Good day, ladies and gentlemen, and welcome to the KMD Brands Half Year 2022 Results Release Conference Call. Today's conference is being recorded. Kindly be reminded that there will be no web questions taken today. Only audio questions shall be taken for today's call. For those who have questions, please dial into the audio to be able to ask your questions. At this time, I turn the conference over to Michael Daly, Group CEO. Please go ahead. Good morning, everyone, and thank you for joining us on today's presentation of the KMD Brands results for the first half of the 2022 financial year. My name is Michael Daly, and I'm the CEO of the group. I'm joined on the call by Chris Kinraid, our chief financial officer. We will be talking to the presentation lodged on the NZX and ASX this morning. Unless otherwise specified, all financial numbers are in NZD. Today's presentation will begin with an introduction to our newly rebranded KMD Brands, followed by the first half highlights, group financials, brand results, and we will conclude with our focus for the second half of FY 2022. Earlier this month, we rebranded to KMD Brands Limited with a refreshed corporate strategy and identity to drive the group into the next phase of growth. The new parent company name and refreshed strategy brings our brands together under an overarching corporate identity and harnesses the company's evolution over the past 35 years. Since the acquisition of Oboz and Rip Curl, we have been looking to distinguish the holding company from the Kathmandu brand. The change to KMD Brands is an outward sign of the transformation that has occurred within the group in recent years and its future strategy, while still acknowledging its history. With our rebranded name, we have also refreshed the purpose and vision of the company. Our purpose is to inspire people to explore and love the outdoors. I'd like to emphasize that all of our brands are focused on supporting, enhancing, and encouraging activities for the outdoor consumer. Our vision is to be the leading family of global outdoor brands that are designed for purpose, driven by innovation, and the best choice not only for people, but also the planet. Moving to slide 6, we consider our three brands, Kathmandu, Oboz, and Rip Curl, provide all the fundamentals for strong long-term growth through their technical and innovative products, their global reach and diversification, capabilities across multiple geographies and channels, and their strong base of loyal and active customers. KMD Brands as a parent company, will bring vision and strategic guidance to enable group synergies across brands through the sharing of technology, product research and development, and leveraging operational excellence to enable the best delivery of customer service. We will now cover the highlights for the first half of FY 2022. Moving to slide 8, I would like to first cover off our four strategic pillars. We are building a portfolio of global brands. We aim to continue to expand our global footprint as we invest in world-class brands and customer experiences. We will elevate our digital capabilities by investing in group digital platforms to deliver a world-class unified commerce experience. We are also leveraging and delivering operational excellence to all brands across shared group support functions. Finally, we are demonstrating leadership across environmental, social, and governance by transforming business culture and mindset. As we execute on our strategy, it is important for us to maintain balance sheet flexibility to support organic growth and potential M&A opportunities. On slide nine, you can see that during the first half of FY 2022, we successfully executed on all four pillars. At a group level, we appointed a president of KMD Brands Europe to drive our international growth across multiple brands in that region. We implemented a new common loyalty management system across Rip Curl and Kathmandu in Australia and New Zealand. We also made key group appointments in HR and commercial and determined the group's ESG focus areas. In relation to Rip Curl, we continue to build our brand, opening 10 new owned and licensed retail stores globally and sponsoring the first-ever WSL finals held in the USA, where the winner of the men's event was a Rip Curl surfer, Gabriel Medina. Reflecting our focus on elevating digital, Rip Curl online sales grew by 14.5%, with penetration increasing to 13.8% of direct-to-consumer sales. We demonstrated operational excellence by implementing the same point-of-sale system for Rip Curl and Kathmandu across Australasia. We also expanded a wetsuit recycling program to all Rip Curl stores in Australia and finalized the Rip Curl ESG strategy. We made substantial progress at Kathmandu, where we have completed the Europe fall/winter 2022 sell-in, with forward orders in line with expectations, and we appointed a general manager of international to drive growth. The execution of our digital strategy is evidenced by our 46.4% growth in online sales, with penetration increasing to 21.2% of sales. Importantly, we are utilizing Rip Curl's infrastructure to drive our international expansion into Europe and Canada. On the ESG front, we've demonstrated success with Kathmandu winning the Deloitte Top 200 Sustainable Business Leadership Award. In relation to Oboz, the demand for the brands and products has never been stronger, and forward orders into FY 2023 support our medium-term growth targets. We have successfully launched online sales and implemented the group's business intelligence tool. To promote employee engagement, Oboz established an employee volunteer program. Moving to slide 10, we will look at the impacts of COVID lockdowns on Rip Curl and Kathmandu store sales across Australia and New Zealand. Kathmandu lost nearly 7,000 trading days in quarter one due to COVID lockdowns, compared to under 2,500 in quarter one last year. For a three-week period in August and September, over 70% of the Kathmandu store network was closed. Pleasingly, Q2 same-store sales rebounded 15.4%, demonstrating the lost sales opportunity in Q1. Rip Curl lost over 4,200 trading days in quarter one due to lockdowns, compared to 3,700 in quarter one