8 ANNUAL REPORT  2013 KATHMANDU 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. with our Covent Garden and Spitalfield stores are all in  close proximity to major competitors in the UK market. 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). • 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. 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. 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. 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.  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: 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: 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 • 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  FINANCIAL PERFORMANCE  UK BUSINESS  Australia 6.7% New Zealand 4.4% UK (6.5%). In FY2012, closure of our UK regional office and warehouse  and shifting to an outsourced distribution service. In FY2013;