Accent Group Expects Strong FY20 Performance | KOSEC

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Accent Group Expects Strong FY20 Performance

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The COVID-19 pandemic has wiped out businesses but has also allowed prominent footwear retailer, Accent Group, to outperform its competitors. In its latest trading update, the firm was pleased to share its desirable results. In compliance with lockdown measures, all Australia and New Zealand stores operating under the Group were shut on 27 March 2020.

As plans to gradually open re-open stores were announced a month later, Australia and New Zealand stores have since re-opened before 11 and 22 May 2020 respectively. More notably, the resumption of operations was made possible with Australia’s Jobekeeper initiative and New Zealand’s wage subsidy program. Both stimulus measures enabled Accent Group to bring back its team members despite slow foot traffic and sales volumes.

A general trend revealed stronger sales volumes in New Zealand, South Australia, Queensland, Western Australia and regional areas. In comparison, performance in bigger cities such as Sydney and Melbourne were relatively weaker. More broadly speaking, the trend towards purchasing sportswear remains strong, with brands such as The Athlete’s Foot and Stylerunner leading the gains through May and June.

The bulk of the positivity relates to Accent Group’s ability to excel within the digital space. Specifically, in May, digital sales came in at $29 million, while breaking a new daily record exceeding $2 million during Click Frenzy.  By June, the online platforms constituted close to one-quarter of group’s total sales. Collectively, sales in May and the week ending 21 June 2020 were robust with Like for Like sales surging 7 per cent.

Group Chief Executive, Daniel Agostinelli is of the view that its solid performance fuelled by digital sales has significantly surpassed expectations. This is evident through its ability to capture new customers online who have never shopped with Accent before. Therefore, Accent’s performance also reflected the broader shift in consumer behaviour which the firm accurately captured.

From the standpoint of the firm, the results were of great significance as the digital initiatives that were in progress for more than three years have paid off. Consequently, the platform has been able to withstand record traffic volumes with further room for growth and scalability. Moving forward, Accent intends to place greater emphasis in this segment with digital channels being its top priority.

Aside to operations, the firm has also engaged in discussions with respective landlords. Presently, Accent will continue to fork out rental payments for the majority of its brick-and-mortar stores. This is because the combination of Accent’s strong store network and digital capability has allowed the firm to thrive in uncertain market conditions. Yet should discussions fail to arrive at a fair conclusion, the firm may resort to shutting its stores.

As Accent Group concludes the financial year, it expects final operating profit below the Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) line to comprise of a non-cash impairment of $3- $4 million. Nevertheless, the firm expects FY20 EBITDA to be 10 per cent higher than the $108.8 million recorded in FY2019.

By Caroline Wong 

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Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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