last year. Quarter two same-store sales grew 3% following the lockdowns in Q1. I'll now hand over to Chris to cover the financial slides. Thanks, Michael. Statutory results include the adoption of IFRS 16 on Slide 12. For comparability, the impact of IFRS 16 has been excluded from our underlying results. Underlying sales decreased 0.8% to NZD 407.3 million as a result of Q1 COVID lockdowns and the impact of Vietnam factory closures on Oboz's. However, sales rebounded in Q2 as Kathmandu and Rip Curl stores opened in Australasia. Gross margin was 130 basis points below last year due to elevated international freight costs and increased clearance mix for the Kathmandu brand. We continue to carefully manage our operating expenses during store closures while investing in the long-term value of our brands. Moving to Slide 13. You can see another demonstration of the COVID impact on Q1, followed by a rebound in sales in Q2. As seen on the pie chart, we're building a global business which is diversified by brand, sales, channel, and by region. We expect to see further de-risk and the inventory build to mitigate international supply chain challenges. Q2 operating cash flow was strong, reflecting the sales rebound. Non-cash items include depreciation and amortization of NZD 15.7 million. The directors declared an interim dividend of NZD 0.03 per share, a 50% increase from the NZD 0.02 per share from last year. Fully franked for Australian shareholders and not imputed for New Zealand shareholders. The record date is 15th June 2022, and the payment date is 30 June 2022. I'll now talk through the segment results and performance of each of our brands. Looking at Rip Curl in more detail on Slide 18. Sales were 2.7% above last year, with strong sales growth delivered in the online and wholesale channels. Europe and Hawaii in particular achieved sales growth while the rest of North America was impacted by wetsuit shortages and port congestion. Australia was impacted by store closures in Q1, however rebounded in Q2. Direct to consumer same-store sales decreased 1.5% overall, but increased 2.1% when adjusted for lockdowns. Q2 same-store sales grew 3% and was 20.1% above pre-COVID levels pleasingly. Sales through our online channel, as I mentioned previously, grew 14.5%, while wholesale sales grew at 16.1%, with less COVID interruption in the selling period compared to last year. Gross margins were impacted by a higher wholesale mix and elevated freight costs internationally. Moving to Slide 19. We'll focus on the key Rip Curl brand initiatives. We sponsored the first-ever World Surf League finals, which was the most-watched day in the history of professional surfing, with a record 6.8 million live views. Rip Curl team rider Gabriel Medina won his third world title, driving both viewership and Rip Curl claim on professional surfing in the U.S. Rip Curl launched an interactive bikini fit guide, which promotes size inclusivity and offers a new shopping experience for bikinis, both in-store and online. Salt Water Culture is a move into the environmentally friendly production of quality surf products. We have a preferred fiber list driving sustainable solutions and collections featuring cotton with a Better Cotton Initiative. Recycled synthetics, FSC-accredited viscose, and BLOOM bio-based EVA foam. Moving on to Slide 22 for Kathmandu, showing the P&L for the first half. COVID lockdowns and travel restrictions impacted Kathmandu financials, with total sales 0.8% below last year. In Australia, sales were 4.3% above last year at constant exchange rates, with over 5,000 lost trading days in the first half compared to 2,300 lost days last year in that first half. In New Zealand, total sales were 4% below last year, with nearly 2,000 lost trading days in the first half, compared to only 266 lost days last half year. First half same-store sales increased 15.9% when adjusted for lockdowns, and 3% overall. There was a strong Q2 rebound with same-store sales growth of over 15% following lockdowns. However, same-store sales remained 21% below pre-COVID levels due to continued restrictions in international travel, tourism, and subdued CBD locations. Online sales grew 46.4%, as mentioned earlier, to 21% of D2C sales. Gross margin was impacted with an elevated mix of clearance, negative hedging impacts, as well as international freight costs. However, second half growth margins are expected to be above last year based on promotional plans, with higher international freight costs offset by the impacts of beneficial hedging we're currently experiencing. Our operating expenses were carefully controlled through lockdowns, while again, we continue to invest in the long-term brand growth. Our brand momentum is building due to our renewed focus on marketing and products. Turning to Slide 22. We have strong brand awareness, with Kathmandu leading its category in Australia and New Zealand. We are leading the market for top-of-mind awareness, consideration, brand desire, and digital visitation. Our customer base is active and highly engaged with a net promoter score of 76, with 2 million active Summit Club members. We continue to invest in long-term brand equity through our summer campaign, which has built an all-season perception, with increased consideration for summer, contributing to building brand desire. We're driving key brand differentiators, especially among millennial consumers, with significant digital impressions across Australia and New Zealand, and strongly positive social sentiment across paid and organic channels. We are focusing on having a year-round relevance with successful new summer-specific product franchises launch and building on continued momentum in the camping category. This autumn and winter, we have launched a new Anytime Sweat franchise, and we will continue to extend our Heli Anoraks and Cozy Fleece franchises. We continue to lead the industry in groundbreaking sustainability innovations, with BioDown launching in winter 2022, winning the prestigious Outdoor Retailer Innovation Award in January. A fantastic achievement. Moving to slide 24 on Oboz's first half performance. Wholesale and online sales were heavily impacted by the three-month closure