Analysts at Citi have reported that Accent Group’s latest trading update was a touch softer than expected.
In a note to investors, Citi analysts wrote that the key theme in the footwear business over recent months is how gross margin is being sacrificed to drive sales, as consumers are increasingly shopping on promotion.
The group’s like-for-like sales remained at 3.5 per cent, in line with what they were for the first seven weeks, but slightly below the average 3.7 per cent that its analysts have set for the first half of FY25.
Total sales are up 6.8 per cent, which is down from 8.7 per cent for first seven weeks, and a touch below the 8 per cent in consensus for 1H25.
Citi analysts also noted that gross margins were weaker than expected, down by 70 basis points year-to-date, more than 40 basis points lower than consensus. This comes as Accent Group confirmed it has had to be more promotional to drive sales.
Meanwhile, Accent’s cost of doing business s a percentage of sales is improving, which Citi analysts say are in line with expectations.
“CODB/Sales is better than last year, which is directionally in line with VA Consensus which has CODB/Sales down ~50bps in 1H25,” the note read.
“Rollout appears to be exceeding expectations, consistent with the company’s track record. Guiding to 40 new stores in 1H, previous guidance was at least 50 for FY25.
“Consensus has 2 net new stores in 1H25 seems too low even when taking into account the 14 Trybe stores that have been divested and the up to 17 Glue stores that will close (8 so far).”
There are also suggestions that the inclusion of David Forsey, the former CEO of British sporting retailer Sports Direct, to the Accent Group board could pave the way for the sporting business to enter the Australian market ahead.