Accent Group will provide a trading update at its November AGM. Like-for-like sales growth for the first seven weeks of FY25e was 3.5%. We expect trends to have slowed slightly and forecast 1H25e like-for-like sales of 2.8%. We have included the recently announced distribution agreements to our forecasts.  We also consider peer commentary on gross margin and competitive behaviour.

City Chic’s exit of Avenue and capital raising conclude an incredibly painful experience of global ambition and then retreat. The City Chic brand has a strong following in Australia but has been impacted by excess inventory. The company is addressing its cost base but more savings will be needed to restore profitability. Moreover, store openings seem unlikely at this stage given the poor sales productivity.

We initiate coverage of footwear and apparel retailer Accent Group. The company has store rollout potential to grow by 240 stores in four years, or a 6.6% CAGR. Moreover, the evolving product mix contributes to higher gross margins as more vertically sourced product and more higher margin apparel goods are sold. However, the company is facing rising cost of doing business coupled with a period of slowing same store sales which puts pressure on margins in FY24e. The store network growth potential and gross margin gains will help lift margins in FY25e and more so in FY26e.