of factories in Vietnam, compounded by international freight delays. Approximately half of first half FY 2022 orders were unable to be fulfilled, and growth margin was slightly eroded due to international freight costs, which averaged more than 300% higher over historical average. Operating expenses have been carefully managed in this period while we continue to make investments again to support brand momentum. That remains strong as demand outstrips supply due to the increased consumer focus on outdoor experiences. Pleasingly, forward orders into FY 2023 support our medium-term revenue growth targets, and initial online performances indicate there are strong growth opportunity available. I'll now hand back to Michael to cover our focus for the second half. Thanks, Chris. Moving to slide 26. We have a clear set of strategic priorities to focus on in the second half. We will remain focused on building global brands. We plan to open new Rip Curl stores in the key growth markets of North America and Europe. We will launch a new global autumn and winter range for Kathmandu and plan for our USA launch. Oboz Vietnam factories are ramping up production, and supply is expected to gradually recover in the second half, and our key Sawtooth X product launch will be in market from April. We will elevate digital through the continued global rollout of our new group-wide loyalty management, customer data, and online trading platforms across all brands. Our Club Rip Curl loyalty scheme will launch in Australia in the second half, with pre-registrations already underway. Kathmandu will be launching online site in Europe and Canada, and the relaunch of Kathmandu's Summit Club will offer an exciting new value proposition. We will build on the positive momentum of Oboz's recent online launch, which presents a strong growth opportunity. We will leverage operational excellence at the group level through merging our Canada and UK fulfillment centers across all brands. For Rip Curl, we will continue the rollout of group POS and ERP systems, enabling Rip Curl to leverage unified commerce opportunities. Kathmandu will leverage enhanced functionality of new merchandising allocations and replenishment software. Lastly, we will continue to lead in ESG in the second half as we finalize our group ESG strategy for communication in October with science-based targets set. We are progressing towards B Corp accreditation for both Rip Curl and Oboz, and our new Kathmandu BioDown product, which won the Outdoor Retailer Innovation Award, will launch in the second half of FY 2022. Turning to slide 27 and updating on our brands. The Rip Curl wholesale order book remains strongly above pre-COVID levels, and Kathmandu enters the traditionally strong upcoming winter season well prepared. Oboz factories in Vietnam are now ramping up production following the end of COVID-related shutdowns. In terms of the outlook, second half gross margins are currently expected to be in line with last year, based on our promotional plans and expectations for international freight costs and currency impacts. COVID continues to cause ongoing disruption to our consumers and employees, especially in the current New Zealand Omicron outbreak. Some of our supply challenges are beginning to ease while forward demand for our products remained at record levels. The second half is traditionally the strongest cash-generating period, and we remain well-capitalized as we invest in the long-term international expansion of our global house of brands. This now concludes the formal part of today's presentation. I wanna thank you all for taking the time to join us on this call, and I would now like to open it up for questions. Thank you. Ladies and gentlemen, if you'd like to ask a question, you may do so by pressing star one on your telephone keypad. Star one for questions. Please make sure the mute function on your phone is turned off so the signal can be read by our equipment. Star one for questions or comments. We'll pause a moment to assemble our phone queue. We'll take our first question from Andrew Steele with Jarden. Please go ahead. Good morning, guys. The first one for me is on brand investment. You've highlighted in the outlook statement that you'll continue to invest in building brands in the second half. Is that incremental brand investment beyond what you highlighted in the trading update of the NZD 14 million? And I guess, how should we think about in aggregate that sort of annualized incremental brand investment on an annualized basis? Yeah, Andrew, I can- Yeah, thanks, Andrew. Grab that one. Go for it. Yeah. I'll just touch on just in terms of the dollar investment. That was more weighted towards the first half, so the second half incremental will be significantly lower from, in terms of that investment. I wouldn't annualize that number if you're thinking of doing that. Michael, you wanna go? I was gonna say much the same. I think what you'll see, the first half really returned our marketing spend to more traditional levels. Noting that the first half of last year was quite muted in terms of spends, just because of the uncertainties. Coming into this first half that we just closed, we felt it really important to return our marketing investment to more traditional levels and indeed probably a little bit higher than we normally would, knowing that we had sort of lockdowns, but we felt that we weren't too well positioned for reopening. In terms of moving forward, I would see our overall marketing spend as a percentage of sales come down from what we're seeing in that first half of this financial year. Thank you. Just to clarify, you highlighted it coming down. How do you think internally about what a normalized level of marketing as a percentage of sales might look like? Look, it's a detailed conversation 'cause obviously you need to look at each market, and if you're launching into new markets, you're obviously spending marketing before you actually even got any sales. It does vary depending on where the brand is at and what jurisdiction. But more generally, I would say, you know, I would think most brands, including our brands, would be looking to spend anywhere between 5%-7% of sales on