The Accent Group Ltd (ASX: AX1) share price is up around 8% after announcing an acquisition called Glue Store for $13 million.
Accent’s acquisition
Accent is the business that sells numerous shoe brands in Australia. It might be best known for ‘The Athlete’s Foot’ network of stores.
Glue Store doesn’t sell glue of course. It’s an Australian youth apparel, shoe and accessory retailer. Accent is also getting the wholesale and distribution brands business of Next Athleisure Pty Ltd (NAL). Its product range includes leading domestic and global brands and a portfolio of owned brands.
It has 21 stores and an online site, with 500,000 loyalty program members.
Glue Store generates around $90 million of annual sales, including $16.6 million of online sales.
The NAL business will become a new division within Accent called Accent Lifestyle. The current NAL CEO, Darren Todd, will be the general manager of Accent Lifestyle. Offers of employment will be made to all NAL staff.
Accent said that it will pay for this acquisition with debt from its existing facilities.
How will Accent grow the business?
The shoe retailer said that it would bring its resources, operational capability and retail experience to accelerate the growth of Glue Store.
It plans to leverage its strong landlord relationships to increase Glue Store’s network over time.
The next part of the plan will be to accelerate Glue Store’s online offering.
The third part of the plans is to grow its owned brands and introduce Accent’s own brands, where appropriate.
Fourth, it’s going to significantly increase the range of footwear in Glue Store outlets
Finally, Accent will leverage its shared services infrastructure to help glue stores.
Management comments
Accent CEO Daniel Agostinelli said: “The NAL acquisition is perfectly aligned to our strategy to grow our leadership position in the lifestyle and youth apparel market in Australia and New Zealand.
“We see significant opportunity to leverage Accent’s retail expertise to improve the Glue Store customer experience and store profitability. The youth apparel market is highly fragmented with significant opportunity to grow the store network and capture market share over time.”
As part of the announcement, it was revealed that Brett Blundy will re-join the Accent Board, effective from today.
Summary thoughts about Accent and the share price
Accent seems like a well run business with a long term vision. It has successfully utilised an organic growth strategy as well as making smart acquisitions over the last few years.
The business pays an attractive dividend and it’s generating large online sales growth, which means it is adapting to the new operating environment well.
This move could also signal a bigger move into the youth clothing market. I think Accent Group is one of the ASX dividend shares to keep an eye on.