The Accent Group Ltd (ASX: AX1) share price is up around 3% after revealing a trading update yesterday.
Accent Group is a shoe store business with over 420 stores across 10 different brands including The Athlete’s Foot, Hype DC, Platypus Shoes, Skechers, Merrell, CAT and Vans.
What was in the Accent update?
Accent announced that in the first half of FY21 ending 27 December 2020, it achieved stronger than expected sales in November and December with total sales up 12.3% and like for like sales went up 7.4% in those months.
Overall, it achieved positive like for like sales growth of 2.7%. First half like for like sales growth excluding Auckland, Victorian and Adelaide stores (whilst stores were closed) was 12.3%.
Its online sales in the first half was $108.1 million, which was 110% higher than the prior corresponding period and represented 22.3% of total sales. Total sales were also helped by sales from new stores.
The continuation of disciplined cost controls commenced in the second half of last year, along with rental abatements and wage subsidies (for the period of July to September). Staff continued to receive full pay despite the store traffic difficulties. In the first half of FY21 the company estimated it received $9.4 million of wage subsidies.
Profit guidance
Accent said that, pre lease accounting changes (AASB 16), for the first half of FY21 it’s expecting total EBITDA (EBITDA explained) to be in the range of $95 million to $98 million. This would be growth of between 40% to 45%.
The company also expects EBIT growth to be similar to the EBITDA growth.
Management comments
Accent Group CEO Daniel Agostinelli said: “I am delighted with the way our team has executed through the all-important November cyber events and the lead up to Christmas. Our strong focus and capability in digital, combined with operational excellence in merchandise and store execution has delivered a strong, trading led result. The company’s store network and best in class digital fulfilment capability, allowed us to fulfill significant volumes of online Christmas customer orders placed up until 22 December in time for Christmas Day.”
Summary thoughts
The company didn’t provide guidance for the second half of FY21, but with a strong first half under its belt then the overall result will be at least pretty good.
I’m not sure if the growth will continue though, or whether it is a temporary strong period because of government stimulus. Accent is a good business, but it’s hard to know which way things will go in 2021.
For me, I’d rather go for a globally-growing retail business like City Chic Collective Ltd (ASX: CCX) instead.