-To increase sales contribution from accessories
-New formats such as Stylerunner and Pivot expand options
-Attractive dividend yield
Footwear retailer
Like-for-like sales growth for the first 20 weeks of FY21 was1.3%, and 15.7% excluding
The company has indicated it may open 80 stores in FY21, significantly more than the 30-50 previously guided. The first Stylerunner store in
Morgan Stanley envisages upside amid continued sales growth and an expanded roll-out. The broker assesses the new Stylerunner format offers options over the longer term although this is not included in its base case.
As a result of the better roll-out prospects, Citi upgrades to Buy from Neutral, believing the company will be a beneficiary of consumers going out more while noting
The company has also indicated it could close 15 stores if appropriate lease terms are not received, signalling a potential upper hand in landlord negotiations. Citi points out new concept stores are in high demand by landlords. Morgans anticipates rental abatements will continue and, along with JobKeeper, go a long way to offset the material impact from store closures in
Accessories
The growth opportunity lies with high-margin vertical accessories. Accent plans to increase the contribution to sales from accessories to 10% of the total sales mix. Morgans asserts, if achievable, this would provide a highly profitable growth driver.
Following the re-opening of
This would amount to 8% of operating earnings, given accessories have higher gross margins relative to group margins. The broker upgrades to Buy from Neutral to reflect the better prospects.
Morgans points out there is a fairly easy comparable to cycle over the next six months, yet expects the diversification and strength of the online penetration will pave the way for solid growth, highlighting the attractive dividend yield.
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