Step One Clothing Ltd (ASX: STP) shares are in focus today after the company's earnings results led to a big sell-off this week.
On Wednesday, the company released its H1 FY26 result, which led to a 12% share price fall.
Investors then continued to exit the company on Thursday.
As a result, Step One shares are down 17% this week.
Image source: Getty Images
What did the company report?
Step One Clothing is a direct-to-consumer online retailer for men's undergarments.
Included in Wednesday's half year earnings was:
- Revenue of $36.3 million for the six months to 31 December 2025, down 24.5% compared to the prior corresponding period
- EBITDA loss of $10 million, compared to a $11.2 million profit a year earlier
- Statutory NPAT loss after tax of $8.5 million, versus a $8.2 million profit in 1H25
- Gross margin declined to 43%, down from 78% in the prior period.
Speaking on the results, Step One Founder and CEO, Greg Taylor, said:
Sales in late 2025 were below our expectations, primarily due to slower-than-expected clearance of legacy inventory despite promotional activity. As a result, we have taken a $10.9 million provision against this stock, which is now fully provided for, with no material additional provisions anticipated.
What now for Step One shares?
Following this week's fall, there could be an opportunity to buy low on Step One shares.
Two brokers have provided updated guidance following the earnings results.
In a note out of Morgans, the broker said the 1H26 earnings were broadly in line with guidance provided in December, although fell materially short of prior expectations.
Morgans said FY26 will be a reset year for the business, with management focusing on rebuilding brand equity for longer term profitable growth.
STP have reset pricing, scaling back promotional activity, increased brand marketing spend to drive new customer acquisition and continue to launch new products in adjacent categories. We have made modest changes to earnings, our price target is $0.29 (was $0.30) and we maintain our HOLD recommendation.
From yesterday's closing price of $0.265, this indicates an upside of 9.4%.
Bell Potter weighs in
The team at Bell Potter also provided updated guidance on Step One shares following the result.
The broker reiterated its hold recommendation, and also revised its price target to $0.29.
Given the recent inventory provision, we remain cautious on inventory management due to the increased investment into new products, particularly with a push into new segments with broader competitive pressures.
We still view STP's product as market leading in terms of quality, however we believe a mix of maturation in the core market/customer mixed with a higher cost of living to provide future strain on the business.
