The ASX small-cap stock Accent Group Ltd (ASX: AX1) is currently sitting at a share price of $1.51. I think this is a compelling time to think about investing, particularly with it now registering a 36% decline since the start of 2025, as the chart below shows.
Accent is an ASX retail share that operates a variety of footwear and apparel businesses. It has its own businesses including The Athlete's Foot, Platypus, Glue Store, Hype, Subtype, Stylerunner, Nude Lucy, and more. The company also sells a number global distributed brands including Skechers, Ugg, Hoka, Herschel, Vans, Merrel, Saucony, and Sebago. The business plans to work with Dickies and Lacoste in FY26.
The company has suffered recently from weaker trading conditions as it enacted elevated promotional activity to ensure its inventory position remains clean, but this has hurt the ASX small-cap stock's margins. However, I think this could be a good time to consider investing when the market is pessimistic on the business. Here's a few reasons why.
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Temporary weakness?
A number of ASX shares have talked about difficult trading in the last few months of FY25 – Accent isn't the only one. Adairs Ltd (ASX: ADH) was another retailer that recently reported difficult trading conditions.
Accent spoke of challenging conditions in the last few months, but I think this isn't likely to last forever. Nick Scali Ltd (ASX: NCK) recently revealed in its FY25 result release that trading in the first month of FY26 (July 2025) was strong with sales growth of 7%. I think this could indicate the high cost of living may be becoming more manageable for some households as the RBA reduces the cash rate and the rate of inflation reduces.
Challenging conditions for the company could turn into a tailwind for year over year growth in the coming year or two.
Frasers agreement
The ASX small-cap stock made a big move by signing the agreement with Frasers, the owner of Sports Direct.
Accent is being granted the right to launch and operate Sports Direct stores in ANZ for an initial 25-year term.
It plans to roll out at least 50 Sports Direct stores initially over the next six years and ultimately sees an opportunity for 100 or more Sports Direct stores. The company has acknowledged the initial roll-out will take "substantial" capital expenditure and operating expenditure.
This relationship will also mean gaining access to the brands Everlast, Lonsdale, Slazenger, Karrimor, USA Pro, and Hot Tuna.
This could also mean unlocking an enhanced product portfolio from brands like Nike, Adidas, Asics, New Balance, and others.
Over the long term, I think this could unlock significant earnings growth for Accent. But, sometimes the market wants more success in the short term.
Growth of businesses
Accent does not need to rely on market conditions changing or Sports Direct to grow profit.
It's doing a number of things that can help its profitability such as rolling out more stores, being more efficient, and increasing its online sales.
I'm particularly interested to see if Accent can grow its percentage of sales of brands that it owns itself, which would make it less reliant on global brands for its success. But, having those global brands is also a positive for the company.
According to the forecasts on Commsec, the Accent share price is only trading at 10x FY26's estimated earnings. I think that's too cheap for a business which has strong long-term growth prospects with Sports Direct.
