Shares of Step One Clothing Ltd slumped 18.9% to AUD 0.15 on Thursday after the company reported a 26.7% drop in full-year revenue to AUD 63.7 million for FY2026, citing a strategic shift away from discounting to restore brand equity.
The Australian activewear retailer’s adjusted earnings before interest, tax, depreciation and amortization fell to AUD 1.7 million from AUD 17.4 million a year earlier, while reported EBITDA swung to a loss of AUD 7.4 million. Net profit after tax declined to a loss of AUD 6.4 million, compared with a profit of AUD 8.4 million in FY2025. The company booked an inventory obsolescence provision of AUD 9.1 million, reducing net inventory to AUD 15.8 million.
Regional performance showed Australia, the largest market, saw sales fall 36.1% to AUD 35 million, while the U.K., accounting for 41% of group revenue, reported an 11.1% decline to AUD 26.2 million. The U.S. market contracted 7.2% to AUD 2.5 million. Third-party sales through partners such as Amazon, TikTok Shop and John Lewis grew 62.3% and now represent 18.2% of total revenue.
Gross margins remained resilient despite the revenue decline, with the reported margin at 61.6% and adjusted margin at 75.9%, down just 0.5 percentage points from FY2025. Advertising and marketing costs fell by AUD 2.4 million to AUD 21.1 million but rose to 33.1% of revenue, up 6.1 percentage points year-over-year. Distribution and fulfillment costs held steady at AUD 12.7 million, representing 19.9% of revenue.
Customer metrics showed the total database expanded to 2.1 million, with new customers accounting for 41% of the base and 47% of orders in the second half. The average order value recovered to AUD 101 in the second half from AUD 98 for the full year, though conversion rates slipped to 4.1% from 4.6% in FY2025.
Step One maintained a debt-free balance sheet with AUD 25.8 million in cash and financial assets, including AUD 16.4 million in available cash at June 30. Operating cash flow recorded an outflow of AUD 2.7 million, compared with an inflow of AUD 8 million in FY2025. The company paid AUD 4.4 million in dividends during the year, distributing 100% of prior-year earnings, and indicated future payouts would resume once retained earnings turn positive.
CEO Greg Taylor emphasized the company’s deliberate reduction of discounting to prioritize brand equity and pricing integrity over short-term volume. "We are not here to compete on price. We are here to compete on quality and brand," Taylor stated. CFO Nigel Underwood noted the business remained capital-light, providing a foundation for executing its reset plan.
