you know, it's not really a B2B. With the opening in Zalando, you know, it's in a major marketplace, for example, in Germany, you know. We have a more than 50 stores in Germany, so it's complementing our omni-channel strategy where we have several platforms. Basically what is important to say is that it's a kind of another store, you know, inside Germany, for example, you know. It's an omni-channel strategy where we believe that a part of our own platform as well, we can develop our brand and continue increasing the number of customers by buying some marketplaces. Sure. Thank you. That's all for me. Your next question comes from the line of Aryan Norozi from Barrenjoey. Hi, guys. Two for me. First of all, your comments, Chris, on the fact that you mentioned don't expect operating leverage, or significant operating leverage. If I just look at your EBITDA margins excluding the LTIs, it's about 29% this half. Obviously, first half is bigger than the second half, but that's sort of back to pre-COVID levels, in terms of margin. Given your comments and what you've just delivered, is it fair to assume that sort of this is sort of a steady-state margin, at least as you sort of accelerate your openings and plan for your next phase growth? Look, I'd love to think so. Just the caution is that we invest where we need to drive that growth. You know, we're not fixated on that topic. We're fixated on what do we need to actually structure the business to be able to open the stores that we wanna open in the markets that we wanna open in, and putting the structures in place to do that successfully. You know, I know I generally don't answer this question with a straight answer very often, but it's basically that we just continue to invest and that there might be lumpiness in there. You know, we could invest more in the second half than we did in the first half and it goes the other way. Yeah, it's not an easy question for us to answer because we're kind of reacting to how quickly we can roll out and what we need to invest in at any point in time. I guess another way of asking it is has there been a lot of cost investment in the back end in the half that's gonna annualize in the second half? To your point in terms of that lumpiness, I mean, should we be sort of more than annualizing the first half cost run rate just 'cause there's costs that haven't fully hit the P&L in that half? Not in any major way. I mean, there's always aspects of that, but I don't think there's anything major that I'd say yes, that you need to adjust for that. What you're saying is probably reasonable. Yeah. Okay. Just on the sales per store. I mean, if you just go back two years ago, you were under trading on your stores 'cause you had COVID, shopping centers impacted. Are you over-trading now? Like when you look at your sales per store metrics in each of your regions, are you getting the catch-up demand benefit at the moment or are you comfortable with where your sales per store sorts out versus the target levels and understanding obviously the price increase in there? If you look at our comps over the last couple of years, obviously they were extremely strong. That's hard to maintain in the long run. Now doing that through the price increases that we had last year, obviously that's baked in now. That's been a step change in, you know, the sales per store. Obviously different markets have different economics and different levels of sales per store. As we add, you know, new markets in Eastern Europe, those markets don't tend to have as high sales per store as say in Australia or, you know, somewhere like, you know, Switzerland with the more, you know, higher income markets. You know, it will change over time. I guess the... I think you asked have we been overtrading? Hard to say. I mean, we've given the comps that we were doing, you could argue, yeah, maybe we were, but we'd hope that we can continue that. Obviously the conditions are, in, you know, economically around the world are not necessarily gonna get any easier in the second half. You know, that's gonna be a challenge for us. Okay. Then just the price increase in magnitude is on that. Is it fair to say for that 10% price increase blanket across... Like if it's all else equal, a 10% increase in your sales? I mean, we haven't shared the percentage and we're not going to now, but you can see the comps and obviously come up with that number somehow. It's obviously, you know, somewhere in the vicinity of 5%-10%, depending on what range we were looking at the time. We're not gonna give an overall percentage on it. Yeah. Just very last one on your gross margin. You're not obviously giving guidance, but if I just think about the drivers for your gross margin into second half 2023 and FY 2024, you've got the price increase that's annualized. That's basically nearly annualized. You've got a weaker currency working against you. Can you just talk through, is there any offset to that? From what I understand, the costs you're getting from factories, shouldn't be getting any worse. In fact, you might be getting some discounts because of the capacity. Just to can you run us through the pluses and minuses and choose, I think maybe more minuses than the pluses over the next 6-1 2 months on the gross margin? Yeah. I guess the benefit from the price increases is baked into that. You know, that continues through the second half. Historically, if you look back, you know, second half gross margin can be lower than the first half just because of the trading period that it contains. You know, I guess when you're looking at it, you know, you've got to assume that we follow a similar sort of pattern than we have historically in the first half, second