marketing. Depending on where we sit on that scale, it depends on ultimately where each brand is at and where we're at in terms of geographical expansion. In markets where we're new, we're gonna be spending a lot higher than that. In more established markets, we'll spend lower. I'd say on average, you know, in a range of 5%-7%. That's clear. Thank you. In terms of gross margins, you've highlighted a flat gross margin or flat year-on-year margin outlook for the remainder of the year. I guess given the lag effect that you see from input costs and rising manufacturing costs, you know, how should we think about the direction of gross margins into FY 2023 and just take into account your forward hedging book as well? Yeah. I'll take that. Look, obviously, all companies are facing margin pressure at the moment, and we're certainly not immune from some of those pressures, whether they be freight or input costs. I guess going against that and in our favor is more favorable hedge positions that we have for this upcoming six months compared to previous periods, as well as a change in the mix of our business. Obviously, the more that our business distorts towards direct-to-consumer, it is higher margins. Look, on balance, we feel relatively comfortable in terms of the second half as far as margins as we've communicated. As we move into FY 2023, like everyone, we're concerned about where inflation is at and where cost inputs may go. At the same time, you know, we believe with our, you know, technical innovation base, we have got the potential to raise prices where we need to. Certainly we've already done that from a Rip Curl and Oboz perspective with our wholesale prices in the last season or two. We'll maintain that flexibility to increase prices if we need to. We'll just assess that. Look, to summarize, you know, we're reasonably comfortable in the second half of this year in terms of margins. Moving into FY 2023, we certainly have concerns depending on where input costs and freight goes. that said, we are reasonably confident that with the technical nature of our brands, we've got the ability to move prices should we need to, and we certainly have done that in the past. you know, we reserve the right, I guess, to do that in the future if we need to protect those margins. Great. Thank you. In terms of working capital, it's clearly been a reasonably large outflow in this half, this PCP. You know, you've explained that well in terms of the underlying drivers of that. You know, how should we think about those underlying working capital dynamics through the remainder of the year? Should we expect some unwind? Do you think you could get close to a net cash balance by the end of the year, or is that more looking like it'll be 1H 2023? Yeah. I'll start, and I'll let Chris finish. Yeah. In terms of our working capital cycle, I'd just flag nervousness if anyone's trying to compare us to other sort of Australian/New Zealand retailers. I say that because of our weighting of our Northern Hemisphere business as well as our weighting towards the winter in the Southern Hemisphere. We tend to run a little bit higher on our inventory levels as we enter this sort of January, February period. Our peak and working capital for inventory in particular is quite high in March just because we've got all those deliveries coming into the Northern Hemisphere for the Northern Hemisphere summer, which is a big part of the Rip Curl business and certainly a huge part of the Oboz business. Also on top of that, we've got the products coming in for the Kathmandu winter peak period for the Southern Hemisphere in Australia and New Zealand. We do run a little bit higher than other, I guess, retailers in Australian, New Zealand-based businesses. I'd just flag that from the outset. That said, yeah, certainly we would normally see a rundown from what is somewhat of a high period for us around sort of January, February, and that will run down through to the end of financial year, certainly. Chris, do you want to comment in terms of the cash position? Yeah, that's correct, Michael. July is always traditionally a low point for the working capital cycle, so we expect some unwind in that number. In terms of the cash position, we expect it to, you know, significantly improve on the current position. We expect it to be probably a low net debt number. Great. Thank you. Just one last question from me. Can you comment at all on your trading in the second half period to date? Andrew, taking a line through our, the same first half of last year, you know, we haven't given any specific update. We do that because February for us is not a particularly meaningful month or indicative of where we're at. As indeed, I think it's our lowest month of sales of the year, so we didn't wanna give any misread. It misreads in terms of our trends, but certainly what I would say is that the overall trends that we've seen in February is pretty consistent with what we saw in part of that first half. Rip Curl sales continue to be on the positive. Kathmandu really on the back of sort of New Zealand Omicron just a little bit soft at this point in time. As I said, they're fairly small numbers through February and early March. It's nothing that we're worried about. That's great. That's all from me. Thank you, guys. Thank you, Andrew. Star one for questions. We'll take our next question from Marni Lysaght with Macquarie. Please go ahead. Good morning, Michael and Chris. I just wanted to touch base or get a sense of, I guess, inventory. The inventory built up about NZD 20 million from last January. I can also see the net change in working capital of about NZD 50 million in the half. How do we think about, I guess, how you're planning stock levels the next six to 12 months? Do you feel like there's a need to invest a little bit more heavily just given that there's ongoing challenges and yet you have been impacted, particularly in Oboz? Yeah. There's a few elements there. Just quickly on the broader working capital. I think you'll recall 12 months ago, Marni, we flagged that with the return of more normal wholesale shipments in that back half of the calendar year, we would see our trade debtors come up a little bit, and that certainly