Accent Group has continued its stellar revenue run, announcing a record full year profit.
Statutory net profit increased 22.5% to $53.9 million, with earnings increasing 22.5% to $108.9 million.
New store formats, reduced discounting and surging online sales helped deliver the result.
Accent Group CEO Daniel Agostinelli said it had been a solid period for the year ended June 30, 2019.
“FY19 has been another record year of profit for Accent Group.
"The company continues to deliver against its growth plan objectives in gross margin improvement, new store rollouts, The Athlete’s Foot (TAF) franchise acquisitions and innovation both in the digital and instore customer experience."
New store formats
The Group opened 54 new stores and closed 21 stores growing to a total of 479 stores.
These include 385 owned stores including online sites, 94 TAF franchise stores.
Innovation in store design and new formats has been beneficial, Agostinelli said.
“Our retail business continues to go from strength to strength.
"We continue to evolve our instore design and customer experience across all banners with new customer experience elements, including shoe cleaning and monogramming/personalisation services, digital screens and permanent DJ booths in the Platypus megastores.
"TAF has commenced the rollout of MyFIT 3D, the latest foot scanning technology that scans a customer’s foot and delivers real-time product recommendations based on the best fit solution for that customer”.
In H2 FY19, the company launched new store banners and formats including a Platypus Megastore in Pitt Street Sydney, a flagship Subtype store in Melbourne, the first Australian CAT concept store, a flagship TAF CBD store in Melbourne and four The Trybe stores across Melbourne and Sydney.
The performance of new stores has been ahead of expectations with a strong return on investment and an average cash payback period of around 18 months.
TAF sales performance in both corporate and franchise stores was ahead of last year on both a total and LFL basis.
TAF digital sales continue to grow strongly, up more than 87% for the year. The business acquired and opened 32 TAF stores to bring the total number of corporate stores to 49 at the end of FY19.
Retail and reduced discounting
Company owned retail sales grew strongly to $656.2 million, 15.8% up on the prior year.
This was driven by strong growth in digital sales of 93% and new store rollouts.
Like-for-like (LFL) retail sales for the second half of FY19 grew by 3.5% and were up 2.3% for the full year.
Gross margin improvement in retail was achieved from the ongoing removal of category and core discounting in H1, increased penetration of vertical distributed brands, new vertical product in shoe care, socks and accessories and margin improvements in the acquired TAF stores.
In the June sales period, the company drove a strong inventory clearance program that had some impact on gross profit margin and resulted in higher LFL sales and the lowest ever levels of aged inventory.
In the retail banners, Skechers, Platypus, Vans, Dr. Martens, Timberland and Merrell all traded strongly during H2, with sales in TAF, Hype and Subtype in line with expectations.
Digital sales
Digital group sales grew 93% during FY19.
A range of new initiatives were implemented, including new websites launched for Subtype, The Trybe and Vans NZ and the rollout of endless aisle and same day delivery.
Customer take-up for express delivery has been ahead of expectations with most same day deliveries fulfilled in under three hours from purchase.
The profitability of digital channel continues to grow and is now equivalent to the profitability rate of stores.
The integrated inventory model, enabled through click- and-collect, click-and-dispatch and endless aisle, provides customers access to Accent's entire inventory base.
This capability enables a flexible customer fulfilment model and has the added benefit of accelerating the clearance of aging and slower moving inventory, reducing the discount required to clear this stock and driving gross margin improvement.
The strong growth in digital is expected to continue and the Group is now targeting 20% digital sales within the next three years.
This growth will be driven through continuing to evolve its 17 brand websites, improving customer experience on digital platforms and better targeting customers by leveraging a 4.8 million strong database and new web-based AI driven CRM technology available in the market.
Wholesale
Wholesale sales for the year were $116.3 million, 7% ahead of prior year with strong performances in Vans, Dr. Martens, Merrell and CAT and Stance.
Skechers wholesale sales were below prior year, consistent with expectations as Accent executes a strategy to grow the Skechers store network.
Wholesale gross profit margins were up on the prior year due to cleaner inventories and improved exchange rates.
Growth plan update
Accent Group plans to open more than 40 new stores in FY20.
Agostinelli said this is based on the continued strength of new store performance and the attractive deals available in the market.
The openings include Hype, Platypus, Skechers, Dr Martens, Cat, Merrell, TAF and Vans.
Going forward, there is potential for a further 30-40 new stores across the Group in these banners by FY22.
The quality of the deals available in the market means that in many cases, the upfront landlord contributions make the new stores cashflow positive in the first month, Agostinelli said.