Step One Clothing (STP) H2 2025 earnings summary

Executive summary

• Revenue grew 2.8% year-over-year to $86.9 million, reflecting modest growth amid a subdued retail environment and cost of living pressures.

• EBITDA was $17.4 million, down 3.7% year-over-year, while net profit after tax increased by 2% to $12.7 million.

• Gross margin declined to 76.4% due to increased discounting and promotional activity targeting value-conscious consumers.

• Maintained a strong financial position with $33.1 million in cash, no debt, and a 100% dividend payout policy.

• Strategic focus on product innovation, customer acquisition, indirect channel growth, and international expansion, with the U.K. as the near-term growth driver.

Financial highlights

• Revenue reached $86.9 million, up 2.8% year-over-year, with Australia and U.K. growing 7.6% and 8.7% respectively; U.S. revenue declined.

• EBITDA margin was 20.1% of revenue, down 1.3 percentage points year-over-year.

• Advertising costs reduced to 27% of revenue, down from 32% last year.

• Operating cash flow was $8.0 million, down 57.1% due to higher inventory and dividend payments.

• Inventory increased by $6.3 million, reflecting product range expansion and active management of slow-moving SKUs.

Outlook and guidance

• FY26 EBITDA expected in the range of $10 million–$12 million, reflecting increased brand investment and inventory optimisation.

• Moderate revenue growth anticipated, with the U.K. as the primary growth driver and new product launches planned before 1H FY26.

• Gross margins anticipated to moderate due to promotional inventory clearance.

• Increased marketing and operating costs expected, with hiring constrained and other costs rising with inflation.

• Focus on reducing reliance on sale periods and restoring gross margins to historic levels.