has happened. That's helping to fuel some of that growth in working capital. We'd expect that with the increased wholesale business that we've seen, particularly on the Rip Curl side. Outside of that, in terms of inventory, yeah, there's a bit of a mix there with the inventory. There's no doubt that, on the back of those unexpected lockdowns that we had in Australia and New Zealand, we along with many other companies are holding more inventory than we would normally like at this time of year in terms of clearance inventory. Not anything too substantial, but certainly, there's more inventory in that respect than we would normally like. That's certainly helping to fuel that inventory growth a little bit. At the same time, and probably a bigger impact, like everyone, we're just making sure that we have the inventory we need to hit our numbers. We have strategically brought forward some of our deliveries, particularly for the Southern Hemisphere, just to make sure that we're ready for that peak winter season. I would say our growth in inventory is a little bit of a mix of a little bit more inventory than we would like just on the back of those lockdowns because we obviously bought for stores that were ultimately closed for a long period of time. We're holding a little bit more. At the same time we have brought strategically forward some of our buys to make sure we have the inventory, just to make sure we don't have huge gaps. That's certainly something that we've done. Also, there's also an element there on the back of wholesale growth orders, particularly for Rip Curl that obviously the higher the wholesale orders you got, the more inventory you have to bring in. Just to help fuel that growth. There's a few different parts in there, but certainly it is all adding to that inventory balance at the end of the first half. Okay. That's clear. Just on that, Marni, I wouldn't expect it to. Sorry, Marni. It's not expected to grow beyond the current point at all. It's, you know, we're saying it's kind of at that peak. Right. Supply chain challenges ease over time, we expect it to, as I said earlier, to normalize that. Okay. 'Cause I can see. Yeah. There's a NZD 33 million build in this half from July. If I wanted to partition that, like or if the market wants to partition that, could you say like immaterial part would be this clearance inventory, then bulk would be Rip Curl with wetsuits, et cetera, and then the balance would be Kathmandu winter stock? I'm Oh, sorry, Michael, you go. No, I was gonna actually hand it to you, Chris. Oh, okay. That's right. I mean, it's relatively evenly split between brands. As Michael said, clearance is a significant portion of that. That's all we would probably say on that. The clearance- I think it. Yeah. If you fast track another 12 months, Marni, certainly I would expect that our inventory levels at this point in time next year will come down a little bit because hopefully with supply chain challenges easing, we won't be bringing forward as many of our buys. That said, offsetting that, we'll have a lot more Oboz inventory this time next year, I imagine so. To Chris's point, I think we're pretty much at a peak here. I wouldn't see any growth from here. Indeed, if anything, there might be a net decline. Okay, that's clear. Just to make it clear, the line was a bit muted. The clearance is not a significant part of the balance or the build-up? No, not at all, no. Awesome. Moving on to just another question. I know that I can see that you've obviously got Oboz is resuming production, but I recall maybe it was at the time of the AGM, you may have flagged some plans to increase capacity in Indonesia for Rip Curl. Is that still going ahead? If you're talking Oboz, we have added a third factory, yes. Historically, we've had two key suppliers. We've added a third, and that is certainly helping to open more capacity for the Oboz brand. Not only to overcome our short-term inventory challenges, but certainly to help fuel longer-term capacity. That new supplier has a capability to produce in a number of countries, so that gives us some flexibility because up until now, for Oboz, we've been restricted to Vietnam as a country of origin. That certainly gives us some flexibility. Yeah. That's with respect to Oboz. What was the question with respect to Rip Curl? Rip Curl. I just remember, obviously, wetsuits is like just you've experienced unprecedented demand for wetsuits, and I recall you advising you have plans to increase capacity at the wetsuit factory in Indonesia. Is that still going ahead or has it been, like, delayed by because of COVID? Yeah. No, the wetsuit factory is in Thailand, so yeah, Thailand is where the Rip Curl facility is. Yes, we are in advanced, I guess, internal discussions and external discussions to adding extra capacity. Whether we do that with external partners or with our own facility, we're still working through those different options. That said, even if we added the capacity at the moment, Marni, unfortunately the challenge is more around the raw materials. The more short-term issue is getting access to the raw materials as opposed to the actual physical capacity of the manufacturing line. We've got a little bit of time on the manufacturing line, so we're making sure we go through the various options and we consider all our options before we commit. Really at this point in time, the main focus is scrambling with our broader suppliers to secure as much raw materials as we can to make as many wetsuits as we can. The raw material imports is the big issue for wetsuit supply at the moment. I guess the availability of those raw materials. Yeah, that's the challenge. Ultimately, our factory, our own factory at the moment in Thailand is not operating at full capacity purely just 'cause it can't get enough materials. Mm. To maintain full efficiencies, unfortunately. Excellent. Those are all the questions I have. I'll jump back in the queue. Thanks, Marni. We'll take our next question from Mark Wade with CLSA. Please go ahead. Good morning, Chris and Michael. Just a question on the wholesale orders and how that whole channel is going. There's a really helpful chart in the pack, which sets out the number of