Ann: FY20 Full Year Results Presentation, page-11

Yes a very good result, but I agree with @tone124 and @ChristopherC in not getting too carried away. Overall I think Daniel and the whole AX1 team have done an amazing job in the circumstances, however this thing isn’t over so there are risks down the track.

I often do a Good, Not so Good, Ugly for companies. But AX1 is more a Good/Great/Unknown ...

The Good/Great ..
- Revenue up despite stores closed for several weeks and slump in wholesale (due to sales of competitor retailers).
- Online/fulfilment capability and marketing (working well, very quick/cheap to rebrand and rollout for each additional store chain)
- ALL financial metrics - EBIT, NPAT, Cash on hand, stock levels, etc etc etc!
- Relationship with land lords. Daniel/AX1 are the “good guys” versus Solomon Lew “Bad Guy”. Daniel has been very wise here - continues to cooperatively get the space and flexibility in leases he wants (but has/will walk away on the few occasions he can’t). IMO, AX1 lease negotiations/relationships are in very good hands.
- AX1 businesses are ALL performing (no one business is carrying the others). Shoe retailing, Online, new concepts, wholesale (in FY21) and own brand accessories.
- Maintaining low single digit YOY growth for existing brands ... with new PIVOT and Style Runner in particular to fuel growth. As an aside, I’m glad they never went to Asia and instead chose to drive growth via new categories in Aust/NZ. One day they may get there, but hopefully only once the brands see the benefit in granting them exclusivity in other countries/regions.
- Daniel is doing the right thing by his team - keeping full time Melbourne staff on full pay. I doubt there’s really full time work for them all ... but IMO this will drive admiration and loyalty of his key staff (store managers and their 2IC’s. Again - wise leadership.
- Jul-Sept should be massively profitable (sales strong despite Vic, Job Keeper subsidies continuing, Covid Supplements remain at full level). Q2 should be pretty good too (expect Vic to reopen) and Covid Supplements remain (at a lower level - but still higher than pre-Covid).

The Unknown ...

- When will Supplements be removed completely? How deep will the Australian recession be? How high will unemployment get? Too what extent will this be offset for retailers by (expected) permanent increases to Youth Allowance and Job Seeker?
- How much will new rent agreements offset any decrease in store traffic?
- At what level will online sales be post Covid? And what growth rate from there? IMO - they will drop from the peak but the long term sales will still look like a step change as times like these just accelerate the trends.

In summary, AX1 remains my favourite (only) retail stock. It’s a dynamic business that works off the foresight and acumen of its leadership. In that regard I consider AX1 to be better placed than any Australian Retainer (although City Chic, Blundy’s other businesses and JBHF are obviously also quality retailers). To coin a phase ... “I stand by Daniel” ... but in a completely different context to how that hashtag is usually used!

Now the reason I’ve written out my thoughts is to test them - so please add, correct and critique them with your own insights so I get something out of the effort.

Cheers Simon