Underwear business Step One has recorded a 6.8 per cent lift in revenue for the first half for FY25 despite reducing its advertising and marketing expenses.
Revenue for the business hit $48.1 million for the first half, up from $45.1 million the same time last year.
Its Australian market recorded the largest lift sales, up 17.4 per per cent to $30.84 million, with the United Kingdom up 7 per cent to $15.67 million.
Its US market, however, dipped by 61.4 per cent to $1.59 million.
Step One reported that all markets were impacted by cost-of-living pressures to varying degrees. Speaking on the dip in the USA, the underwear business said sales there continued to be largely dependent on direct advertising investment.
“Given the less favourable advertising economics, we strategically reduced spending to protect profitability, resulting in lower sales.”
The group’s total advertising and marketing expenses were reduced by $1.4 million to $13.9 million during the period.
As a proportion of revenue, this decreased to 29 per cent of revenue, down from 34.1 per cent for the same time last financial year. This resulted in a 2.4 per cent drop in customer traffic to 8.1 million, while website conversion rates declined to 4.5 per cent from 5.1 per cent in the prior corresponding period (PCP).
Customer growth reached 131,000, bringing total direct customers since inception to 1,801,000.
“Conversion rates and customer recruitment rates remain stable, despite being lower than PCP,” Step One reported in its trading update this morning. “This reduction reflects a combination of factors including socioeconomic conditions, product release timing and customer recruitment campaigns.
“However, the continued success of the key sale events and the fact that 68.6 per cent of sales come from returning customers reiterates that once a customer tries a pair, they are highly likely to return.”
The lift in revenue for the last half also comes despite a drop in customer orders and new customers, both down 11 per cent and 28 per cent respectively.
Step One also reported an earnings before interest, tax, depreciation and amortisation (EBITDA) of $11.2 million, up 10.4 per cent on the PCP, with a closing cash of $43.8 million and no debt.
“I’m pleased to have delivered a resilient result, achieving double digit earnings growth alongside the expansion of strategic initiatives, despite global cost-of-living pressures,” Step One founder and CEO Greg Taylor said.
“While customer acquisition softened, strong retention rates and increased order values underscore the effectiveness of our strategy.
Taylor added that alongside its marketing spend shifts, the business also undertook pricing and promotion strategies which helped drive spend among value-conscious customers.
“This resulted in robust sale periods, although with some impact on our gross margin, which remains strong at 78 per cent,” he said.
“While the environment remains challenging, we are committed to future-proofing our business and driving growth through our products, customer acquisition, new channels and our footprint.”