doors that you're in. Overall, there's a big increase, which has come out of Rip Curl from roughly 5,950 up to about 6,650 doors. That's great. The other two brands have gone backwards slightly in Kathmandu and Oboz. Can you talk us through how those, you know, what's really driving that big increase in Rip Curl and yet Oboz and Kathmandu have been a little bit sluggish on the wholesale channel to date? Yeah. Look, in terms of, I'm sure you can appreciate, keeping a track of exactly how many doors and supplier customers we are in around the world is not the easiest thing to do. It sounds easy, but it's actually quite challenging because obviously you've got to keep a track of what all your customers are doing, what stores they've got open. Obviously, in these times, it's quite challenging to keep a track of. Look, what I would say overall is, in terms of the Kathmandu numbers, the wholesale component is so small, so it's not worth talking about. Obviously, at the moment, the Kathmandu business is predominantly a direct-to-consumer business. From that point of view, I'd put that to the side. In terms of Oboz, I would think that any decline is purely just short-term. The fundamentals of that brand and the fundamentals of demand for that brand are as strong as ever. There might be just some timing issues or maybe there's some temporary store closures on the back of COVID or something that I'm not aware of. I would say overall, in terms of Oboz and Rip Curl, if we look at our customer base, if we look at our wholesale orders, all our trends are quite positive in that respect. In terms of Kathmandu, it's just too early 'cause the wholesale business is such a small component. That'll become increasingly relevant as we start to ship those four winter orders in sort of August of this year. Until then, I wouldn't use wholesale doors for Kathmandu as an indicator. In the Rip Curl, it looks like you had good. Yeah, Rip Curl, yeah, look wholesale penetration. Yeah, no, I think across the board, across most of our regions, we've certainly seen a new business drive. I know internally, the team has been working on a new business drive for the last 12-18 months, and that has been quite successful in terms of adding new distribution for wholesale in most of our markets. Indeed, I think all of our markets are showing net growth in doorways. We're quite picky still on distribution. We don't typically open up to anyone. Of course, if we decided to do that, we could probably blow those numbers out significantly. We choose quality distribution, and that's where the focus is. Certainly very pleased to report that we have added new distribution and that's coming out of the demand for the products, so which is great news. Yeah. No, that's really pleasing. You've obviously got a new chief in charge of this, so it seems like it's going in the right direction, which is good. Absolutely. Yep. Last thing. On the Kathmandu brand, the Summit Club rebranding that's ahead, what do you hope to achieve there? I mean, outwardly, you know, it looks like the member numbers have kind of been stagnant for a number of years and then fallen off slightly with the store closures. Which has been hard to get new members, I take it, but, you know, in a year's time from now, I mean, what might the potential be with that Summit Club? Because traditionally there has been a really strong correlation with those numbers in future sales. Yeah, what do you hope to achieve? Yeah, I think what we hope to achieve is some excitement, to be honest. What we're keen to, you know, I think that scheme has been in place, the loyalty scheme's been in place for a long time. It has been largely driven around discounts, and we feel that, you know, the broader experience for consumers with loyalty has gone over and above just discounts now, whether it's exclusive access to products, whether it's exclusive events, whether it's points and loyalty rewards or other mechanisms that we're seeing across the board, not only in apparel but certainly across broader consumer engagement from insurance companies to airlines and so forth. I think certainly the way we look at it is that scheme needs to evolve and create some new excitement to take it to the next layer, I guess, or next layer of consumers to have them interested in not only signing up to it, but engaging with the Kathmandu brand on an ongoing basis. Really, the main aim's been to drive the frequency of those shoppers up. I'm probably more interested in the frequency of our shoppers and our engagement of our shoppers than our overall numbers, because obviously you can have great overall numbers, but if they're only coming back to you once a year. Yeah. Once every two years, it's not particularly great. To answer your question, Mark, I'd definitely say what we're aiming for is excitement. You know, we need to relaunch that plan to do a better job to engage with our consumers and get them back more frequently and rely not only on discounts, but on a broader suite of measures to engage with that consumer. Yeah, I think I hope, you know, sounds good. I think coupled with the We're Out There kind of campaign you've already got underway and the new range and colors and stuff is, you know, it's got the makings of a really good turnaround. Yeah. Both the brands, both Rip Curl and Kathmandu have been working together on that. You know, we're sort of at the pilot stage for Rip Curl, so we've got the benefit of seeing how it works for Rip Curl, learn. You know, Rip Curl's been able to learn from what's worked well for Kathmandu in the past, and the benefit we'll have now is Rip Curl will go live with its new plan, and then Kathmandu will be able to see how that goes and then adapt their own plan for their relaunch later this year as well. Good example of the brands working together to learn from each other. All right. Thanks for the insight. We'll take our next question from Bianca Fledderus with UBS. Please go ahead. Good morning, Chris and Michael. First question from me is on the Kathmandu brand and the ANZ border reopening. I guess you mentioned same store sales for that brand still 21% below pre-COVID levels. With borders reopening, do you expect any sort of