14TH SEP, 23
Step One Clothing Limited (ASX: STP)
Step One, a leading online clothing and undergarment company, shares increased after the FY23 results were released on 24 August 2023. Shares ended up 68.6% for the month.
The company, which sells its products globally, posted a year-on-year (YoY) decline in revenue, with revenue coming in at $65.2 million compared to $72 million in the prior year. The company experienced tough trading conditions with revenue down in all markets (Australia, UK and US) with weak consumer sentiment weighing on sales. While revenue declined, proforma EBITDA increased to $12 million compared to $9.0 million in the prior year and proforma NPAT increased 61.7% to $8.6 million. The results reflected the priortisation of profitability over top-line growth. On the back of the result, the company declared an inaugural dividend of 5 cents per share.
The company reported strong gross margins of 80.7%, although this was down from 82% in FY22. The average value of orders increased by 19%, and the company added 257,000 new customers, bringing the total number of customers to 1.358 million. The company has a strong balance sheet with cash on hand of $38 million and no debt.
Step One Founder and CEO, Greg Taylor said: “I’m pleased with the strong profit result achieved by StepOne in FY23, reflecting our pivot from prioritising top-line growth to profitability in response to challenging trading conditions in our key markets.” “We continue to build our position as a leading brand for sustainable and high-quality innerwear products for both men and women. During the second half, we explored product adjacency opportunities within the women’s segment, successfully launching a new Bikini Brief line that has resonated well with our customers.” “We are mindful of our elevated inventory position, and while this has helped us in managing global shipping delays to date, we will maintain a prudent approach to inventory management. This involves focusing on reducing the levels of
existing inventory SKUs while ensuring we maintain the flexibility to support new product launches.”
The company will seek to pursue profitable growth in Australia and the UK while continuing to balance growth and profitability in the US. The company’s focus in FY24 will be on improving the customer funnel, expanding partnerships, expanding the product range, investing in production capability, expanding sales channels and marketplaces and improving the customer experience.
