Accent Group Ltd (ASX: AX1) shares are having a day to forget on Friday.
In morning trade, the ASX stock is down 21% to a 52-week low of $1.43.
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Why is this ASX stock crashing?
Investors have been rushing to the exits today after the company sneaked out a disappointing trading update long after the market close on Thursday.
According to the release, the footwear-focused retailer has been battling tough trading conditions during the second half of FY 2025.
It notes that low overall growth in the lifestyle footwear market from March to early June has impacted sales in both the retail and wholesale segments.
Making things worse is that the prevailing promotional environment, along with a disciplined focus on managing inventory levels in a lower sales environment, continues to put pressure on the ASX stock's gross margins.
The Platypus and HypeDC owner advised that like for like sales for the 23 weeks ended 8 June 2025 are down 1%. However, for weeks 8 to 23 they are down 2.5%.
In addition, its gross margin second half to date is down around 80 basis points on the comparable period last year.
In light of the above, the ASX stock expects group EBIT to be in a range of $108 million to $111 million in FY 2025. This is well short of the consensus estimate of $133 million.
Should you buy the dip?
Given that this trading update was released after the market close on Thursday, the team at Bell Potter has already run the rule over it.
According to the note, the broker has reaffirmed its buy rating on Accent's shares with a reduced price target of $2.10 (from $2.60). Based on its current share price, this implies potential upside of 47% for investors over the next 12 months.
Commenting on its buy recommendation, the broker said:
Our PT -19% to $2.10 (prev. $2.60) given earnings downgrades. While some ongoing weakness in highly discretionary categories similar to AX1's non-sport segments remain, we expect monetary policy catalyst led recovery into the back-end of CY25 to support FY26e performance in the name.
As a medium-term catalyst, we expect a higher growth focus for the name leveraging the outperforming sports segment via global partner and key shareholder, FRAS. With the first Sports Direct store to be opened by the end of CY25, we anticipate the unlocking of the sizable store roll-out opportunity for the banner in Australia (50-store target over 6 years), while benefiting from a higher relevance to leading brand partners such as Nike backed by FRAS.