positive impact from that in the second half, or is it more of an FY 2023 story? I guess when are you expecting for same store sales for the Kathmandu brand to recover to pre-COVID levels again? Yeah. Thanks, Bianca. Look, I’ll start and then Chris can add anything that he thinks I’ve missed. Look, I think we’re very confident and looking forward to having an uninterrupted winter in the Southern Hemisphere across Australia and New Zealand. You know, obviously the ongoing outbreaks of Omicron in New Zealand and WA are having a short-term impact on fall, but we certainly would expect that with the flip to cold weather in the coming weeks, and us having the ability to trade unrestricted for really the first time through winter since 2019, gives the Kathmandu brand great potential to be able to return to those COVID levels. I guess we're excited by that because, you know, not only should we get unrestricted trade, we hope through this winter, which is great 'cause it's the first time in a couple of years. Secondly, you know, we have really repositioned the brand with some of the marketing to really appeal to that younger consumer. If you've been into some of our stores more recently, you'll notice that even more so as you get into the depths of winter, really bringing some new products, some new colorways into the range. Certainly with the BioDown jacket, we're really, you know, comfortable that we're well-positioned to get that growth. We're quite upbeat that we'll see a good winter period for the Kathmandu brand on the back of those things. In terms of the opening of borders and the opening. Freedom of movement between, you know, Australia and New Zealand will certainly help that. 'Cause as you know, we haven't seen that for some time, so hopefully we'll see Australians and Kiwis going between the two countries. I think as far as the overall uplift from international borders, I think that's probably more FY 2023, you know, as we move into the European and North American winters. We hopefully start to see New Zealanders and Australians starting to head overseas later this year, you know, sort of Christmas period. With that return and our volume of business appealing to that traveling Southern Hemisphere consumer who's traveling to the Northern Hemisphere for the winter. I'd say we'll see a good second half. We're confident where we're placed. That said, I think the full impact of opening borders we'll see right through until the later in the year, when we see the international borders and the more freedom of movement on the international side as well. Anything to add to that, Chris? No, I think you largely covered it, Michael. Yeah, the second half of Kathmandu has always traditionally been more of a needs-based approach with winter and the natural affinity of the products for those categories. We definitely saw that last year in Australasia, as I recall. I think we saw more insulation in Australia than pre-COVID last year. But definitely that, as Michael said, that travel component's more of a first half FY 2023 story. Okay, great. Thank you. On the Rip Curl brand, with the supply shortages, what regions has that mainly had an impact on? Is that sort of overall for the Rip Curl brand? I guess on Rip Curl as well, with North America being the key growth opportunity, could you just give a bit of an update on how that's going? The Rip Curl supply issues are principally really around wetsuit products. That has affected all markets. We see it more clearly in the North American market just 'cause it's such a big market, and that's probably the market that if you were to go into our stores looking at our wetsuit collection, it's probably even, you know, more empty shelves on our North American stores than maybe our Australian and European. It is affecting all markets. We're seeing it probably most in North America just because of the size of that market, the growth that we're seeing in that market because it's a market where we haven't traditionally been a top three brand. We're slowly, you know, approaching getting to that sort of top three or top five status. We're seeing probably a little bit more growth in that market than we are in other markets. That does extend the issue, I guess. Then on top of that, certainly the challenges of getting products through North American ports on a timely basis are still a major issue. Again, those delays through ports are even making the wetsuit supply shortage even worse again, because even if we can get wetsuits on the water, it's quite challenging to get it through the L.A. port at the moment. I think a couple of months ago, there was 120 ships waiting to be unloaded, and I think they're down to 70 or something. They've still got a massive backlog, which is just delaying our ability to get those products into the market more, even if we did have those products. To answer your question, all markets generally, but we're seeing probably most clearly in the North American market. As far as our progress in terms of Rip Curl in North America, yeah, we're really happy with how that's progressing. You know, wholesale orders, as we've mentioned, are going really well, you know, sort of record levels. We'd love to have more wetsuits, of course, and that would certainly help. We're certainly looking to open, you know, select stores. We're largely focusing on our online business and our wholesale in the more immediate term. We will open up the odd store here or there where it makes sense in the North American market, just to help contribute towards that growth in that market. We're, yeah, we're really well positioned there and our plans to burst into the top three surf brands in North America are well on track. Okay. Thank you. Last question on the Oboz brand. In the second half, with supply normalizing, what can we sort of expect for that brand? Like, are you expecting that to be in line with second half 2021 or still lower because of the supply chain issues? Yeah. Look, it will really come down to how easily we can get footwear through those ports, to be honest, Bianca. To give an exact number is gonna be hard. Based on our forward order book, we will have a very good second half. The forward order book is only as