Step One Clothing reports a sharp revenue decline and a significant inventory write-down, posting a net loss in the first half of 2026. The company signals a strategic reset to regain momentum.
- Revenue falls 24.5% to $36.3 million in 1H26
- Inventory obsolescence provision of $10.9 million impacts EBITDA
- Adjusted EBITDA narrows to $1.0 million from $11.2 million prior
- Net loss after tax of $8.5 million versus prior profit
- Strong cash position of $24 million with no debt
Revenue Decline and Inventory Challenges
Step One Clothing Limited, a direct-to-consumer underwear brand known for its sustainable and ethically manufactured products, has revealed a challenging first half of the 2026 financial year. Revenue dropped sharply by nearly a quarter to $36.3 million, down from $48.1 million in the same period last year. This decline was accompanied by a significant $10.9 million inventory obsolescence provision, reflecting difficulties in clearing legacy stock despite promotional efforts.
Impact on Profitability
The inventory write-down pushed Step One into an EBITDA loss of $10.0 million, a stark reversal from the $11.2 million profit recorded in the first half of 2025. When excluding this one-off provision, the company reported an adjusted EBITDA of $1.0 million, indicating some operational resilience amid the reset. However, the net loss after tax stood at $8.5 million, compared to an $8.2 million profit in the prior corresponding period.
Strategic Reset Underway
Founder and CEO Greg Taylor acknowledged the slower-than-expected clearance of older inventory as a key factor behind the disappointing results. He emphasised that the company’s reset program is progressing as planned, focusing on moderating discount levels, enhancing product innovation, and restoring brand quality perception. Customer retention remains solid at 65%, which Taylor sees as a foundation to expand the product range and increase brand awareness.
Financial Position and Outlook
Despite the operational setbacks, Step One maintains a strong balance sheet with $24 million in cash and financial assets and no debt, providing a buffer to support its strategic initiatives. The company has refrained from providing full-year earnings guidance, citing the transitional phase of the business and ongoing reset activities.
Looking Ahead
Step One’s results highlight the challenges of inventory management and market repositioning in a competitive retail environment. The company’s ability to execute its reset program and translate customer loyalty into renewed growth will be critical to watch in the coming months.
Bottom Line?
Step One’s reset journey is underway, but the path to profitability remains uncertain amid inventory hurdles.
Questions in the middle?
- How quickly can Step One clear its legacy inventory without further write-downs?
- Will the reset program successfully restore brand perception and drive new customer acquisition?
- When might the company provide updated full-year earnings guidance reflecting its transition progress?