Accent Group (AX1) is the largest footwear retailer in Australia. Accent is the exclusive distributor of several global footwear brands in Australia and New Zealand, which are sold in monobranded and multibrand stores.

Accent’s fiscal 2025 EBIT of AUD 110 million was flat on last year. Guidance for fiscal 2026 is high-single-digit EBIT growth. Like-for-like sales improved in the first seven weeks of fiscal 2026, but only modestly.

Like-for-like sales turned positive in the early weeks of fiscal 2025, up 0.8% on last year. That’s better than the outright decline in the second half of fiscal 2025, but with costs growing at roughly 4%, Accent needs much more to drive margin expansion.

Recovery off to slow start

While we expect a recovery in fiscal 2026, it’s off to a slow start. We cut our revenue forecast by 6% on lower sales growth and fewer new stores this year.

With sales growing in line with costs, we expect flat profit margins this year, and a fiscal 2026 EBIT fall of 33% to AUD 118 million.

We still expect a consumer rebound, but we’ve pushed this back to the second half of fiscal 2026.

Economic data is encouraging, with consumer sentiment rebounding strongly in August, and credit card spending accelerating, particularly among younger consumers.

Market overreaction to soft trade

We cut our fair value estimate for narrow-moat Accent by 8% to AUD 2.30 on near-term earnings downgrades. Shares tumbled 17% on the result and are off about 40% year to date.

This looks like an overreaction to a few soft months of trade. Accent is materially undervalued. We see this as a cyclical, not structural, downturn. Other apparel retailers we cover are also under pressure as volumes normalise from the postpandemic boom.

Our midcycle EBIT margin assumption of 11% stands, consistent with Accent’s prepandemic average and well above 7% in fiscal 2025.

Our forecast for margin recovery is underpinned by a rebound in consumer spending, normalising cost growth, particularly wages, and less discounting. Emerging private-label brands Nude Lucy and Stylerunner also present a high-margin growth channel.

Bulls say

  • If Accent can keep acquiring new, exclusive distribution agreements, like the recent deal with Hoka, it could continue to rollout stores at a time when many retailers are shrinking their physical network.
  • Expansion into vertically owned apparel, through brands Nude Lucy and Stylerunner, offers a new, higher margin growth avenue.
  • Accent’s healthy balance sheet and low leverage leaves it less vulnerable to higher interest rates.

Bears say

  • Accent’s rapid expansion in recent years creates a risk of potential store closures.
  • If online migration occurs faster-than-expected, Accent’s suppliers might be tempted to take control of distribution and pursue direct-to-consumer selling.
  • Global sportswear retailer JD Sports has identified Australia as its principal Asia-Pacific market, placing it in direct competition with Accent.

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