Accent Group extends rise after Trading Update
- Accent Group records a 40-45 per cent increase in EBITDA
- The Group saw rising digital sales of 11 per cent, equalling 22 per cent of total sales
- Australian retail sales saw their largest jump in recorded history in the September quarter
Accent Group (ASX: AX1) has continued its strong run during 2020 into the New Year after the release of a trading update to the ASX on the 7th of January 2021, propelled its share price further. The trading update cited strong growth for the first half of FY21, in particular earnings, sales and profits for the period. The strong results come after retail sales saw their biggest quarterly percentage gain since 1983. Retail sales are expected to contribute to 1.4 per cent to GDP growth in the fourth quarter of 2021.
Accent Group is an importer, wholesaler, and retailer of international footwear brands such as Athlete’s Foot, Hype and Platypus. They are also the distributor of renowned footwear brands such as Dr Martens, Vans and Skechers with a total market cap of $1.36 Billion. Despite the challenges posed to the company throughout 2020, Accent has recorded its successes. Strong fundamentals and continued sales despite market conditions have been reflected in its share price rising almost 30 per cent in 2020 and 312 per cent from the March lows.
Excluding Victoria, all states and territories across Australia reported positive sales figures during the third quarter. This has no doubt contributed to a 40 to 45 per cent increase in Earnings Before Interest Tax Depreciation and Amortization (EBITDA) against the first half of 2020. This remarkable result was propelled by a 12.3 per cent increase in total sales and a 7.4 per cent increase in Like for Like (LFL) sales during the months of November and December.
During 2020 a major component of business success was attributed to the ability to adjust to changing conditions. This included a focus on e-Commerce to provide unchanged access to products for consumers. Accent Group recorded an increased in digital sales of 110 per cent during the first half of 2021 to $108.1 million. This figure is representative of 22.3 per cent of total sales.
Further, Accent Group highlighted that strong sales from new stores, strong gross margins and the continuation of cost controls all contributed to the results. JP Morgan Economist Tom Kennedy also highlighted how "Australia’s retail report is heavily skewed toward goods consumption, so overlooks much of the rebound experienced across the services sector since mid-year," Mr Kennedy said. This focus on goods as opposed to services is likely to continue into 2021 due to the macroeconomic climate.
The footwear company also noted how they have been able to retain all permanent employees despite lockdowns in Adelaide, Auckland and Victoria and the Northern Beaches at an estimated cost of $9.4 million. As of the 11th of January 2021, Accent Group is trading at $2.51, up over 6 per cent year to date.
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