• EBIT: $80.7 million, up 11.5% year-over-year.
• Total Sales: $844.6 million, including franchisees.
• Net Profit After Tax: $47.2 million, up 11.7% year-over-year.
• Gross Margin: 55.6%, down 100 basis points.
• Cost of Doing Business: 44.7%, improved by 31 basis points.
• Owned Retail Sales: $683.5 million, with like-for-like sales up 3%.
• Vertical Owned Brand Sales: More than $65 million, up over 8%.
• Wholesale Sales: $83 million, up 1.3%.
• New Stores Opened: 42 new stores, bringing total to 903.
• Interim Dividend: $0.055 per share, fully franked.
• Like-for-Like Sales (H2 first 7 weeks): Up 2.2% year-over-year.

• Warning! GuruFocus has detected 6 Warning Sign with ASX:AX1.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Accent Group Ltd (ASX:AX1) reported a group EBIT of $80.7 million, up 11.5% from the previous year.
• The company successfully opened 42 new stores, increasing the total number of stores to 903, including online platforms.
• Vertical owned brand and product sales grew to more than $65 million, contributing to an improved gross margin.
• The company announced a fully franked interim dividend of $0.055 per share, representing a payout ratio of around 70% of the half-year EPS before non-recurring items.
• Accent Group Ltd (ASX:AX1) has signed new distribution agreements with Lacoste and Dickies, and renewed agreements with Merrell and Timberland, indicating strong brand partnerships.

Negative Points

• Gross margin percentage decreased by 100 basis points to 55.6%, due to a more promotional consumer environment.
• The company faced inflationary pressures in store team wages and annual rent reviews, impacting cost management.
• New Zealand remains a challenging market, with no significant improvement in sales performance.
• The Vans brand has been underperforming globally, although there are slight signs of improvement.
• The company is experiencing a promotional environment in lifestyle footwear, affecting margins and requiring competitive pricing strategies.

Q & A Highlights

Q: How much of the 70-basis points weakness in gross margins in the second half to-date is due to currency? Can you discuss your hedging profile and its impact on gross margins? A: Matthew Durbin, Group CFO and COO, explained that the 70 basis points weakness is not significantly attributed to currency but rather to a promotional environment. The company maintains a forward hedging profile at about 30% and does not anticipate a material currency impact on margins unless the currency drops below $0.63.

Q: Can you elaborate on the store roll-out opportunities and how you see them existing in your key brands? A: Daniel Agostinelli, CEO, stated that while they are well-positioned with 206 Platypus stores, the focus is on expanding footprints where feasible. They are also refreshing and refurbishing stores, which has shown positive results. Growth is expected in brands like Nude Lucy, Stylerunner, and The Athlete's Foot.

Q: How are the strong banners like Nude Lucy and Athlete's Foot performing compared to the group? A: Daniel Agostinelli noted that Nude Lucy and Athlete's Foot are comping stronger than other banners. The last 7 weeks have shown an uptick across most banners, with Platypus seeing positive results from store refreshes. The Hoka brand is also performing well.

Q: Can you provide an update on the Frasers Group negotiation and any potential impacts? A: Matthew Durbin mentioned that they are working hard on the negotiations but cannot provide further details beyond what was released in the announcement.

Q: How do you plan to address the promotional focus of customers and its impact on margins? A: Daniel Agostinelli acknowledged the challenge of promotional focus, which is a broader industry issue. The company is meeting market demands to maintain market share but is seeing some improvement. The focus is on maintaining margins, particularly in high-end segments like Athlete's Foot and Hype.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.