The Accent Group Ltd (ASX: AX1) share price is having a tough finish to the week.
In morning trade, the footwear retailer's shares are down 12% to $2.13.
This follows the release of its full year results.
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Accent share price sinks on FY 2024 results
- Total sales up 2.5% to $1.61 billion
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) down 1.5% to $293.7 million
- EBIT down 20.5% to $110.4 million
- Net profit after tax down 33% to $59.5 million
- Full year dividend down 25.7% to 13 cents per share
What happened during the year?
For the 12 months ended 30 June, Accent reported a 2.5% increase on total sales to $1.61 billion and a 3% lift in total owned sales to $1.43 billion. Owned sales exclude The Athlete's Foot franchise sales.
Management advised that its sales growth was driven by a 6.3% increase in owned retail sales, which offset a 16.9% decline in wholesale sales. It notes that the former was supported by the continued strong performance in online sales, leveraging the company's integrated omnichannel capability. Like for like retail sales were up 1.7% for the year (and 4.1% in the second half).
Things weren't as positive for its earnings after a 138 basis points increase in its cost of doing business offset a higher gross margin. This led to its EBITDA falling 1.5% in FY 2024 to $293.7 million. The company has now initiated an operating cost review which is planned to drive a reduction in costs as a percentage of sales across FY 2025 to FY 2027.
Accent's EBIT was down 20.5% to $110.4 million. However, this includes non-recurring charges relating to underperforming Glue stores and store transitions of $17.3 million. Excluding these charges, its EBIT would have been down approximately 8% year on year.
In light of this profit decline, the Accent board cut its dividend by 25.7% to 13 cents per share. This comprises an interim dividend of 8.5 cents per share and a final dividend of 4.5 cents per share.
Management commentary
Accent Group's CEO, Daniel Agostinelli, was pleased with the company's performance in a challenging environment. He said:
In the context of a more challenging consumer environment, I am pleased with the performance of the Accent team. The Company remains focused on growth and return on investment for shareholders. Highlights for the year include the profit contribution of our newer banners including Nude Lucy, Stylerunner, HOKA and UGG along with continued strong performance in Skechers, The Athlete's Foot (TAF), Hype DC and others.
The CEO also spoke about the Glue store closures and revealed that it is selling its Trybe business and ending its CAT distribution agreement. He adds:
As we add and grow new businesses, the Company continues to evaluate business unit performance to drive investor returns. This ongoing process resulted in the previously announced decision to exit 17 underperforming Glue stores. We advise today that The Trybe business has been sold and that the Company will not continue with the CAT distribution agreement beyond its expiry at the end of December 2024.
Outlook
Management advised that at least 50 new stores are planned to open in FY 2025 across various brands. It also expects an improved underlying gross margin from continued growth in the its "moat" brands.
Pleasingly, Accent has started FY 2025 strongly. Total sales for the first seven weeks of the financial year are up 8.7%. Like for like retail sales are up 3.5% over the same period.
Mr Agostinelli said:
I am very pleased with trade in the opening weeks of FY25. The Accent team is focused on executing our plan for FY25 including strong new product, opening at least 50 new stores, growth from our existing and new distributed brands and a continued drive on cost efficiency and gross margin improvement.
