Accent Group Ltd (ASX: AX1) has experienced a significant drop in its share price, with a 12% decline to $2.13 observed in morning trading. This downturn follows the announcement of its full-year results for FY 2024, which revealed a substantial reduction in profits and a cut in the dividend.
FY 2024 Financial Performance
Sales and Earnings Overview
- Total Sales: Increased by 2.5% to $1.61 billion.
- EBITDA: Decreased by 1.5% to $293.7 million.
- EBIT: Fell by 20.5% to $110.4 million.
- Net Profit After Tax: Declined by 33% to $59.5 million.
- Full-Year Dividend: Reduced by 25.7% to 13 cents per share.
Sales Growth Dynamics
For the year ending June 30, Accent Group recorded a 2.5% rise in total sales, reaching $1.61 billion. This growth was fueled by a 6.3% increase in owned retail sales, which partially offset a 16.9% decrease in wholesale sales. The company's strong online sales performance played a crucial role in this growth. On a like-for-like basis, retail sales increased by 1.7% for the year, with a 4.1% rise in the second half.
Earnings Challenges
Despite a higher gross margin, an increase in the cost of business operations by 138 basis points led to a 1.5% decrease in EBITDA to $293.7 million. Accent Group has initiated a review of operating costs to reduce them as a percentage of sales through FY 2025 to FY 2027. EBIT was notably impacted by non-recurring charges related to underperforming Glue stores and store transitions, amounting to $17.3 million. Without these charges, EBIT would have seen a smaller decline of approximately 8% year-on-year.
Dividend Reduction
The Accent Group board has decided to cut the dividend by 25.7% to 13 cents per share. This dividend comprises an interim payment of 8.5 cents per share and a final payment of 4.5 cents per share.
Management Commentary
CEO Daniel Agostinelli expressed satisfaction with the company's performance amidst a challenging consumer environment. He highlighted the successful contributions from newer banners such as Nude Lucy, Stylerunner, HOKA, and UGG, alongside robust performance from brands like Skechers, The Athlete's Foot (TAF), and Hype DC. Agostinelli also noted strategic decisions to close 17 underperforming Glue stores, sell the Trybe business, and end the CAT distribution agreement.
Future Outlook
Looking ahead, Accent Group plans to open at least 50 new stores in FY 2025 across various brands and expects improved underlying gross margins due to continued growth in its core brands. The company has made a strong start to FY 2025, with total sales up by 8.7% in the first seven weeks and like-for-like retail sales up by 3.5% over the same period.
In summary, Accent Group Ltd is navigating a period of financial adjustment with a focus on strategic growth and cost management. The company remains optimistic about future performance as it continues to refine its business strategy and expand its retail footprint.