Step One Clothing (ASX: STP) reported a 26.7% decline in revenue to AUD 63.7 million for fiscal year 2026, ending June 30, as the company executed a strategic reset focused on restoring brand equity and pricing integrity.
The company’s reported EBITDA swung to a loss of AUD 7.4 million from a AUD 17.4 million profit in the prior year, while adjusted EBITDA fell 90.1% to AUD 1.7 million. Gross profit declined 40.9% to AUD 39.2 million, despite a reported gross margin of 61.6%. Inventory obsolescence provisions totaled AUD 9.1 million, contributing to a net inventory reduction of 37.2% to AUD 15.8 million.
Geographic revenue distribution showed uneven declines, with Australia down 36.1% to AUD 35.0 million, the UK down 11.1% to AUD 26.2 million, and the US down 7.2% to AUD 2.5 million. Indirect channels, including Amazon and TikTok Shop, grew 62.3% and now account for 18.2% of total revenue, up from 11.2% previously.
Operational metrics reflected softer demand, with average order value falling to AUD 98 from AUD 103, and conversion rates declining from 4.6% to 4.1%. Advertising costs dropped 10% in absolute terms to AUD 21.1 million but rose to 33.1% of revenue from 27.0%.
The company’s balance sheet showed total assets down 21.7% to AUD 48.6 million, with cash and financial assets declining 22.1% to AUD 25.8 million. Operating cash flow fell 96.6% to AUD 0.4 million, while free cash flow was negative AUD 4.4 million over the last twelve months. No dividends were declared for FY2026.
CEO Greg Taylor said the reduction in discounting was necessary to restore brand equity and pricing integrity rather than chasing volume. CFO Nigel Underwood emphasized the company’s capital-light model as a foundation for executing the reset plan. Step One’s stock fell 18.92% to AUD 0.16 following the announcement.
