JPMorgan has downgraded Accent Group (ASX:AX1) from Overweight to Neutral, significantly reducing its price target by 30% to AUD1.15. This move reflects the footwear retailer’s ongoing struggles with challenging operating conditions in the first half of fiscal year 2026, marked by persistent gross margin pressure and weakening sales.
Key Takeaways
- JPMorgan downgraded Accent Group from Overweight to Neutral.
- The price target was cut by 30% to AUD1.15.
- Challenging operating conditions persist for the footwear retailer.
- Gross margin pressure and weaker like-for-like sales trends are key concerns.
- FY26 EBIT guidance has been lowered significantly.
Retail Headwinds Intensify
The downgrade comes as Accent Group grapples with a difficult retail environment. The company has experienced a notable decline in gross margins, down 160 basis points year-over-year in the initial 20 weeks of the first half of fiscal year 2026. This is coupled with deteriorating like-for-like sales performance, indicating a slowdown in consumer spending or increased competition.
Lowered Earnings Outlook
In response to these headwinds, Accent Group has revised its earnings forecast for fiscal year 2026. The company has lowered its Earnings Before Interest and Taxes (EBIT) guidance to a range of AUD85-95 million. This revised outlook is approximately 23% below the current consensus estimates and the company’s prior guidance of around AUD117 million, signalling a significant adjustment to expected profitability.
Cautious Outlook and Investment Concerns
JPMorgan’s cautious stance on Accent Group’s future is further influenced by several factors. The investment bank points to the ongoing promotional intensity within the retail sector, which can erode margins and profitability. Additionally, the company faces elevated investment requirements associated with its strategic roll-out of the Sports Direct brand, adding another layer of financial pressure. These combined factors contribute to the analyst’s decision to adopt a more neutral stance on the stock.
