Accent Group Faces Margin Squeeze Despite Sales Gains in H1 FY25
Accent Group Limited forecasts a solid $80 million EBIT for H1 FY25, driven by sales growth despite a challenging promotional environment squeezing margins. Strategic talks with Frasers Group signal potential long-term shifts.
- H1 FY25 EBIT expected around $80 million including $3.3 million non-recurring items
- Total Group owned sales up 4.6%, like-for-like retail sales up 2.9%
- Gross margin down 100 basis points due to ongoing promotional pressures
- Slower sales growth in final six weeks including Cyber weekend
- Active strategic discussions with Frasers Group aiming for H2 FY25 agreement
Accent Group’s Solid Earnings Outlook
Accent Group Limited (ASX: AX1) has provided a trading update for the first half of fiscal year 2025, projecting an EBIT of approximately $80 million. This figure includes a positive net impact of $3.3 million from non-recurring items such as the reversal of a historical impairment on the Hype brand and costs related to brand discontinuations and store impairments.
The company’s total owned sales, which encompass both retail and wholesale channels, rose 4.6% compared to the prior year. Like-for-like retail sales, a key metric for underlying performance, increased by 2.9% over the 26-week period ending December 29, 2024. However, growth slowed to 1.8% in the final six weeks, including the critical Cyber weekend trading period, reflecting a more cautious consumer response to value-driven promotions in the market.
Margin Compression Amid Promotional Environment
Despite sales growth, Accent Group reported a 100 basis point decline in gross margin compared to the previous year. CEO Daniel Agostinelli attributed this margin compression to the persistent promotional trading environment, which pressured pricing and profitability. The company’s ability to control costs and maintain inventory quality was highlighted as a positive counterbalance, with inventory aging described as clean and stock levels aligned with strategic plans.
Strategic Partnership Talks with Frasers Group
One of the most significant developments in this update is Accent Group’s ongoing strategic discussions with Frasers Group. The two companies are progressing towards formalising a long-term strategic agreement, with negotiations expected to conclude in the second half of FY25. While details remain confidential, this partnership could reshape Accent’s market positioning and operational capabilities, potentially unlocking synergies in retail footprint, brand portfolio, or supply chain efficiencies.
Investors will be keenly watching the outcome of these talks, as they may influence Accent’s growth trajectory and competitive stance in the footwear retail sector.
Looking Ahead to Full H1 FY25 Results
Accent Group plans to release its full half-year results on February 21, 2025, accompanied by an investor briefing. This will provide a more detailed financial and operational picture, including audited EBIT figures and further commentary on margin trends and strategic initiatives.
Overall, Accent’s update paints a picture of steady sales growth tempered by margin pressures and a dynamic retail environment. The company’s disciplined cost and inventory management, combined with potential strategic partnerships, suggest a cautious but constructive outlook.
Bottom Line?
Accent’s H1 performance balances growth with margin challenges, setting the stage for strategic shifts ahead.
Questions in the middle?
- How will the final terms of the Frasers Group agreement impact Accent’s long-term strategy?
- Can Accent sustain sales momentum while navigating ongoing promotional pressures?
- What margin recovery strategies will management deploy in H2 FY25?
