The Accent Group Ltd (ASX: AX1) share price has dropped 10% after providing a FY26 update that was weaker than the market was expecting.
Accent is best known as a retailer that sells footwear (and apparel). It owns businesses like The Athletes Foot, Stylerunner, Platypus and Nude Lucy. It’s also a local retailer of global brands such as Skechers, Hoka, Vans and Ugg. The company has also signed an agreement to open Sports Direct stores in Australia.
Weak trading update
The company revealed that in the first 20 weeks of FY26, its total ‘owned’ sales (including wholesale sales and sales from new stores) rose 3.7%. However, like-for-like (LFL) retail sales were down 0.4%. On the positive side, October LFL sales were up 0.4%.
Added to that, at the end of October, the financial year-to-date gross profit margin in FY26 was down 160 basis points (1.60%) compared to last year. This was “reflective of the elevated promotional environment”.
Accent explained that retail market conditions remain challenging, including ongoing promotional activity. The sports category “continued to perform well”, particularly running and performance footwear across The Athletes Foot and distributed brands Hoka, Saucony and Merrell.
However, lifestyle footwear sales have been soft and below expectations. Wholesale sales are ahead of the previous year, with forward orders remaining “strong” into the second half of FY26.
The company noted that its costs of doing business (CODB) and inventory continue to be “well managed and in line with plan”.
Profitability expectations
The company said that LFL sales have been below expectations at low single-digit growth and the gross profit margin was below last year too, leading to profit guidance that disappointed the market.
The EBIT (EBIT explained) for the FY26 first half is expected to be in the range of $55 million to $60 million (including the non-recurring losses associated with the closure of the MySale operations).
For the full 2026 financial year, EBIT is expected to be in a range of between of $85 million to $95 million. The full-year guidance assumes a FY26 second-half EBIT of between $30 million to $35 million (compared to FY25 second half EBIT of $29.6 million).
The company has decided to close the MySale business that was acquired as part of the strategic transaction with Frasers Group. The operations will be wound down. As at the end of October 2025, MySale had seen an EBIT loss of $3.48 million.
Accent recently extended the Skechers distribution agreement to 2035 and recently extended the Hoka distribution agreement by five years to 2030. Due to a change in the ownership of Dickies, a decision has been taken to discontinue this “non-material distribution agreement”.
The company recently opened its first Sports Direct store at the Fountain Gate shopping centre in Victoria on 15 November 2025, alongside the online store. It’s planning to open three further Sports Direct stores over the rest of FY26, with 50 targeted over the next six years.
Final thoughts on the Accent share price
This update was clearly disappointing with both sales and the margin not as strong as hoped.
The Sports Direct initiative could be a significant driver of earnings in the coming years, but it’s an investment in set-up costs in the short-term.
I think the business has a lot of rebound potential if economic conditions do recover because of how cyclical discretionary retail spending can be.
It’s one of the higher-risk ASX dividend shares that I have my eye on.
