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Accent Group Ltd (ASX:AX1) has experienced a 10% decline in its share price following the release of its FY24 financial results.
Company Overview
Accent Group is known for its diverse portfolio of shoe brands, including Skechers, Hoka, and Vans. The company also operates several owned businesses such as The Athlete’s Foot (TAF), Stylerunner, and Nude Lucy.
FY24 Financial Highlights
- Total Sales: $1.61 billion, reflecting a 2.7% increase (including TAF franchises).
- Owned Sales: $1.43 billion, up by 3%.
- EBITDA: Decreased by 1.5% to $293.7 million.
- EBIT: Fell by 20.5% to $110.4 million.
- Net Profit After Tax (NPAT): Decreased by 33% to $59.5 million.
- Final Dividend: $0.045 per share.
- Full-Year Dividend: Down 26% to $0.13 per share.
Additional Financial Metrics
- Like-for-Like (LFL) Retail Sales Growth: Achieved 1.7% growth. This growth was driven by strong online sales performance and the company's integrated omnichannel approach.
- Gross Profit Margin: Increased to 55.8%, up by 58 basis points.
- Cost of Doing Business (CODB): Rose to 45.9%, up by 138 basis points, attributed to inflation in store rents and wages. However, improvements were noted in the latter half of the year due to cost efficiency measures including lease renewals and reductions in support office and distribution costs.
The company has initiated a further cost review expected to improve the CODB ratio from FY25 to FY27.
Store and Brand Developments
- New Stores: Opened 93 new stores while closing 19 underperforming locations. Plans are in place to close 17 Glue stores by early 2025.
- Store Count: Currently operates 895 stores, including online platforms.
- TAF Franchise Agreements: Decisions made to not renew TAF franchise agreements upon expiry and explore the re-acquisition of the remaining 60 franchise territories over the next five years. Three TAF franchises were acquired.
- Trybe Business: Sold to concentrate on core and growth brands.
- CAT Distribution Agreement: Will expire in December 2024. The six remaining stores will close throughout FY25.
Future Outlook
Accent Group plans to open an additional 50 new stores in FY25. The company anticipates an improved underlying gross profit margin, growth in the Nude Lucy brand (including a new US online store), expanded profit margins for TAF, and growth from both existing and new distributed brands such as Skechers, Hoka, and Ugg.
In the first seven weeks of FY25, total sales have risen by 8.7%, with LFL retail sales increasing by 3.5% year-over-year.
Despite the recent drop in the Accent share price, it has only reverted to its level from a week ago. Early FY25 sales growth is encouraging, and ongoing expansion plans may provide a positive outlook for the company.
