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Accent Group share price on watch after solid first half profit growth

The Accent Group Ltd (ASX: AX1) share price will be one to watch on Thursday following the after-hours release of the footwear retailer’s half year results.

How did Accent perform in the first half?

For the six months ended December 31, Accent reported total sales of $507.9 million. This was a 10.9% increase on the prior corresponding period. Company operated stores contributed sales of $444.2 million, up 14.1% on the same period last year.

This was driven by like for like sales growth of 2.4%, digital sales growth of 33%, and the opening of 51 new stores. In respect to the latter, 26 of these stores were opened in November and December. In addition to this, the company closed 8 stores during the period when their leases expired. Management made the move when forward sustainable rents could not be agreed with landlords. For the full year, the company expects to open more than 70 new stores.

Despite tough market conditions putting pressure on its gross margin, Accent Group’s EBITDA and profit margins held up thanks to its lower costs of doing business. This led to EBITDA growing 10.5% to $67.7 million and net profit after tax increasing 9.7% to $35.3 million.

This allowed the Accent Group board to declare a fully franked interim dividend of 5.25 cents per share, up 16.7% on the prior year.

Accent Group CEO, Daniel Agostinelli, said “We are pleased to have delivered strong sales and earnings growth in a challenging environment. The strength of the Group’s digitally integrated business model, along with the ongoing focus and investment on innovation in digital and store formats, continues to drive growth.”

Outlook.

The company has started the second half on a positive note. It revealed that retail sales for the first seven weeks of the second half are up 3% over the prior corresponding period.

In light of this, management is confident that it will deliver further profit growth in the second half.

Mr Agostinelli concluded “The management team remain focused on continued innovation, execution of the growth plan, and trading the business to respond to market conditions. Sustainable underlying margin improvement remains a key focus, including avoiding lazy, discount-driven retailing, increasing vertical brand and product mix and driving operating efficiencies. Accent Group continues to be defined by strong cash conversion, and the consistent strong returns it delivers on shareholders’ funds.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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