Why the Accent Group Ltd (ASX:AX1) share price rocketed 17% higher today

In morning trade the Accent Group Ltd (ASX: AX1) share price has rocketed higher following the release of its annual general meeting presentation.

At the time of writing the footwear retailer’s shares are up over 17% to $1.30.

What was in the update?

As well as providing the market with a reminder on its strong performance in FY 2018, today’s presentation included that all-important trading update.

When the company released its results in August, management advised that it was targeting mid-single digit EBITDA growth in FY 2019.

It expected to achieve this through low single digit like for like sales growth, continued strong growth in digital, and growth from new stores.

As well as this, continued margin improvement through increasing vertical brands penetration, new emerging brands, and reduced discounting were expected to support its EBITDA growth.

Pleasingly, the first 20 weeks of FY 2019 have been “materially stronger” than expected.

This has been driven by like for likes sales growth of 2.5%, digital sales growth of 80%, increased new store openings, better than expected performances from new stores, a 300 basis point increase in gross margin, and the buyback of The Athlete’s Foot stores being ahead of schedule.

Management has reminded investors that the Christmas and back to school periods are vitally important for the retailer. But if trading continues in line with what it has experienced thus far, first half EBITDA is expected to be between 15% and 20% higher than the prior corresponding period.

The outlook for the second half period remains the same, with management targeting mid-single digit EBITDA growth.

Should you invest?

I thought that this update was incredibly positive and I can’t say I’m surprised to see its shares rocket higher today. Especially considering how they have inexplicably fallen significantly since the end of August.

Despite today’s gains, I still see a lot of value in Accent Group’s shares and think they would be worth considering along with fellow beaten down retail shares Adairs Ltd (ASX: ADH) and Super Retail Group Ltd (ASX: SUL).

All those shares provided decent dividends, just like these buy-rated dividend shares which have been tipped as potential market beaters in 2019.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended Accent Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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