On 21 February 2019, Accent Group Limited (ASX: AX1), a company from the Consumer Discretionary sector which owns and operates a number of footwear and apparel businesses in the performance and active lifestyle sectors, announced its 1H FY2019 results.
During the period, the company reported an increase in its NPAT by 27.3% to $32,159 as compared to its previous corresponding period. The EBITDA increased by 23.3%. EPS also witnessed a jump by 20%. The company declared an interim dividend of 4.50 cents which was up by 50% as compared to previous corresponding period, the gross margin was up by 280 bps, and the operating cash inflow increased by 58.6% to $49,311.
To ensure a strong and competitive position for growth, Accent Group has adopted a robust and scalable end-to-end supply chain with direct access to brands and customers business model.
During the period, the total sales, which included the Athlete’s Foot franchise stores, were up by 6.2% on the prior year to $458.1 million. There was a growth of 94% in the continued omnichannel sales. In the first half of the FY2019, the LFL retail sale, including the Athlete’s Foot franchise stores, went up by 1.2%. The period reported the opening of 35 new stores followed by the closure of 16 stores.
The growth in the gross margin was driven by strong retail growth, vertical brands penetration and the strategy of reducing discount-driven retailing compared to prior year. The cost of doing business (CODB) increased as a result of additional operating expenses associated with new stores, the digital support team and TAF corporate stores implementation costs. The company’s continued focus was on the CODB reduction which included front line productivity along with achieving sustainable store occupancy outcomes at lease renewal.
In the retail segment, the sales were up by 12.2% to $331.1 million. The LFL sales went up by 1.2% and the gross margin by 330 bps. Total omnichannel sales went up by 94%. Skechers, Vans and Dr Martens drove the strong sales growth in standalone stores and margin growth in Platypus and Hype. Platypus traded beyond expectations and Hype- in line with the plan.
The omnichannel sales growth was up by 94% in 1H FY2019, which was 170% in the previous corresponding period. There were 16 websites which are now in operation across Australia and New Zealand. There is still one website which is expected to get launched in the second half of FY2019. The significant growth in the sales was driven by Single view of inventory over 400 stores and the online purchase of available inventory. Other than the online platform, there were also many local distribution points. Around 4.4 million new customers got registered through various loyalty programs within the first seven months of FY2019. The bigger picture of the company is now to drive acquisition and greater value for customers.
The Wholesale Sales were up by 5.7% to $58.3 million, driven by Vans, Dr Martens, Merrell and CAT. Skechers’ wholesale sales were in line with the expectations. Wholesale margin improved during the period and it continues to improve further. The company also received a Brand license renewals for Timberland, CAT and Saucony renewed until 2021 and Palladium until 2023. The company also launched a new range of vertical socks, accessories, shoe cleaners and custom laces in Hype, Platypus and TAF. The company expects that these new ranges of socks, accessories, shoe cleaners and custom laces will be the driving factors of future growth. The company also launched Supra and Sneaker Lab which is also trading strongly.
In the remaining part of FY2019, the company expects at least 10% EBITDA growth through low single digit LFL store growth, the addition of new stores, strong digital growth, continuous margin improvement.
By the end of trading session on 21 February 2019, the closing price of the stock was A$1.430, up by 4.762% as compared to previous trading day’s closing price. The company has a market capitalization of A$738.79 million with 541.24 million outstanding shares and PE ratio 16.59x.
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