The Accent Group Ltd (ASX: AX1) share price has declined by 17% since 12 June 2025 and 37% from 28 January 2025, as the chart below shows. When a cyclical ASX retail share goes through a difficult time, I get excited by the potential of a turn around.
Accent sells footwear from a wide number of global brands through distribution agreements. Some of the brands it sells includes Vans, Hoka, Skechers, Herschel, Sebago, Merrell, Ugg and Saucony. It is commencing with Dickies and Lacoste in FY26.
The company has some of its own businesses including Platypus, The Athlete's Foot, Glue Store, Hype, Nude Lucy, Stylerunner and more.
It was a recent FY25 trading update that caused the decline. While like-for-like sales for the 23 weeks to 8 June 2025 were only down 1%, the company warned that the "promotional environment" and managing inventory levels in a lower sales environment "continues to put pressures on gross margins". In the FY25 second half, the gross profit margin dropped 80 basis points compared to the prior corresponding period.
Let's take a look at the positives and negatives of Accent shares.
Negatives
After seeing the update, the broker UBS decided to reduce its earnings per share (EPS) estimates by 27% in FY25 and 34% in FY26. This was attributed to Accent's trading update and Frasers/Sports Direct announcement.
The broker noted that trading slowed significantly in weeks 8 to 23 of the second half of FY25. The lifestyle footwear category, rather than performance footwear, weakened notably. This was most notable in Platypus and Skechers with retail sale, and Vans through wholesale sales.
As the company did more promotions to clear inventory, it experienced operating de-leverage at its retail stores and especially wholesale because of high fixed costs, offsetting retention of previously generated cost savings, according to the broker.
UBS is expecting those category trends to continue into the first half of FY26. While the short-term seems challenging, the broker is optimistic about what the business can achieve in the longer-term.
Positives on Accent share price
UBS is expecting the company's sales and cost of doing business (CODB) to improve in the 2026 calendar year.
The broker has a buy rating on the business because of the recovery potential of the lifestyle category, potential positives from the store rollout (including Sports Direct), growth in vertical and distributed brands and cost savings.
UBS thinks incorporating Sports Direct into the business has strong growth potential, but carries execution risk.
The broker suggests Sports Direct provides Accent better access to the attractive fitness and athletic equipment market, though the stores are larger than Accent is used to, and access to quality store sites may be difficult.
However, the partnership with Sports Direct means being able to sell brands like Everlast, Lonsdale and Slazenger.
UBS expects net profit after tax (NPAT) to be $57 million in FY25 and $62 million in FY26, before rising to $79 million in FY27, $88 million in FY28 and $94 million in FY29.
Based on UBS' numbers, the Accent share price is valued at 15x FY26's estimated earnings with a possible grossed-up dividend yield of 6.6%, including franking credits.
Overall, UBS is expecting Accent shares to deliver capital growth of 19% over the next year.
