Step One Shares Plummet 55% on Guidance Downgrade [ASX:STP]

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Underwear retailer and recent ASX-listing Step One Clothing [ASX:STP] fell 55% on downgraded revenue and EBITDA guidance.

STP shares plunged 55% on Monday after the recently listed retailer admitted slower than expected revenue growth in key markets.

The steep fall means the stock is now down 85% over the last 12 months.

In the last month alone, STP is down 75% as the wider risk-off mood punished the stock further.

Step One’s freefall on Monday came despite a rather buoyant day of trade on the ASX, with the benchmark ASX 200 Index up a modest 0.25% in afternoon trade.

ASX:STP stock graph


Step One’s lacklustre FY22 trading update

Step One — pitching itself as an online, direct to consumer, innerwear brand — came out of a trading halt today to relay some sobering news.

STP now expects sales revenue growth to be 15–20%, compared to previous guidance of 21–25%.

Expected proforma EBITDA was revised down to $7.0–8.5 million from $15 million.

Step One attributed the revisions to ‘tougher than anticipated trading conditions’ and ‘impacted consumer confidence’, with the US market bringing a return loss of more than US$3 million.

Adding to its woes, the retailer’s marketing costs rose, resulting in a 46% allocation of revenue to advertising campaigns.

Step One now expects its gross profit margin for FY22 to be closer to FY21 levels, ‘despite recent increases in selling prices’.

ASX:STP 2022 financials

Source: STP

STP share price outlook

CEO Greg Taylor said:

I am disappointed to inform you of the impact of the headwinds we are currently facing in our international expansion.

These challenges are by no means insurmountable, and I am completely focused on solving the issues we are facing to deliver an exceptional product to customers around the world.

We had a track record of delivering in international markets, but we are now a much more substantial business and our focus is on building a strong platform, with the right infrastructure to support sustainable international growth.

This will ensure that Step One is well-positioned to rebound strongly as global macro-economic disruption eases.’

Step said it remains determined to reach its growth prospects, focusing on a ‘responsive and adaptive strategy’.

Time will tell if STP’s new strategies work.

Now, it’s not just Step One suffering from a souring market outlook.

Inflation, rising costs, and stubborn supply chain snarls continue to hit companies across the board.

But that’s not to say that all companies are suffering.

The current times present opportunities for investors who know how to take advantage of shifting conditions.

Investors like veteran strategist Jim Rickards.

Jim and his team recently unveiled a strategy for these turbulent times.

To hear Jim’s investment ideas, access the ‘What would Jim Rickards be buying right now?’ presentation here.


Kiryll Prakapenka,

For Money Morning

About Kiryll Prakapenka

Kiryll Prakapenka is a research analyst focusing on investigating the biggest trends in investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from the University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding…

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