The Accent Group Ltd (ASX: AX1) share price is having a tough start to the week.
In afternoon trade, the footwear focused retailer's shares are down 6% to $2.19.
This leaves the Accent share price trading within sight of its 52-week low of $2.03.
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Why is the Accent share price falling?
The weakness in the Accent share price today appears to have been driven by a broker note out of Morgans this morning.
According to the note, the broker has retained its hold rating but trimmed its price target on the company's shares by 6.5% to $2.40.
Morgans made the move after changing its analyst and adjusting its estimates.
What did the broker say?
The note reveals that Morgans has reduced its earnings before interest and tax (EBIT) estimate for FY 2022.
It now expects EBIT of $97.4 million for the full year, down from $102.1 million previously. This is notably lower than the current consensus estimate of $103.4 million and will be a sizeable decline from FY 2021's EBIT of $124.9 million.
Most of the damage to its profits is expected in the first half of FY 2022 following lockdowns.
Morgans explained: "We forecast a 53.3% drop in first half EBIT to $38.2m, with the decline mainly a function of the impact of lockdowns and the non-recurrence of the $9m JobKeeper benefit received in the PCP. Our estimate is 19% lower than Visible Alpha consensus ($47.4m with a broad range of $36.5-58.5m)."
Combined with its current valuation, the broker doesn't appear to believe enough value for money is on offer with the Accent share price at this point.
The broker concludes: "AX1 has a multi-faceted growth strategy, but this is countered by a 23x FY22F P/E ratio, higher gearing than many of its peers, and the reliance on distribution agreements with large third-party suppliers. We rate the stock a HOLD."
