There's a time-honoured truth in the share market: some of the best opportunities arise when great companies stumble—and Accent Group Ltd (ASX: AX1) could be the latest example.
This Australian stock has crashed 45% from its 52-week high of $2.66 and currently changes hands for just $1.45.
Why has this Australian stock fallen so hard?
In June, the footwear focused retailer revealed that like-for-like sales had dipped 1% in the second half, dragged down by weak results in its lifestyle brands.
In addition, its EBIT guidance came in around 18% below consensus forecasts after its margins were impacted by promotional activities and inventory management challenges.
Why patient investors could be rewarded
Short-term headwinds aside, Accent still boasts a powerful mix of retail brands—including Platypus, Hype DC, Skechers, The Athlete's Foot, and Stylerunner—and is aggressively expanding its footprint through a strategic partnership with UK-based Frasers Group. It is the owner of the Sports Direct brand.
The first Sports Direct store is set to open by year-end, with a 50-store rollout planned over six years. Accent will also gain greater access to key global brands like Nike and Adidas, while adding value via digital and outlet channels like MySale.
Overall, this leaves the Australian stock well-placed when consumer spending challenges ease.
Speaking of which, the macro environment is turning more favourable. The Reserve Bank is tipped to cut the cash rate multiple times over the next 12 months, which could breathe new life into consumer spending.
As interest rates fall and household budgets ease, retailers like Accent are well placed to benefit.
Time to buy?
The team at Bell Potter think investors should be snapping up its shares while they are down in the dumps. Last week, it put a buy rating and $1.90 price target on the Australian stock.
Based on its current share price of $1.45, this implies potential upside of 31% for investors over the next 12 months.
But perhaps the most overlooked quality is Accent's potential as an income stock. Despite the recent downgrade, the company is still forecast to pay some generous fully franked dividends in the coming years.
Bell Potter is forecasting dividends per share of 7.4 cents in FY 2025, 9.5 cents in FY 2026, and then 10.8 cents in FY 2027. This equates to fully franked dividend yields of 5.1%, 6.5%, and 7.4%, respectively.
Commenting on its buy rating, the broker said:
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.
Overall, this could make this Australian stock one to consider buying and holding for the long term.
