The Accent Group Ltd (ASX: AX1) share price has fallen 4% in morning trade after announcing earnings would fall over 62% in its first half (HY22) result.
The company owns shoe retailers including Hype DC, Platypus and The Athletes Foot.
Profit plunges as Omicron bites
Notable highlights from the update include:
- HY22 earnings before interest and tax (EBIT) in the range of $30.0 to $31.0 million
- Like-for-like sales down 3.4% across November and December
Today’s half-year guidance is a significant decrease compared to Accent’s prior results.
Accent achieved an EBIT of $81.8 million in the prior corresponding half (HY21).
In the half before that (HY20), which was unaffected by the pandemic, EBIT was $55.5 million.
Even on a like-for-like basis, which normalises revenue, sales marginally fell.
Management noted gross margins remain above expectations. Meanwhile, no specific commentary was given on operating costs. No news is good news!
This indicates the issue is primarily one of reduced demand as shoppers bunker down at home.
Double pandemic hit
The pandemic continues to wreak havoc on Accent’s store network.
The company noted in November that the first four months of HY22 retail sales had fallen 26% below management expectations.
While there was some reprieve from November to Christmas as restrictions eased, customer traffic fell materially for a second time over the crucial post-Christmas sales period.
“Store traffic and sales in the final week of December, and in particular Boxing Day, was well down on expectations and the prior year, which the Company attributes to the rise in COVID-19”
The effects have lingered into January. However, inventory levels remain on track after earlier delivery delays from suppliers.
My take
Accent isn’t the first, and unlikely the last retailer to feel the pinch of the pandemic.
But the results are largely a function of external factors.
If stores shut, or if customers choose to minimise outside exposure, there is little management can do to stimulate demand.
Aspects Accent can control, such as inventory and costs, remain on track.
The headline numbers read poorly. But it will be a stronger business post this half, positioning it well to execute on its growth plan over 2022.
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