half. You know, currency will have an impact that's obviously not as strong as where it was, second half of last year. Upside in, you know, better buying and cost prices. You know, I've probably avoided your question completely. It's hard for us to give you a definitive answer here, all the different components and links to that other than. What, We're not expecting any major things, I guess. What is your hedge rate for second half 2023 and the 5 2024, please? We're not calling out the hedge rate anymore because the U.S. dollar is what we historically talk to is less relevant now. I mean, that's obviously a, you know, still a large part of the business, but the euro US dollar is a big part now. Just the, you know, the impacts of translation back of results back from other currencies is also having a, you know, reasonable impact on the numbers. We're trying not to get everybody fixated on that one number. You can, you know, think, compared to last year it will be lower. You know, probably AUD 0.01-AUD 0.02 lower than what it was at that point, maybe more. Yeah, it's not as big an impact on the, on the gross margin as it used to be. One thing that I want to tell you that you mentioned that I totally agree is that there is plenty of opportunity with suppliers, you know, in order to get better prices now that there is a capacity opportunity. That's great, Carlos. Thanks a lot. Appreciate it. Your next question comes from the line of John Hynd from Wilsons. Good morning, Victor and Chris. Thanks for taking my questions. If I may, can we perhaps unpack the trajectory of sales close to your last update? Can you give us some color perhaps about how important the cyber period and Christmas is to Lovisa? Is it a focus for the customer now on a global scale as well, or more regionally, a focus? I mean, absolutely, Black Friday, Cyber Monday, that whole period is becoming bigger and bigger globally. There's no doubt that, you know, there's sales being pulled into that period that maybe weren't there before. Christmas is still a huge part of our sales for the year and for any retailer. There's no major change in that, you know, compared to where we have been. There's not really anything further to add on that. I guess just in terms of trajectory of comps and total sales, I mean, you can see the numbers we put out there, so hopefully they're pretty self-explanatory. Yeah. You essentially you've stayed at that same trajectory post the AGM update by the looks of things. Does that if I'm reading that correctly, and does that mean that the store openings, which were amazing, they were much closer to the Christmas and Cyber periods this year? When you say store openings, you mean did we open? That the- Stores later in the year? Yeah. Yeah. I mean, I can't remember what the store count was when we announced at the AGM. It certainly, you know, went up quite a few from then until the end of December. We opened a lot more stores in December than what we would normally do. You know. Yeah, that's what I'm asking. All that sort of thing. Okay. I guess the run rate now for stores is really, you know, is really attractive. I think we can all do the math on the, you know, what it implies for perhaps by the end of 2023. You know, you've got your funding in place now. What are some of the impediments that we should look for, you know, on perhaps not achieving that run rate? Does it just come down to locations? No. We are becoming a global brand, you know, we are a global brand already. There is some macroeconomical or macro headwind that you cannot expect it. Maybe, I don't know, Europe will be soft because of the war or U.S. will have a small crisis, you know. So far we have been managing all these things, and sometimes Some area is not performing, but the other areas are performing and are basically comping to our forecast, you know? That's the good thing about having a global brand and being present in 30 markets. That sometimes some markets are not performing as good as others, but the others are overcoming the bad performance of the markets that are not performing. This is something that is very important, that adding several markets is adding as well flexibility in terms of how where is going to come our performance. We are not really focused only in two markets. We are focusing in all the markets in order to try to continue capturing the attention of our customers and trying to understand the needs and motivation of each individual market. Yeah. Thank you. Just to take that one step further, how with the new systems and infrastructure in place, how nimble is Lovisa with its store rollout program? For example, if the, I don't know, if the geopolitical issues eased in Europe, in areas where you're not at the moment, how quickly can you get on the ground and hit locations where you're not at the moment? I think we've been improving over the last few years on this. I think we are becoming a very nimble organization in terms of how we open net more than 80 stores during the last six months. I think it's an important milestone in the company, and I believe that, I mean, we will continue trying to be as effective and nimble as possible in opening markets anywhere. We opened seven new markets. It means that, I mean, we have 25% more markets than we were having six months ago. I think that it's hard work, but at the same time achievable. Yeah. Thanks. Just one more from me. Not wanting to split here hairs or focus on a negative given, you know, the store growth you've achieved. I'm just looking at the 17 store closures. Was there anything that you learned that didn't work in those 17 stores that you can share with us? Or was it just bad locations? Yeah. I think if you