Accent Group Ltd (ASX: AX1) shares are under pressure on Thursday morning.
At the time of writing, the ASX 300 stock is down almost 15% to $2.16.
Why is this ASX 300 stock crashing?
Investors have been selling the leisure footwear retailer's shares this morning after it released a trading update ahead of its annual general meeting.
According to the release, Accent Group's sales growth has slowed since its last update.
The owner of HypeDC and The Athlete's Foot revealed that for the first 20 weeks of FY 2025, total group owned sales (including wholesale sales) are up 6.8% over the prior corresponding period. This compares to 8.7% growth during the first seven weeks of FY 2025.
The ASX 300 stock revealed that its top line growth has been driven by new store openings and like for like retail sales growth of 3.5%.
In respect to the former, management advised that its new store opening program is on track and it now expects to open around 40 new stores in the first half. This doesn't include any stores for the Trybe, which was successfully divested in August and is now fully transitioned to its new owners. In addition, the closure of 17 underperforming Glue stores is progressing to plan with 8 stores closed to date.
Gross margin weakness
Another item that is heading in the wrong direction is its gross margin. As of the end of October (week 18), the ASX 300 stock's gross margin was down 70 basis points (-0.7%) compared with the comparable period last year.
Management notes that it has been impacted by a more promotional trading environment. Positively, the continued focus on cost of doing business (CODB) improvement is gaining traction with CODB as a percentage of sales improving on last year inclusive of the impact of restructure costs for the support team.
Commenting on trading so far in FY 2025, Accent's CEO, Daniel Agostinelli, said:
Retail sales for the first 20 weeks have continued to be in line with the LFL sales reported in the first 7 weeks. We continue to observe that customers are responding to promotion and value offers with an associated impact to Gross Margin %.
Finally, the ASX 300 stock revealed that it intends to appoint Dave Forsey to its board following the annual general meeting. He is a former CEO of Sports Direct and the current Frasers Group GM for the APAC region. Frasers Group became a major shareholder in the company earlier this year. It remains in active discussion with Frasers regarding future strategic opportunities.
