Accent Group Expands Sports Direct Stores Amid Margin Challenges

FY25 Performance in a Challenging Market

Accent Group Limited (ASX, AX1) presented its 2025 Annual General Meeting results, revealing a year marked by steady sales growth but margin pressures amid a tougher consumer environment. Total group sales, including franchise operations, nudged up 0.8% to $1.62 billion, while net profit after tax slipped 3.1% to $57.7 million. The company attributed margin compression to heightened promotional activity and disciplined inventory management, which, while prudent, weighed on gross margins that fell by 85 basis points to 54.9%.

Despite these headwinds, Accent Group expanded its footprint with 54 new store openings across Australia and New Zealand, growing its contactable customer base to over 10 million. Key brands such as Nude Lucy, Stylerunner, HOKA, and UGG continued to perform well, underpinning the company’s diversified portfolio strategy.

Strategic Partnership and Growth Outlook

A highlight of the AGM was the announcement of a long-term strategic partnership with UK-based Frasers Group plc to launch and operate Sports Direct stores in Australia and New Zealand. The first store opened in Fountain Gate, Victoria, in mid-November, with plans for at least 50 stores over the next six years. This move signals Accent Group’s ambition to broaden its market presence and leverage global brand synergies.

Looking ahead, the company provided FY26 guidance with EBIT expected between $85 million and $95 million. The first 20 weeks of FY26 showed a 3.7% increase in total group owned sales year-to-date, though like-for-like sales declined slightly by 0.4%, and gross margin percentage softened by 1.6%. The Sports category, including The Athlete’s Foot and HOKA, remains a bright spot, while lifestyle footwear sales have underperformed.

Sustainability and Operational Resilience

Accent Group reaffirmed its commitment to environmental, social, and governance (ESG) principles, highlighting initiatives such as extensive safety audits, diversity targets with a 67, 33 female-to-male ratio, ethical sourcing policies, and a robust recycling program that collected over 105,000 pairs of shoes. The company is preparing to meet new carbon reporting standards by FY26, reflecting a forward-looking approach to sustainability.

Operationally, the absence of CEO Daniel Agostinelli due to illness was noted, with senior executives stepping up to maintain momentum. The company’s focus on digital capability, vertical brand growth, and franchise reacquisition programs underpin its strategy to build a scalable and defensible business model in a competitive retail landscape.

Balancing Growth with Margin Discipline

While Accent Group’s expansion and strategic initiatives position it well for future growth, the margin pressures and cautious EBIT guidance underscore the challenges of navigating a complex retail environment. The early stages of the Sports Direct rollout and the impact of non-recurring costs related to the MySale operations closure add layers of uncertainty to near-term performance.