break down the 17, I think five of them were relocations. That's exactly what you just said, that the location of the store was in a mall wasn't what we wanted, and we made do for the term of the lease, on renewal, we've agreed with the landlord to move to a different spot that's better. That's, we count that as a closure and a, you know, obviously, and then a new store opening in the same mall. I think there were five of those. There were four closures in the Middle East from our franchise partner. If you strip those out, it's actually not that big a number in terms of the overall scheme of the store network, that's part of our normal process. We get to the end of the lease, negotiate with the landlord. If we're not performing as well as we want, if they're not willing to reduce the rent or make the economics work for us, we'll happily close the store because there's no point holding onto stores for the sake of it. You know, there's always learnings in those things. I mean, 10, particularly 10 stores or less out of 700, that's not that many you get wrong. Yep, that's exactly right. Right. Thanks very much. Congratulations on such a strong result. Thank you. Thanks. Your next question comes from the line of Julian Mulcahy from E&P. Hi, Victor. Just a question on your read on fashion trends. Now, I realize that Lovisa does not depend on any particular dominant trend, but you still need a trend. With this sort of minimalist fashion, trend that seems to be developing on red carpet fashion shows and that sort of thing, are you all worried that it's gonna impact like-for-like stores in the business? For the time being, so far so good, no, in terms of like-for-like stores. I think what I can tell you is that we are continuing over the history of Lovisa, is we want to be the fashionable option for any customer that wants to buy a fashion with affordable prices, no? I think that we have an innovation department as well, where we are basically working on also new ideas as well, and at the same time trying to capture every single trend in our stores. As you can see, we have several SKUs where we try to be a little bit the fashion option, no, for jewelry category in every single market, not only in... One thing that I think is true, prove us right in our strategy on fashion is that basically we work in several markets, no? It's not only specific to the Southern Hemisphere or the Northern Hemisphere or very focused on the U.S. or very focused on Europe, no? I think that's an important thing to say. Robert, if the fashion becomes not wearing jewelry, can you quite easily just, you know, accelerate the store rollout even faster just to compensate? Well, we will deal with that problem in case it's happening, no? I don't expect that this is going to happen, over the next few months or maybe years to come, because at the end of the day, we are a fashion company with element of affordability, you know. People will continue, I think, buying jewelry and in case it's not so fashion to buy jewelry, maybe they will come to us, you know, because, it's less costly than some of our competitors. Yeah. Cool. Just finally, I saw you've opened a store in Taiwan. Does that opening in that market first have any restrictions on what you could do into China? We haven't opened a store in Taiwan, Julian. I saw it on LinkedIn. Oh, we've had an opened. Oh, it's coming, isn't it? Not yet open, not yet coming. We will, whenever we open, you will find out, you know. Oh, it. You know, at the end of the day, you overcome any restriction anywhere, you know? At the end of the day, what we want is to be close to our potential customers, and we will open wherever we believe is the right. Julian, for example, there are plenty of global companies that they have stores in Taiwan. My previous company, as you may know, they have, I don't know, it's more than 20 stores in Taiwan, and it's not affecting at all the China market in terms of relationship or anything like that. We tend not to be into political thinking, you know, when we open any market. It's more about if we believe that there is fashion jewelry customers on that particular market. Yeah. Cool. Just Chris did, so you said that the price increase, the average was 5%-10%, but you didn't want to be specific. Is that right? It's in that range. You could assume. Right. Okay. Thanks, guys. Thank you. Thanks, Julian. Your next question comes from the line of Sophie Carran from Goldman Sachs. Hi, Victor and Chris. Just a quick follow-up from me, just around the CapEx. Could you give us a rough split on expansionary versus maintenance CapEx? How should we think about the step up in CapEx, just noting differences between different markets and where that rollout is gonna be concentrated? Yeah. I probably can't give you a split in the dollars that we actually spent. I guess a big part of the CapEx that we spent in the six months was on new stores. You know, we probably didn't get through as many refurbishments as what we would have liked to in the half. It, it isn't a, as big a part of that number. You know, if you're, if you're looking at it, you know, trying to forecast out what you think that demand is, I mean, generally every lease as we renew it, we look at whether we need to spend CapEx on that store to get it back up to standard, depending on how long ago the last refit was. If you assume that average lease terms are, you know, five or six years and, you know, re-refurbing stores on renewal, at, you know, probably on average, you know, probably a third to half the normal fit-out cost of the store, depending on what we decide to do, then that gives you a benchmark for what we might need to spend on an ongoing basis. Great. Sorry, just