good as the deliveries you can get into the market. What we're seeing at the moment is, you know, transit dates that normally might be 35 days are still, you know, upwards of 75 days plus. It just may mean that some shipments that would normally be in this half and should be in this half may flip into the next half. I wouldn't wanna give specific guidance on that second half for Oboz, just because we may see a little bit of a drift depending on how quickly we can get those products into market. Certainly, we've got a lot of work to do to restock shelves in that market because we are at a historically low inventory levels for Oboz on the back of those lockdowns and, we've got containers and containers of shoes that are making their way into that market. That's a good problem to have from a point of view. We're not sure how much demand there is 'cause we just don't have the shoes. Certainly, we think that the Oboz brand is well-placed in the medium term. As far as the immediate next 4-6 months. Just a little bit hard to know just because of the uncertainty on getting products freely through those ports. Yep. Okay, great. Thank you very much. That's all for me. Thanks, Bianca. We'll take our next question from Matt Noland with Forsyth Barr. Please go ahead. Morning, Chris and Michael. Just confirming you can hear me. Yeah, Matt. Yeah, all good. Loud and clear. Great. Maybe just following on with Oboz, so previously you used air freight to get some of the products out there. Is that an option you'd consider as well to meet demand or the cost on margins? Look, in my feedback that I've asked those questions before as well, but the air market is just as complicated as the sea market. Certainly when you start talking air market at the moment on the very inflated rates, I don't know the exact dollars, but certainly the amount of products we'd have to shift, and it's quite heavy products to make any difference would be quite margin destructive, to be honest. While it's always good to have some sales than no sales, our customers are being patient with us. They understand the situation, and they also understand the situation that bringing air freight will bring in some small lines and small runs, but it's not necessarily gonna deal with their overall issues. Look, we are using air freight as we need to, and that's the same for wetsuits where we need to. Unfortunately, the air markets for freight are just as complicated, indeed more complicated than the sea freight markets at the moment and quite, you know, punitive in terms of the cost, for sure. Yeah. You wouldn't do it when you're shipping hundreds of thousands of shoes over a period. As Michael said, it's more for hitting those demand gaps or gaps for certain key customers that you do that. Cool. Thanks for that. Maybe shifting on to Kathmandu and the new color range. Are you happy with how those are being perceived by customers? Just in terms of the elevated clearance volumes there, was the new colors overrepresented in that or not? No, not really. I think I would say in terms of clearance, what is overrepresented in clearance is heavier weight products just on the back of those closures in our network, you know, particularly in that sort of July and August period. To be fair, most of our new products really have only started landing with spring, summer, and then into this autumn. As far as any overhang on clearance, that's largely related to heavier weight products from, I guess, previous ranges. No build up of any of the new product in that clearance in any way. Sorry, what was the other part of that question? Oh, no, that's ticked it off actually. Thank you. Yeah. Maybe just one more from me. Sorry. Yep. Yep. No, that's fine. Yeah, go for it. Just noticing a lot more advertising, particularly on Instagram surrounding your efforts on sustainability. Can you give us an update on how you're progressing with Rip Curl and Oboz in terms of the B Corp and then also the level of the marketing expenditure that might be coming through with your sustainability efforts and how to think about that going forward as well as a percentage of marketing spend? Yeah. The numbers I mentioned earlier in terms of marketing spend are all inclusive of anything that we're putting out there with respect to ESG. You're obviously referring to the Instagram post for Kathmandu. Certainly, I think in terms of Kathmandu perspective, we feel that we maybe haven't given Kathmandu as much profile in the market as what we could have with respect to it, to its environmental credentials, particularly around its B Corp accreditation. Any work that we've done sort of suggests that, you know, that's not necessarily well-known by the consumer. We have probably elevated that messaging a little bit on the Kathmandu side, more recently just to help educate the consumer where the Kathmandu brand is placed. We very much see the Kathmandu brand very high relative to its peers as far as where it's at in, on its environmental journey. Certainly, the B Corp accreditation supports that. That's I guess a short-term push on the Kathmandu brand. In terms of Oboz and Rip Curl accreditation, yeah, a lot of work happening. The Oboz business is a lot smaller and a lot simpler, you know, operating in really one market across a couple of styles of footwear. In terms of its ability on the accreditation, it's a lot easier than the Rip Curl business, which is multi-channel, multi-geography. But they're both progressing well. We're working with B Corp on that sort of reaccreditation process for Kathmandu, as well as the application process for Oboz and Rip Curl. A lot of work's been done, progressing quite well. We're not exactly sure of the timing, but we're certainly aiming to get those accreditations as soon as possible and hopefully that occurs in this calendar year. Thanks for the update, and that's all from me. Um- Ladies and gentlemen, this does conclude today's question and answer session. At this time, I'd like to turn it back to your presenters for any additional or closing remarks. No, no specific comments. Just thanks to everyone for participating and, yeah, that's all. That's all from us. Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.