“No lazy retailing” drives record half-year profit for Accent Group

Accent Group’s “no lazy retailing” strategy to remove discounting and focus on profitable, sustainable sales has paid off, with the footwear retailer on Thursday posting a record $32.2 million in net profit after tax for the six months to 30 December 2018, a 27.3 per cent improvement on the previous corresponding period.

The group, which runs the Platypus, HypeDC and The Athlete’s Foot retail chains, and distributes brands, such as Skechers, Vans and Dr. Martens, booked $458.1 million in total sales in the half, up 6.2 per cent year-on-year. Excluding The Athlete’s Foot franchise store sales, company-owned sales reached $389.4 million, an 11.2 per cent year-on-year increase.

Like-for-like sales were up 1.2 per cent in the half, accelerating from the 1 per cent growth seen in the first half of FY18. Earnings before interest tax, depreciation and amortisation were $61.3 million, up 23.3 per cent, with earnings per share up 20 per cent to $5.69.

Accent Group CEO Daniel Agostinelli attributed the strong performance to the company’s “no lazy retailing” strategy, which saw gross margin improve 280 basis points on the first half of FY18 to 57.3 per cent.

“The strength of our brands, stores and customer proposition along with the fully integrated omnichannel platform that has been built over the last three years, continues to deliver record financial results,” he said in an earnings statement.

Among the group’s retail brands, Platypus traded ahead of expectations, while Hype, The Athlete’s Foot and Subtype, Accent Group’s newly acquired sneaker business, traded in line with plan.

Accent Group opened 35 new stores during the half, including a 600sqm Platypus flagship megastore in Melbourne Central, which it said has traded well beyond expectations. The next Platypus superstore will open on Pitt Street Mall in Q4 of this year, and the group now expects to open more than 50 new stores in FY19. The first Subtype store in Melbourne is due to open in April.

Digital sales nearly doubled in the half, after they nearly tripled in the first half of FY18. A key factor in the growth of online is Accent Group’s flexible fulfilment model, which includes click and collect, click and dispatch and endless aisle.

These services not only drive incremental sales, but they also enable stores to clear aging and slower moving inventory more quickly, which reduces the need to discount stock to move it and drives gross margin improvement. The group noted that it is focused on driving sustainable full-margin sales online, as it is in its concept stores.

“Digital sales and profit growth were above expectations and digital channel profitability improved strongly off a solid base,” Agostinelli said, adding that a range of initiatives in the pipeline will ensure Accent Group remains best in class.

The company has increased its outlook for the second half of FY19, after reporting a 2.5 per cent increase in like-for-like retail sales for the first seven weeks of the half and overall gross margin percentage improvements. The retailer now expects at least 10 per cent EBITDA growth in the second half.

The board on Thursday declared a fully franked interim dividend of 4.5 cents per share, up 50 per cent on the prior year interim dividend. This reflects the board’s confidence in the management team an the company’s future growth plans, according to Accent Group chairman David Gordon.

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