Company Interview / StepOne steps up its growth

Key Topics Discussed:

Step One's (ASX: STP) success attributed to premium quality products and excellent customer serviceBusiness strategy centred on organic customer growth through partnershipsThe influential role of athlete ambassadors, who are also shareholdersMaintenance of a fully certified, ethical supply chain

Greg Taylor, the Chief Executive of Step One (ASX: STP), expresses satisfaction with his company's progress. Undeterred by stiff economic competition, Greg shares that Step One (ASX: STP) has seen significant expansion not only domestically but worldwide. He attributes the company's success primarily to their premium quality product - a daily necessity designed to eliminate discomfort, made from organically grown bamboo. Boosting their success has been their impressive customer service, which has bagged them over 70,000 five-star reviews.

Greg goes beyond offering insights into Step One's (ASX: STP) business strategy, revealing their move to increase their customer base organically through partnerships. Their initiative with the Surf Lifesaving in Australia generated nearly 10,000 new customers, a quarter of whom are repeat buyers, serving to demonstrate the effectiveness of the method. Promisingly, Greg shares potential plans of replicating the success of this approach internationally.

Moreover, Greg equates Step One's (ASX: STP) fruitful rapport with athlete ambassadors to a top tier marketing strategy. Displaying fervour for the brand, these athlete ambassadors have purchased shares from the company, which Greg regards as highly influential for their network. Lastly, Greg reveals Step One's commitment to ethical practices, being the first Australian clothing company to have a fully certified supply chain. Asserting the company's global thrust, Greg remarks on their emphasis on maintaining a fair and eco-friendly production process.

Full unedited transcript below:

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Underwear maker and retailer. Step one has reported full year net profit of $12.4 million, which is up 44% on the previous year, revenue growing by almost 30% to 84.5 million. It's declared a 2.8 cents a share fully franked dividend, which it says represents almost 100% of the company's profits. It has seen new customers grow by 312,000in the year to more than 1.6 million globally, and it says its strategy for FY 25 is to expand its underwear range and continue to expand globally. Get some detail now. Greg Taylor is the chief executive of founder of Step one. He joins us now. Greg, welcome. Congratulations. You must be very pleased with the result. Absolutely. Yeah. Especially in the current climate, the economic competition. Yeah. It's been fantastic to to show that we've been able to grow but grow significantly, not just here but in all markets as well. And I think, you know, some of that is to you know, I think we've always said to people it's like, you know, we make a product that people wear every day and we make a best in class

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product. And we've shown people are willing to not only pay for quality but pay for comfort and the results reflect that. What is it about your product, perhaps, that distinguishes yours with your competitors at this point, and why customers are going for it? Well, I mean, first, first of all, it's functional. So it's designed to to stop sweat chafing right up there, sort of key parts of it. It's made from organically grown bamboo so naturally wicks away sweat and it's comfortable. And you know, we've got over 70,005 star reviews and we sell a pair every seven seconds. So the business has grown so quickly. And, and and again, if you make a great product and I think like the traditional underwear is sort of three pieces of cotton stuck together and we've reinvented that, we've made it comfortable. We put a 3D pouch in it for the men. We've released our women's range this year and that's going phenomenally well. The growth of that was 54%. Um, so, you know, and that's now representing already 14% of our business. And so, you

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know, the product is functionally different, but, you know, it is showing that you know, I always said you didn't know you're wearing the broken version till you try the unbroken version. Right. So you obviously started here in Australia. You're pushing globally there. What sort of traction are you getting beyond the shores here. Yeah. So so we started the UK in 2020. And that market it's a difficult market over there. Cost of living certainly hit. But in during the period we managed to grow 33%. So it really goes to show that we've got a business model that is not only, uh, we can grow, but we can also grow it profitably. And in a market that, uh, you know, is certainly doing quite tough over there to, to grow 33% is certainly one of the, the key areas I look at. And, and, you know, I think really talks to the fact it's closer to a, a staple product than a discretionary product because people wear it every day. You're having a crack in the States. Do they get it. Yeah. Yeah. No they get it. You know, revenue is up, you know, 250% or so. You know, it's a

