The Accent Group Ltd (ASX: AX1) share price is sinking on Friday morning.
At the time of writing, the footwear retailer's shares are down 8.5% to $2.01.
This follows the release of the company's half-year results before the market open.
Accent share price sinks on half-year report
- Sales down 1.7% to $810.9 million
- Earnings before interest, tax, depreciation and amortisation (EBITDA) down 7.5% to $157.5 million
- Net profit after tax down 27.6% to $42.2 million
- Fully franked interim dividend down 29% to 8.5 cents per share
What happened during the half?
For the six months ended 31 December, Accent reported a 1.7% decline in sales (including franchises) to $810.9 million. Like for like sales were down 0.6%.
Strong sales results were achieved across Skechers, The Athlete's Foot, Hype DC, HOKA, Stylerunner, and Nude Lucy. However, challenging sales conditions were experienced in Platypus, Dr Martens, Vans, and Glue.
Also dragging on its performance was the wholesale business, which reported a 25% decline in sales. This reflects softer demand from its B2B customers.
Although Accent's gross margin improved 140 basis points to 56.6%, its cost of doing business (CODB) margin offset this with an increase to 45% from 42% a year earlier. Management advised that its CODB was impacted by negative LFL retail sales, lower wholesale sales, and cost inflation in occupancy and team costs.
It is aiming to combat this with further cost efficiency initiatives in non-customer facing areas, including an ongoing review of support office costs.
In light of its profit decline, the Accent board elected to cut its fully franked interim dividend by 29% to 8.5 cents per share.
Management commentary
Accent's CEO, Daniel Agostinelli, saw a number of positives from the half. He said:
Retail sales for the key trading period of Black Friday, Christmas and Boxing Day were positive including record Boxing Day sales online and instore. Like-for-like retail sales for this period (Weeks 20-26) were up 1.8%.
I am delighted with the ongoing performance in Skechers, Hype DC, The Athlete's Foot (TAF), HOKA, Stylerunner and Nude Lucy. Nude Lucy now has 34 stores trading. Digital sales continue to grow strongly, and online EBIT was ahead of last year.
The Group opened 72 new stores in H1 (including 13 new Nude Lucy stores). The Company closed H1 FY24 with inventory levels below last year ($256.6 million vs $267.4 million) and aged stock levels are clean.
Outlook
The good news for shareholders is that the second half has started positively.
Management advised that total owned sales year to date to the end of January are up 1.6%, and owned retail sales over this period are up 5.6%, reflecting new store openings.
But much like the first half, the company's gross margin and CODB margin remain higher than the prior corresponding period.
Mr Agostinelli concludes:
Whilst we recognise that there is some uncertainty in the economic outlook, in the context of the consumer environment, we have been pleased with trading and execution in the key periods of November, December and January.
Looking forward, our store opening program remains on track. Stylerunner performance has been positive and the Nude Lucy brand is resonating well with customers. Continued store rollouts are planned in both banners.
The Accent share price is down 6% over the last 12 months.
