Athleisure Trends And New Stores Will Unlock Value

Key Takeaways

• Expansion in athleisure and performance banners, exclusive distribution deals, and new store growth strengthen brand, differentiation, and revenue outlook.
  
• Digital initiatives and disciplined portfolio management support higher profitability, cost efficiency, and resilience against economic headwinds.
  
• Aggressive store expansion, margin pressures, and exposure to FX and inflation risks threaten profitability amid uncertain consumer demand and potential overextension into new brands and banners.

Catalysts

Engages in the retail, distribution, and franchise of lifestyle footwear, apparel, and accessories in Australia and New Zealand.

• Ongoing expansion into sports-inspired and performance footwear-including successful banners like The Athlete's Foot, Skechers, and Hoka-aligns with consumer prioritization of health and wellness and a growing preference for athleisure and functional footwear, which should underpin medium-term revenue and EBIT growth.
  
• Significant pipeline of new store openings (at least 30 in FY26, plus major Sports Direct rollout and expansion of banners like Stylerunner and Hoka) allows Accent Group to further leverage urbanization and a youthful, fashion-driven demographic, supporting steady revenue growth and store productivity.
  
• Exclusive long-term distribution deals (e.g., Skechers extended to 2035, new agreements with Lacoste and Dickies) and growing vertical-owned brands presence (Nude Lucy, NiLS, etc.) should improve product differentiation, reinforce brand positioning, and underpin gross margin expansion.
  
• Strategic investment in digital initiatives (e.g., loyalty programs, customer data analytics) is expected to drive higher revenue per customer and incrementally reduce customer acquisition costs, supporting higher net margins and operating leverage over time.
  
• Disciplined store portfolio management-closing underperforming stores and shifting towards higher-ROI locations-combined with continual focus on cost and operational efficiency (including offshoring non-customer-facing roles) is designed to maintain or improve EBIT margins even in a challenging macro environment.

Accent Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Accent Group's revenue will grow by 6.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.9% today to 4.7% in 3 years time.
• Analysts expect earnings to reach A$84.5 million (and earnings per share of A$0.14) by about September 2028, up from A$57.7 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting A$109 million in earnings, and the most bearish expecting A$66.0 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.8x on those 2028 earnings, up from 13.9x today. This future PE is lower than the current PE for the AU Specialty Retail industry at 26.2x.
• Analysts expect the number of shares outstanding to grow by 6.22% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.16%, as per the Simply Wall St company report.

Accent Group Future Earnings Per Share Growth

Risks

• The projected "high single-digit" EBIT growth for FY '26 relies heavily on new store openings (including the ambitious rollout of 50 Sports Direct stores over 6 years, and at least 30 others in FY '26), which may risk oversaturation and cannibalization, potentially leading to higher fixed costs and declining same-store sales and compressing net margins and earnings.
  
• Gross margin was down 85 basis points to 54.9% due to increased promotional activity in a challenging consumer environment, and ongoing margin headwinds are expected from competitive discounting, cost inflation (notably wages and rents), and the initial dilution from Sports Direct-creating risk to margin recovery and overall profitability.
  
• The business continues to face moderation and even contraction in "lifestyle" oriented banners, with growth being maintained only by performance and athleisure brands; should the lifestyle recovery stall or economic headwinds persist, topline revenue growth could falter, leading to a more permanent structural slowdown.
  
• Company financials are exposed to unfavorable FX headwinds (AUD/USD hedged at lower rates), which management repeatedly flagged as a drag on gross margins, meaning revenue and profit could be pressured further if the currency weakens or cost inflation continues.
  
• Accent Group's expansion into new brands and banners, such as the Sports Direct partnership (which relies on mixed-reputation value brands and incurs start-up, royalty, and marketing costs), brings product and execution risks, including the potential for brand dilution, lower margin mix, or difficulty differentiating in a competitive market-potentially dragging on earnings and return on invested capital.

Valuation

• The analysts have a consensus price target of A$1.693 for Accent Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$2.3, and the most bearish reporting a price target of just A$1.25.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$1.8 billion, earnings will come to A$84.5 million, and it would be trading on a PE ratio of 18.8x, assuming you use a discount rate of 9.2%.
• Given the current share price of A$1.34, the analyst price target of A$1.69 is 21.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.