Permanent store numbers totalled 136 as at 31 July: New Zealand 44, Australia 87 and UK 5. Since balance date we have closed our Westfield White City store in the UK. We continue to trade successfully in a temporary site in the Christchurch Re-start precinct. 

The permanent new stores opened during the year were: 

Australia:  Carindale (Brisbane), Fountain Gate (Melbourne), Tuggerah (NSW), Robina (QLD), Morley Galleria (Perth), Pitt St (Sydney), Mackay (QLD), Coffs Harbour (NSW), Casuarina (Darwin), The Glen (Melbourne), Eastgardens (Sydney), Hobart CBD (TAS), Penrith (Sydney), Nunawading Brand Smart (Melbourne). Moonee Ponds in Melbourne was originally opened in FY2012 as a temporary site, but is now a permanent store. 

New Zealand:  Pukekohe and Westgate (Auckland). 

United Kingdom:  Kensington High St (London). 

We closed our Berners St (London) and Brighton stores during the year as part of the re-organisation of our UK business detailed later in this report. 

There was an uplift of earnings from the new stores opened in the last year, relative to the comparable group opened in FY2012. In FY2014, we have seven new store leases currently confirmed; five of these are expected to open by the end of 2013. This is a slightly slower rate of opening than in the first half of FY2013, but we are confident that we will achieve our target of 15 new stores again in FY2014. 

Re-investment in our existing store portfolio will continue to be very important with regard to sustaining strong same store sales growth over the medium and long term. In FY2013, we relocated our flagship store in the Perth CBD. We also relocated our Richmond (Melbourne), and Nelson and Invercargill stores in New Zealand to larger and more visible premises. These relocations were all opportunities to move to better located and larger sites appropriate for maximising sales growth in those markets. Major refurbishments were carried out at the Highpoint and Knox City stores in Melbourne, our Bondi Junction store in Sydney, and our Covent Garden store in London. Investment in projects of this type will be increasingly important in future years as we maintain our market leadership position. 

## UK BUSINESS 

We undertook substantial work re-organising the UK business and store portfolio in FY2013. Most of this work and the associated planned capital expenditure has now been completed. Only the refurbishment of our Spitalfields store remained in progress, and this store re-opened in September. The 18 month re-alignment of the UK business has involved: 

In FY2012, closure of our UK regional office and warehouse and shifting to an outsourced distribution service. 

In FY2013; 

• Re-aligning our London store portfolio to position these in appropriate locations for outdoor and travel apparel and equipment retailing. We closed our Berners Street and White City stores, and opened a new store in Kensington High Street. This store, along 

with our Covent Garden and Spitalfield stores are all in close proximity to major competitors in the UK market. 

• Refurbishing the London stores with the new Kathmandu branding and fixtures. 

• Placing all ongoing customer services and UK support functions in our Bristol store, which is our only regional location following the closure of our Brighton store. 

The UK market remains challenging. It is a weakened economy post the GFC, and daily competitive retail price points are more critical than ever. There is relatively less affinity with the outdoor and travel category in the UK compared to Australasia, and a much stronger uptake of shopping online rather than in retail stores. It is this last aspect of consumer buying behaviour in the UK market that is our key future focus. We plan for our reduced store network to support a more aggressive online based selling strategy across the UK. Our future investment in the UK is intended to grow Kathmandu brand awareness and support year-round competitive promotional activity, in both our own and other relevant online channels. 

## INFRASTRUCTURE 

FY2013 was generally a year of consolidation in our office and distribution infrastructure. We completed the planned enlargement of our Melbourne Distribution Centre. In FY2012 we ended the previous sublet of one-third of the premises, and in the first half of FY2013 we completely re-worked the internal layout of the warehouse to better cater for current and projected growth in activity levels. Apart from this project, there was a limited requirement for expenditure on infrastructure assets to support the store network. The exception to this was our continuing investment in systems improvement. We expect a similar scenario to apply in FY2014. 

## FINANCIAL PERFORMANCE 

Group sales $384.0m increased by 10.6% over the previous year. The increase in same store sales, by 1.8% overall and 5.6% at constant exchange rates, was a good outcome given market conditions. Country by country change in same store sales was as follows: 

Australia 6.7% 

New Zealand 4.4% 

UK (6.5%). 

Total gross profit increased by $22.5m (10.3%). The gross margins achieved continue to sit comfortably within our long term target range of 62% to 64%, and generally match the levels achieved last year. Gross margins were up 10bps in New Zealand and down 60 bps in Australia. As previously noted, the relatively small gross margin variations in FY2013 compared to the prior year were primarily attributable to the product mix sold and the timing of sales during our key promotional periods. Weather, particularly in winter, can influence our gross profit outcome, however in Australia and New Zealand we assess the weather impact was neutral overall in FY2013. Also, the hedging rates we received on USD purchasing in FY2013 and the impact 