on the, any sort of major differences between fit-out costs in new markets? Yeah. That's all. I mean, the U.S. As we've said time and time again is the most expensive market in the world for us to build a store in. You know, it's in a lot of respects, you know, more than double some of the other markets in terms of what it costs to build a store. You know, we try to offset that by getting the landlord to help pay for the fit-out because a lot of the time it's the extra cost is caused by their requirements. We've been reasonably successful in that, which has helped bring that net CapEx for the U.S. market down closer to what we spend in a, you know, some of our other markets, but still above. As the rollout is skewed towards that U.S. market, that means that the, you know, the CapEx that we're spending is higher and obviously that will have a flow on effect in depreciation over years to come. Great. Thank you. Thanks. Our final question comes from the line of Aryan Norozi from Barrenjoey. Hi. Just a clarification on the LTI. Last year in the FY 2022 result, you disclosed in the accounts that there was a AUD 5 million co-provision or cost taken for FY 2023's LTI. Is that fair to assume that you've already provisioned for AUD 5 million? If you've added there's an extra cost that's been provisioned for both this year and next year, can you just give us a bit of color around how you're thinking about the catch-up and the profile of that fee? It could be confusing. Yes. I'm not sure where you're getting the AUD 5 million from, Aryan. Is that may just be, cash component of... Where are you getting that number from? It's in the Remuneration Report, the LT tranche two on the vesting schedule. There's AUD 4.99 million that was expensed in the FY 2022 results based on FY 2023 vesting assumption, and then another AUD 2.9 million for FY 2024. Yeah. Yeah. I'm just trying to find the page that. It's page 24, 9.3. Yeah. That's, that's just the equity component. There's If you, if you think about it in terms of the opportunity for this year is AUD 28 million in total, AUD 3.6 million of that is in cash, and the rest is in equity. The number you're looking at is only the equity component. Yeah. It's, it's fair to say that you've already provisioned for AUD 5 million of that equity component last year for this year, basically. Yeah. Correct. I'm just not talking the whole, the whole picture. Yeah. Yeah. That's exactly the point I was making earlier. There's. Sorry, go ahead. There's an extra cost you've incurred this year based on FY 2024 as well. There's a provision, increased provision that you made in this half on, for the FY 2024 LTI as well. Okay. The true cost for FY 2023 is materially lower than the AUD 15 million that you called out. Like, the true LTI that you would have incurred if you hadn't provisioned would have been materially lower than AUD 15 million. It would have been lower. I'm not sure what your question is, though. Because it is what it is, right? We've got to book an amount in relation to the LTI this year, part of which relates to what we could have booked last year, but we didn't. We've had to catch up some of that because our assumptions around forecast profits for this year and next year have changed. We've had to catch up on some of that that relates to this year's LTI and some of it relates to next year's LTI. I don't know if that helps. Yeah. No, that's fair. That's fair. That makes sense. Perfect. Thanks. I guess the, probably the point to remember, though, is that the cost in this year is as high as it will be, because next year it will be a much lower number because we've had to provide for next year's LTI last year and this year. There'll be much less to catch up on next year. If that makes sense. Has the LTI had any impact on morale when there's a large pay divergence from the CEO to the rest of the business? Have you seen pressure, upward pressure on the remainder of wages throughout the business based on that LTI or not? Not that I'm aware of. Not a topic of conversation around. Perfect. Thanks very much. Okay. This is the operator. We have one final question from Stephen Flood from Ord Minnett. Hello. Hello. Hi. Hi. I'm just a private investor and love your work. In the media, there's been some comments about unhappy employees and some legal action. Is that being addressed? Are the customers, are the employees happy? Every time I go into a store, the employees always seem hard working and very happy. I was surprised to see that in the media. What's going on? We don't disclose anything. You can see the results. I think the people are very happy with the results inside the company, and we are very happy with the team, you know. One of the things that I would mention on the press release is that we want to thank you the team. You know, because this is not really the big performance is by all the team, you know, that is working with Lovisa, and we are very proud of them, and I think that they are very happy and proud of working with us. Okay. Working for Lovisa. Yeah. That's what I see, too. That's why I was surprised to see that in the media in the last, few months, some very unhappy employees, claiming that they're overworked and having to deal with bad conditions. Anyway, thanks for the question. Thanks for taking my question. I really appreciate it. I'm just a small private investor, right? Thank you. Thank you. Thank you, sir. With no further questions, I turn the call back over to Victor Herrero. Thank you very much. Hopefully, we will see each other on, in six months' time, and we can continue talking, more about the Lovisa performance, and we'll see some of you guys, within the next coming days. Thank you very much.