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process over there. You know, we're still learning. We're still growing. And and you know, with a couple of partnerships we had this year. So we did in Australia, we partnered with surf lifesaving. And we raised a quarter of $1 million for them. And we put a made a pair of surf lifesaving with their logo on it. And, you know, really, really pleased to see that not only can we do a great community box, but that generated nearly 10,000 new customers for us. And the association with those brands is incredible. Um, and then and of those 10,000, already a quarter of them have come back and purchase again. So it's a really good way for us to grow organically and grow through partnerships. And we talked about that at the half that we just announced the partnership with step one. So with, uh, surf lifesaving and the results now show that this model is something that we can replicate not just here, but internationally as well. How key is that marketing strategy that you have, for instance, coming up with partnerships such as surf lifesaving? Yeah. Look, I mean, it's something that we hadn't done until sort of six months ago, but you can it takes a lot

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of boxes and, you know, then gets marketed to, to their database and, and just the brand association, you know, so that that alone and, and you talk about that say in the UK we've, we've partnered with John Lewis, we're selling online and that's one of the UK's best retailers. And so we've had a really successful online trial there. And that could potentially lead to some exposure into their retail stores. So UK has got the growth horizons. They're a great and what we're doing in Australia. So we've taken that that concept of what we've done with surf lifesaving. We've partnered with September which starts next month, and that's where to walk 10,000 steps every day. So the anti shave piece of our product fits in again. Uh and then you know working with Police Legacy here in Australia as well. And so you know there's so many different areas we can work with within um NGOs sporting teams where we can use that model to, to grow new customers at a pretty much $0 mark, but create loyal and returning customers as well. We've got an athlete

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ambassador program. So what's what's that all about? Yeah. So it started out like, well, using athletes as ambassadors. And a couple of them said, said, you know, can I buy shares in the business? I said, yeah, you can. And it was quite interesting. One of them said, you know, ran them through the business, said, yeah, I'm going to buy the shares today. I said, okay, yeah, you know, how are you doing? Because I'm in and Bridge Street and assets. Exactly. You know. So, so. So you know ASX is on Bridge Street. Yep. I was like yeah you don't buy that way. But you know athletes are very, very good at what they do. But what what I didn't realise is the influence they have and the network of people they grow throughout their their career. And the engagement level on an athlete is, is probably 4 or 5 acts of that of what you'd see of a typical influencer. So how we're working with them is they say some some of our top athletes, like Gretel Tippett, you've got Jason Kidd, you've got a facility like NBL, like diamonds players, Opal players. They go and do a camp. They'll give all the kids a set, one tee shirt, a pair of set ones and a code. So it's a really good

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way to a really good way to introduce the brand authentically and genuinely through the shareholders, through the athletes who are shareholders. And these are shareholders. These these athletes have actually pulled money out of their own pocket and bought shares. And that really says a lot. So it's not just they're an ambassador, they're a shareholder. And once you've got that alignment, you're in the same boat and the content that comes out and the enthusiasm is incredibly different to when you're just paying someone in an ambassadorial role. How do you find your ESG credentials? How attractive are they for investors? That's one of the things I'm probably most proud about within the business. And we've got a fully end to end, and we're the first Australian clothing company to receive it. So it's an end to end, fully certified supply chain. So from where the bamboo is grown, we grow that organically. That's an FSC certified forest. And then every person, every supplier that touches our product from knitting, weaving, dyeing, yarning right to our three plus even through the logistic companies is being certified

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for no child labor fair working conditions, uh, you know, and then the forest itself, no deforestation, no loss of natural habitat. And we even do things such as add biological mould to the wastewater so that can be used for irrigation. So where you come and talk to, say, surf lifesaving, they want to know about your supply chain. We don't have to have, you know, 90 page document filled out. We can just say, here's our certificate. And all of our suppliers are accredited. So it's a big process. Took us probably three years to get, but I think it just goes to show the value. When you talk to John Lewis and you talk to these other big brands. They want to know the comfort that we're not going to wake up and see the product being made in, you know, in a place that's not nice or made by children. Even so. So, so where are you doing the bulk of your manufacturing at the moment? Yeah, we do that in China. So we've got a couple of factories in China. We've got one in Vietnam as well. So um, and you know, we've been dealing with these factories since day dot, so we've got a really good relationship with them. Um, they understand the product and they've also helped us develop our women's range as well. And

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have you found those costs, particularly as far as the input prices are concerned? They now come down. Um, so input I mean, as I mean, we're since I started this business, we actually haven't had a price rise from our suppliers. So and that's purely because we've obviously increased our volume. So, so from that point of view, you know, there was some challenges around logistical shipping costs. You know, obviously everyone saw that that's starting to return to normal now. So but you know, if you look at the overall result like our gross margin stayed, you know, pretty pretty similar was up ten basis points. So it's still over 80%, which is, you know, gives us great room for growth.