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Accent (ASX:AX1) share price in focus on 28% profit drop in HY24 result

The Accent Group Ltd (ASX: AX1) share price is in focus, it has reported a significant drop of net profit in its FY24 first-half result.

Accent acts as a distributor in Australia for a number of global shoe brands including Skechers, Vans, Hoka, Kappa, Merrell, Dr Martens, Ugg and more. It owns The Athlete’s Foot in Australia, as well as the owned-brands of Stylerunner, Nude Lucy and others.

Accent FY24 first-half result

Here are some of the highlights from the first six months of FY24:

  • Owned sales fell 2% to $732.9 million
  • Gross profit increased 0.6% to $414.9 million
  • Underlying cost of doing business rose 2.4% to 36.4%
  • EBIT (EBIT explained) declined 21% to $72.4 million
  • Net profit after tax (NPAT) dropped 27.6% to $42.2 million
  • Interim dividend per share down 29% to $0.085

One thing to note with these numbers is that this result is a 26-week half-year period, while the comparative period was a 27-week period, so if we compared 26 weeks to 26 weeks, the declines would be less pronounced, which is worthwhile to take into account when judging the Accent share price.

Costs increased due to a like for like sales decline, lower wholesale sales, and cost inflation (particularly occupancy costs and wages). It has implemented further cost efficiency initiatives in non-customer facing areas.

On a 26-week comparison basis, total sales including franchises rose 2.7% to $810.9 million.

During HY24, Accent opened 72 new stores across Australia and New Zealand. The company was pleased to report it opened 22 new Platypus stores across Australia and New Zealand, as well as 17 Skechers stores.

It also reported that vertically-owned brand sales increased 13% on HY23 to more than $60 million, representing around 8% of total sales.

Outlook for the Accent share price

The company gave a trading update, which it was pleased with considering the current economic conditions.

It said in the year to date to the end of January, total owned sales were up 1.6% and owned retail sales over this period were up 5.6%, due to new store openings.

Like for like retail sales for the first 7 weeks of the second half were down 0.7%, the gross profit margin was above last year and the cost of doing business (CODB) was also higher than last year, though at a lower rate of increase.

The company said its store opening program “remains on track”. The Stylerunner performance has been “positive” and along with Nude Lucy, both brands are “resonating well with customers.”

I think Accent is a good business with a lot of growth potential, particularly once these weaker economic conditions dissipate. How long will that take? I’d guess at least for the rest of 2024, with interest rates likely to remain quite high for many months.

I’d be willing to be patient for a better buy price – it’s possible there could be some more volatility ahead.

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At the time of publishing, Jaz owns shares of Accent.
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