The Accent Group Ltd (ASX: AX1) share price is having a strong start to the session on Thursday.
At the time of writing, the ASX 300 retail stock is up over 7% to $2.11.
Why is this ASX 300 retail stock surging?
Investors have been buying the footwear focused retailer’s shares this morning following the release of a trading update.
According to the release, Accent expects that its earnings before interest and tax (EBIT) will be in the range of $109 million to $111 million in FY 2024. This will be down by 20% to 21.5% from $138.8 million in FY 2023.
However, it is worth noting that this earnings guidance includes an additional charge of approximately $14.2 million relating to its Glue Store brand.
Management notes that it has made a decision to exit 17 underperforming stores where the required returns are not being achieved.
Once these stores are closed, it will result in the Glue Store business consisting of 18 stores (including its digital store). Management expects this change to make the business profitable in FY 2025.
If you were to exclude the Glue Store charge, Accent’s FY 2024 EBIT is expected to be in a range of $123.2 million to $125.2 million. This would mean a 9.8% to 11.2% decline year on year.
And while a decline is not what investors like to see, the ASX 300 retail stock’s result will be largely in line with expectations.
For example, analysts at Bell Potter were forecasting Accent to deliver EBIT of $124.6 million for the year.
Second half improvement
The ASX 300 retail stock’s CEO, Daniel Agostinelli, revealed that the company’s performance has improved in the second half. So much so, it has achieved solid like for like (LFL) sales growth during the half. Agostinelli said:
Trading conditions across the Group in H2 FY24 improved on H1 FY24, with LFL sales in H2 4.1% ahead of prior year. For the full year, total LFL sales are up +1.7% on FY23.
I am pleased with our retail performance in H2 where the Company continued to experience strong momentum in Skechers, The Athlete’s Foot, Hype DC, Stylerunner, Nude Lucy, and Hoka amongst others. The decision to exit the 17 underperforming stores will allow the Glue Store management team to focus on a profitable business comprising 18 stores including digital.
Accent intends to release its full year results for FY 2024 on 23 August 2024.
The post Why is this ASX 300 retail stock surging 7% today? appeared first on The Motley Fool Australia.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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