Accent (ASX:AX1) share price lifts 6% despite 'severely impacted' first half results

Accent dropped its first-half results signalling tough COVID-19 related trading conditions.

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Key points

  • Accent shares open higher during market open regardless of the company's weakened first half results
  • The group recorded a 72% fall in NPAT of $14.8 million
  • The Board declared a fully franked interim dividend of 2.5 cents per share, down from 8 cents per shares on the prior corresponding period

The Accent Group Ltd (ASX: AX1) share price is pushing higher today. This comes after the company released its half-year results for the 2022 financial year late yesterday afternoon.

At the time of writing, Accent shares are up 6.25% to $2.04.

Below, we take a closer look to see how the footwear retailer performed for the period.

Accent delivers softened result for the first half of FY22

The Accent share price is on the move following the company's results for the six months ending 26 December 2021. Here are some of the key highlights:

What happened in H1 FY22 for Accent?

Trading for the half-year was materially impacted by the continuing COVID-related disruptions and lockdowns across Australia and New Zealand. From the months of July to October, more than 55% of the Group's stores (representing 400 of the 700 stores) were required to close due to government-mandated lockdowns.

Despite these challenges, the group delivered total sales of $594 million, up 9.7% on the prior year. Net profit after tax stood at $14.8 million, delivered through its omnichannel operating model, coupled with the ongoing focus on VIP, Vertical, and Virtual.

Online sales soared by 47.9% on H1 FY21's result to $159.8 million, accounting for 31.2% of the group's total retail sales. This was underpinned by the group's investment in new websites, loyalty programs, and customer data.

Owned retail sales took up the bulk of earnings, rising by 7.7% on the prior comparable year to $443.3 million. Management estimated the impact of COVID lockdowns and disruption on owned retail sales to be at least $95 million.

In addition, Accent opened up 104 new stores during the year and closed 4 stores when rent could not be paid. In total, there are 738 stores operating across Australia and New Zealand.

What did management say?

Accent group CEO, Daniel Agostinelli touched on the result, saying:

Trade in the first half of the year was severely impacted by the COVID related disruption and lockdowns that occurred across Australia and New Zealand…

In this context I am pleased with the results that have been achieved along with the continued progress the group has delivered against its growth plan objectives.

The continued focus on VIP (our loyalty customers), Vertical and Virtual, along with our integrated digital and store operating model, has enabled the group to grow online sales, continue to grow its customer database and loyalty programs and successfully trade through our inventory.

Key achievements for the half include opening 104 new stores, growing our customer database by a further 600,000 customers, signing a 10-year distribution agreement for Reebok and continuing to drive our key growth business.

What's next for Accent?

In the first eight weeks of H2 FY22, Accent stated that trade has been significantly impacted by reduced customer traffic due to COVID-19.

Like for Like (LFL) sales over the last two months were down 10% when compared to the prior year.

When looking at the first four weeks of 2022 (until 23 January), LFL sales plunged 19.1% over H1 FY21.

On a positive note, LFL sales for the four weeks from 24 January to 20 February improved considerably. This brings them in line with last year's performance.

Following the post-Christmas sales period, Accent has driven price, margin sales, and gross margin over the first eight weeks. For now, this is in line with expectations and ahead of the prior year.

Whilst the uncertain trading environment relating to COVID-19 is unknown, the company remains cautious on the near-term outlook. As such, it did not provide sales or profit guidance for both the second half and the FY22 full-year.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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