Accent Group profits from digital sales and better margins

Footwear retailer Accent Group has earned a record net profit of NZ$51.6 million, up 17.9 per cent year over year.

Digital sales of Accent Group products rose 131 per cent on the prior year driven by four new e-commerce sites for Timberland, Dr. Martens, Platypus New Zealand and Skechers New Zealand, the launch of click-and-collect and click-and-dispatch options in Platypus and Hype, as well as the integration of Afterpay in-store across retail banners.

“In the face of challenging consumer environment and increasing competition from international entrants, our strategy of delivering a best in class customer experience has delivered strong results,” Accent Group chief executive Daniel Agostinelli said.

“We have made good progress against our growth plans, including increased digital sales and new stores along with a significant improvement in gross profit margin through vertical brand sales and reduced discounting.”

The group saw total sales, including The Athlete’s Foot (TAF) franchise sales, reach NZ$943.6 million, while company owned sales NZ$740 million, up 9.3 per cent on the year prior.

The group’s in-store retail segment sales grew by 12.2 per cent on the prior year, accounting for NZ$621 million, with like-for-like sales growing 2 per cent for the year. 31 new stores were opened, 15 were closed, and 29 were refurbished for the period, while the group’s ‘next level’ concept stores launched for Hype and Platypus performed well.

“The new concept stores for Hype and Platypus continue to evolve our in-store design, bringing the key elements of a world class integrated (stores and digital) retail experience to our customers,” Agostinelli said.

“The results achieved in our new store openings continue to be ahead of business case expectations in both EBITDA performance and return on capital.”

Hype, Skechers, Dr. Martens, Vans and Timberland all traded strongly for the period, while sales in Platypus, Merrell and Hype fell in line with expectations.

The company extended its takeover of its Australian TAF franchise, with a number of franchised stores becoming corporate stores over the course of the year, with 28 corporate stores now making up the group’s roster. Digital sales for TAF rose by more than 100 per cent since last year, while corporate store sales “significantly outperformed” their franchised counterparts, reflecting investments in store fit-outs, inventory and people.

Accent Group has also reached an agreement to repurchase the New Zealand TAF master franchise licence, along with six NZ corporate stores and three franchise stores, which will take effect from the beginning of October 2018.

Wholesale sales for the year reached NZ$119 million, with several brands outperforming the year prior, though Skechers sales fell year on year.

Moving forward, the group expects to open 30 new stores in FY19, with a further 30 to 40 stores possible within the next two to three years. In addition to these new stores, a 600sqm Platypus Megastore in Melbourne Central will open, and showcase a full range of Accent vertical brands and accessories.

Internally, a dedicated team has been set up to focus on vertical and emerging brands, with several new product initiatives launching across several of the groups’ brands.

The company is currently investigating a potential expansion into a range of international markets, with the preferred method of expansion noted as organic, direct entry through the Platypus brand.

In FY19 the group forecasts mid-single digit EBITDA growth, strong digital growth and continued margin improvement through vertical and emerging brands and further reduced discounting.

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