Accent Group (ASX:AX1) shares dropped 13% on the stralian market Monday after the footwear retailer issued a profit warning amid weakening trading conditions.
Revised Earnings Outlook
The company lowered its second-half fiscal 2026 EBIT guidance to A$23 million to A$28 million, reflecting a 22% decline at the midpoint from prior projections of A$30 million to A$35 million. This update factors in about A$2 million in restructuring costs tied to a new cost-cutting initiative set for April through June.
The adjusted forecast falls 20% short of the current consensus estimate of A$31.8 million.
Sales and Margin Pressures
Like-for-like sales decreased 1% in the second half through May 3, missing expectations of 0.7% growth. Trading remained flat over the first eight weeks but deteriorated sharply in April, with an estimated 3.6% decline.
Gross margins for the ongoing business stood at 54.2% through April 26, down 80 basis points from the prior-year period. This contrasts with earlier guidance anticipating flat margins year-over-year for the second half.
Analyst Views and Forward Plans
Goldman Sachs analysts noted: “We expect AX1 to underperform today on 1) the lowering of 2H26 EBIT guidance from A$30-35m to A$23-28m, implying 22% at midpoint of guidance (-15% excluding A$2m restructure costs) 2) mgmt flagging deteriorating April trading conditions.”
Management assumes current trading patterns persist through the rest of the second half. Accent Group is preparing a cost-reduction program to generate substantial savings in fiscal 2027, with full details forthcoming at the next Investor Strategy Day.
